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August 6, 2019

344 US tariffs on Chinese goods, Hong Kong Protests, Brexit

US tariffs on china

PLUS: Hong Kong Protests, Brexit Latest (Amazon Newsday)

US Trade Tariffs on Chinese Goods

US President Donald Trump has said he will impose new US trade tariffs on Chinese goods. A fresh 10% tariff is set to be imposed on a further $300bn (£247bn) of Chinese goods, in a sharp escalation of a trade war between the two countries.

(Read here about the original US tariffs on Chinese goods)

It came after the latest round of bilateral talks showed little sign of a breakthrough.

The new tariffs, due to take effect on 1 September, effectively tax all Chinese imports to the US.

The duty is likely to target a wide range of goods, from smartphones to clothing.

China’s Foreign Minister Wang Yi criticized the US move.

“Adding tariffs is definitely not a constructive way to resolve economic and trade frictions, it’s not the correct way,” Mr Wang said on the sidelines of a meeting of South-East Asian ministers in Bangkok.

Mr Trump announced the tariff plan on Twitter while taking aim at China for not honouring promises to buy more US agricultural products at this week’s negotiations in Shanghai.

He also attacked Chinese President Xi Jinping for failing to do more to stem sales of the synthetic opioid fentanyl.

In later remarks, the US president told reporters the 10% tariff was a short-term measure and that tariffs could be lifted further in stages to more than 25%.

“Somebody should have done this with China a long time ago,” he added.

US Response

On Wall Street, the Dow Jones share index closed down 1.1%, and Asia markets were much lower on Friday. Oil prices fell sharply.

The US Chamber of Commerce, which represents more than three million US companies, said the latest tariffs on China “will only inflict greater pain on American businesses, farmers, workers and consumers, and undermine an otherwise strong US economy”.

It urged the two sides to remove all tariffs.

The latest round of duties comes amid mounting concern over how effective Mr Trump’s strategy is proving to be.

On Thursday, Mr Trump’s former chief economic adviser, Gary Cohn, said in a BBC interview that the tariff battle was having a “dramatic impact” on US manufacturing and capital investment.

The International Monetary Fund has warned that the US-China trade war is the biggest risk to the global economy.

Hong Kong Protests

Police in Hong Kong have been fighting running battles with activists in a third consecutive day of protests after a call for a general strike caused widespread disruption on Monday.

Protesters blocked roads and paralysed train services at peak times on a day of action across the city.

More than 200 flights were cancelled as the protests entered their ninth week.

Hong Kong’s leader, Carrie Lam, has pledged to restore law and order, rejecting calls for her resignation.

Initially, the demonstrations, which began on 9 June, focused on a controversial extradition law, which would have allowed the transfer of suspects to mainland China. However, the protests have now become a wider challenge to Beijing’s authority.

Ms Lam warned that Hong Kong was “on the verge of a very dangerous situation”.

In her first media address in two weeks, Ms Lam said the protesters’ actions had challenged the principle of “one country, two systems” – the extra freedoms granted to Hong Kong when it was returned from British to Chinese rule in 1997.

She also accused activists of using the extradition bill as a cover for their real goals.

“We continue to allow these violent protesters to make use of the [extradition] bill to conceal their ulterior motives,” she said. “Those ulterior motives are going to destroy Hong Kong.”

The Chinese foreign ministry said no one should underestimate China’s resolve to safeguard the stability of Hong Kong, Reuters news agency reports.

Monday’s protests

Police fired tear gas at several locations as protesters rallied into the night, setting fires and besieging police stations. In the North Point district, which has a reputation for pro-Beijing sympathies, men wielding long poles clashed with demonstrators before falling back.

More than 80 people were arrested, in addition to the 420 detained since 9 June. In that time, police said they had used more than 1,000 tear gas canisters and 160 rubber bullets.

Protest leaders had called for a general strike. While many people made it to work, in some areas protesters blocked trains from leaving stations and scuffled with commuters. Several lines of the Mass Transit Railway (MTR) were suspended for a time, and the Cross-Harbour Tunnel was also blocked.

Brexit Latest – Brexit: EU ‘refusing to negotiate’, says Gove

Cabinet minister Michael Gove says the EU “seem to be refusing to negotiate with the UK” over a new Brexit deal.

Mr Gove, who is responsible for no-deal planning, said he was “deeply saddened” that Brussels was, in his words, saying “no, we don’t want to talk”.

It comes after the EU said UK demands to remove the Irish backstop from Theresa May’s deal were unacceptable.

Irish PM Leo Varadkar has reiterated that the withdrawal deal, including the backstop, cannot be renegotiated.

The European Commission said it was willing to hold further talks, “should the UK wish to clarify its position”.

Meanwhile, a group of politicians has started a legal action aimed at preventing Boris Johnson shutting down Parliament to force through a no-deal Brexit.

Theresa May’s deal has been rejected three times by MPs and as things stand, the UK will leave the EU on 31 October whether it has agreed a new one or not.

On Monday, EU negotiators told European diplomats there was currently no basis for “meaningful discussions” and talks were back where they were three years ago.

A senior EU diplomat reportedly said a no-deal Brexit appeared to be the UK government’s “central scenario”.

Addressing those suggestions, Mr Gove said: “At the moment, it’s the EU that seems to be saying they’re not interested, they are simply saying ‘no, we don’t want to talk’.

“I think that’s wrong and sad, it’s not in Europe’s interests”, he added.

Backstop concerns

Monday’s EU meeting followed discussion last week between the EU and the PM’s European envoy, David Frost, where he reiterated Mr Johnson’s stance that the backstop plan must be removed from Mrs May’s deal.

He also raised concerns about the UK’s “divorce bill” and the proposed role of the European Court of Justice, the EU’s top court, after Brexit.

Many opponents of Mrs May’s deal cite concerns over the backstop – an insurance policy to prevent a hard border returning on the island of Ireland – which if implemented, would see Northern Ireland staying aligned to some rules of the EU single market.

It would also involve a temporary single customs territory, effectively keeping the whole of the UK in the EU customs union. These arrangements would apply unless and until both the EU and UK agreed they were no longer necessary.

Speaking on Tuesday in Belfast, Mr Varadkar told reporters he did not accept that a no-deal Brexit was unavoidable, adding there were “a number of ways” in which it could be avoided.

He said these options included ratifying Mrs May’s deal, further extending the UK’s EU membership, or the UK cancelling Brexit by revoking Article 50.

The BBC’s Brussels reporter Adam Fleming said the EU was grappling with how to deal with a prime minister in Boris Johnson who was demanding things they were not prepared to give.

He said the EU had not given up yet, and all eyes would be on the G7 summit in France at the end of August, which many believe could be the moment of truth – the point at which a no-deal Brexit may become inevitable.

Meanwhile, Mr Johnson is meeting his first foreign leader since entering Downing Street – Estonian Prime Minister Juri Ratas. The country’s Foreign Minister, Urmas Reinsalu, said earlier that while the “reality” was the withdrawal agreement – including the backstop – had been jointly agreed by EU member states, there was still a need for continued dialogue in the coming weeks to avoid a no-deal Brexit.

Last week the government announced an extra £2.1bn of funding to prepare for a no-deal Brexit – doubling the amount of money it has set aside this year.

The plans include more Border Force officers and upgrades to transport infrastructure at ports, as well as more money to tackle queues in Kent created by delays at the Channel.

Mr Gove said the government’s preparations for no deal had been stepped up and “the days of drift that we have had in the past have ended”.

He said the plan to take the UK out of the EU by 31 October was a “firm deadline”, and “we will be ready to leave come what may”.

Sterling drops to its lowest level since ‘flash crash’ of 2017

The pound’s standing against the world top currencies has dropped to its lowest level since the “flash crash” after the EU referendum.

The Sterling Effective Exchange Rate Index, published by the Bank of England this morning, showed it had slipped below the point reached during another bout of Brexit jitters in August 2017.

The Effective Exchange Rate Index shows how the pound is faring against a basket of currencies from the UK’s major trading partners, including the dollar, the euro and the yen.

The Index is trade-weighted, giving prominence to foreign currencies according to how much we use them for international transactions.

It is based at 100 in 2005, reached a high of 106 in 2007 and stood at 87.94 on the day of the EU referendum, 23 June 2016.

The latest level, reported by the Bank this morning, is 74.47 based on exchange rates at close of play yesterday, which puts it under the previous low point of 74.53 on 29 August 2017.

But it remains above the 73.86 low the index reached three months after the 2016 vote when the pound was engulfed in a moment of turmoil and fell 6% in just two minutes during overnight trading in the Far East.

The blame was put on either a mistaken “fat finger” trade, or a sell-off triggered by computer algorithms sensitive to concerns about a hard Brexit.

No-deal Brexit risk weighs down the pound

The pound hit a new low today against the euro of €1.0870, despite the better-than-expected UK services data we reported earlier.

Rehan Ansari, head of options at Caxton FX, says:

“Further weakness is being priced into the UK pound due to the political uncertainty as we approach the next deadline on 31 October. The two scenarios that are weighing on the pound are no-deal Brexit and the chances of a General Election, both of which have previously driven the UK’s currency lower.”

The value of the pound fell to a 23-month low against the euro and near a 31-month low versus the dollar this morning as fears of a disorderly Brexit continued to spook currency traders.

Against the euro, the pound was down 0.6%, meaning £1 is now worth €1.09. It was 0.2% lower against the dollar, so £1 can now buy just $1.21.

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