On Friday, we reported that among the five "nuclear" options available to Beijing to retaliate against Trump's latest $100BN in proposed import tariffs, was the choice whether to sell US Treasuries. But what if Beijing did not want to unleash a full-blown market nuke, and instead was hoping for a targeted, EMP hit?
Then it would simply stop buying US paper, instead of dumping it outright; in the process it wouldn't hurt the US too much - avoiding a furious tit-for-tat response - but would still send a clear signal to the White House, whose fiscal spending plan will more than double net Treasury issuance this year from under $500BN to over $1 trillion, and which needs every possible marginal buyer of US paper, both domestic and foreign.
Which is precisely what a new report by SGH Macro Advisors claims.
According to the consultancy, a long-time favorite of macro hedge funds, Beijing has twice threatened deliberately targeted tit-for-tat punitive measures against the US to date: "first, in response to the Trump Administration’s threat of steel and aluminum tariffs, and second, in response to broader measures aimed at $50 billion of products that lie directly at the heart of Chinese technology transfers, intellectual property violations, and strategic, “Made in China 2025” plan."
But even as US cabinet officials lined up yesterday to calm jittery equity markets, SGH says in a note released over the weekend that "China had already signaled an aggressive and potentially more ominous escalation in the developing trade wars to the White House":
From what we understand, the Chinese government has halted its purchases of US Treasuries. Despite the direct encouragement, according to Chinese sources, by US Treasury Secretary Steve Mnuchin for China to "stay put,” Beijing has apparently discontinued purchases of US Treasuries “for the past few weeks.”
Some more details from the note:
Chinese officials hold out hope that “equal-footing consultations and negotiations” could be held on specific trade issues, with results potentially by mid-June. But that timing was envisioned before President Trump's formal statement calling for US Trade Representative Robert Lighthizer to consider an additional $100 billion worth of Chinese goods that could fall under a US tariff regime.
Furthermore, there have been no discussions to date yet of substance, at a high level, on what an agreement might hold. Within Beijing, concessions under consideration remain focused on opening some “newly emerging industries,” as well as financial industries, to the US, and broad assurances that China might keep the growth rate of US imports to at least 15% this year. And on the currency front, Chinese officials consider the Renminbi, which has remained relatively strong, to be at a “broadly reasonable” level, and hold out that if bilateral trade disputes are finally settled through negotiations, it could continue to rise steadily this year.But those are all small, and insufficient, steps, and more significant tensions loom.
Beijing, and President Xi Jinping, remain focused on extracting concessions from the US on high-tech export restrictions to China. But Beijing remains on its back heels in continuously underestimating the imperative for the Trump Administration to “deliver” – in a material fashion – on the President’s campaign promises to bring an "unchecked China" to heel.
That includes, in the background, discrete by significant proposals that are under active consideration by the White House and Congress to add teeth to the CFIUS (Committee on Foreign Investment in the United States) approval process of vetting mergers and the acquisition of sensitive technologies by foreign firms.
A hard line on China remains, along with immigration, on the top of the Trump political agenda before the critical November mid-term elections that loom, ominously, ahead.
A (Very Precise) Tit-for-Tat
The measures announced on Wednesday by China in response to the formal release by the White House of US Trade Representative Robert Lighthizer’s list of potential targets subject to an additional tariff was a direct tit for tat in magnitude, as well as in timing, of the threat of 25% tariffs covering $50 billion worth of exports from China.
It was, furthermore, intended as a “precision blow,” targeted at the heart of President Trump’s political base.
In an executive meeting chaired by Premier Li Keqiang on Wednesday morning, Beijing time, China’s State Council decided to threaten actions with China’s own list of 106 products in 14 categories of American products worth $50 billion, including automobiles, aircraft, chemical products, soybean, corn, sorghum, and cotton.
At the meeting, and in subsequent statements to the public, participants stressed that the aim of the trade retaliation was to make Trump feel real political pain, and to warn him against launching a head-on “trade war” with China. And, as we had expected, the main targets of trade retaliation were, by design, geographically aimed at the Rust Belt and agricultural states that strongly supported Trump in the 2016 elections.
Premier Li, from what we understand, is said to have characterized these measures as “a precision blow” to punish Trump, but he furthermore went on to add that the objective is not to engage in a trade war with the US, but rather to force the Trump Administration to conduct “equal-footing consultations and negotiations” with China on bilateral trade disputes.
Beijing's Eye on November, and 2020
Beijing has studied closely the US political landscape and aimed its latest measures directly at American farmers and workers who they believe, correctly or not, are Trump’s main source of support. It has not gone unnoticed in Beijing that the American farm and agricultural sector and workers are already feeling the heat, and running advertisements on TV in opposition of a “trade war.”
The Rust Belt vote could swing either way, but without the support of the farm and agricultural demographic, Chinese sources believe, Trump would struggle to win the 2020 presidential elections. At least that is the desired effect – if all goes wrong for China.
But, at least as of last night, Chinese officials were also heartened to hear what they thought was a softening in tone from senior Administration economic officials, including NEC Director Larry Kudlow, Secretary of Commerce Wilbur Ross, and the architect of the harshest of administration trade policies, the White House trade adviser, Peter Navarro.
That conciliatory response was welcomed by Beijing, but not without some chest thumping in public, including a crowing, victorious editorial in the China Daily.
That tone may have been premature, and seen by the White House as ill-advised, as well as the continued insistence by Beijing on some semblance of “equivalence” in these escalating trade tensions with the US.
While the report has not made it into the public arena, it is worth noting that 10Y nominal yields have barely moved on the news, rising from a session low of 2.78% to 2.80%, and are currently trading back with a 2.79% handle. Of course, should China proceed to announce that it is now a matter of official policy not to buy US paper, the adverse reaction will be far more aggressive.
As for FX impacts, the rolloff of TSY purchases would be superficially positive for the Yuan, hardly what exporters China wants, although Beijing has an effective way of fixing that: just devalue the currency, something which Bloomberg reported overnight China is now actively contemplating.
Comments
no prob bob, the fed will BTFD all day every day. they'll buy that WW3 rally like they found a 50% off promo code on a coupon site. any news is good news. broccoliman will never let us down
https://www.youtube.com/watch?v=0akBdQa55b4
hey china...do us a favor and
P U L L I T
In reply to no prob bob, the fed will… by ted41776
Pssst.....listen.....
we were never ever gonna pay those back
In reply to hey china...do us a favor… by BullyBearish
Good plan- go launder your money somewhere else......
In reply to Pssst.....listen… by Jim in MN
So the Worlds' Superpower does not control its own destiny?
Ironic in a way. Which leads me to believe that .GOV imposed these sanctions in an attempt to start something, knowing China wouldn't take it lightly. Now the Fed has someone to blame when markets tank.
In reply to Good plan- launder your… by jcaz
I wouldn't say that. It's mighty powerful fukked up.
In reply to World's superpower is not so… by nope-1004
Sum Ting Veri Wong... ?
In reply to I wouldn't say that. It's… by Erek
Thing about news from China is, 2 hours later I'm still hungry for more.
In reply to . by Sir Edge
I empathize. My wife is Chinese...
In reply to Thing about news on China is… by ParkAveFlasher
I'm making over $14k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://disq.us/url?url=http%3A%2F%2Fwww.Jobzon3.com%3Ab8eR_DQLwGRPVGtFv…
In reply to I empathize. My wife is… by GeezerGeek
All right "Belgium", you're up.
In reply to Use the suplus to buy a few… by RhinoSilver
As of 1:25 PM, stocks exploding "cautiously" higher.....................
"You can't make this stuff up. I dare you to try."
In reply to All right "Belgium", you're… by ArgentDawn
The percent of the total treasury market that is actually controlled by China:
http://thesoundingline.com/which-countries-hold-the-most-us-government-…
In reply to As of 1:25 PM, stocks… by JRobby
To be expected, of course.
In reply to The percent of the total… by Four Star
The Zionists control America via 2 things:
- The Federal Reserve (or the US$)
- Israhell
If it weren't for the Zionists, no one would have a problem with America or the $.
Israhell: The SCOURGE of Empires
In reply to To be expected, of course. by IH8OBAMA
The USD, love it or hate it, is still the "cleanest turd in the toilet".
I've been hearing "the end is nigh" for most of my life, as my parents' generation did...
We're still here. It's still the same unjust world, where the saver is punished, and the corrupt have wildly successful careers in banking and politics
In reply to ALL of Asia is pulling… by beepbop
"I've been hearing "the end is nigh" for most of my life, as my parents' generation did..."
Ditto. Fear I have is, the further downstream one is in a long term debt-cycle, the closer one is to the end...
And the end will probably occur with the world just getting more unjust.
In reply to The USD, love it or hate it,… by Croesus
They weren't wrong. They were just early.
In reply to "I've been hearing "the end… by Creative_Destruct
Look at the chart of the 20/30 year bond over the past 20/30 years.
In reply to The USD, love it or hate it,… by Croesus
THE SO CALLED "NEW TESTAMENT" IS NOTHING BUT A DOCUMENT OF CONTEMPT TOWARDS THE JOOISH FOLK
*********************************************
SHAME ON ALL OF YOU FOR DENIGRATING THE JOOS...YOU SPAWN...GET A LIFE...MAYBE 20 MILL JOOS IN THE WORLD OUT OF 7 BILLION? ARE U KIDDING ME? ALL THIS FOCUS AT THE U.N.--ALL THIS HATRED? WHAT THE F IS WRONG WITH YOU?...YOU FILTH...LOOK DEEP DEEP WITHIN YOURSELF...JESUS WAS A JOO, SO WHY NOT YOU?
*******************************
Teaching of Contempt Primary Source Sampler
https://www.bc.edu/content/dam/files/research_sites/cjl/texts/.../conte…
**********************************
The Christian Teaching of Contempt for Jews and Judaism: A Primary Source Sampler. Introduction. The debate over the Mel Gibson movie, The Passion of the Christ, has made it clear that most Christians simply are not aware of the history of Christian anti-Jewish teachings. These teachings were conveyed in several ways ...
Jules Isaac - Wikipedia
https://en.wikipedia.org/wiki/Jules_Isaac
********************************************
Jules Isaac was “a well known and highly respected Jewish historian in France with an impressive career in the world of education” by the time World War II began. Internationally, Isaac was most well known for his tireless work after the War in the field of Jewish-Christian relations, culminating in his decisive key role in the ...
Life · Career · Judaeo-Christian relations · Death and legacy
The teaching of contempt returns | David Brog | The Blogs | The Times ...
blogs.timesofisrael.com/the-teaching-of-contempt-returns/
In reply to ALL of Asia is pulling… by beepbop
There you go with facts....sheesh
In reply to The percent of the total… by Four Star
Where else are they going to put it that's somewhat safe?
In reply to The percent of the total… by Four Star
Your wifes cunt?
In reply to Where else are they going to… by arby63
I have a good way you can make $40 for 3 minutes work, and I'll give you an extra $10 if you swallow.
In reply to Use the suplus to buy a few… by RhinoSilver
Is she hot? I had a Chinese girl in Vancouver. Off the chart.
In reply to I empathize. My wife is… by GeezerGeek
Did she get the extra $10 4 swallowing?
In reply to Is she hot? I had a Chinese… by Solomonpal
That won't save you when the time comes. Zuckerberg had the same idea.
In reply to I empathize. My wife is… by GeezerGeek
Buy Yuan. Dump the dollar.
If you are one of the decent persons remaining in the world and you look at and fairly consider the following:
- The continuous stream of establishment lies;
- All the unjust wars to protect the petrodollar and destroy nations which nationalize their oil or trade in other currencies;
- All the fake-news Russian collusion crap to date;
- The bullshit Skripal poisonings;
- All the false flags from 9/11 to WMD's to the multiple US-UK-Israeli engineered false-flag gas attacks in Syria;
then you will likely become extremely nauseated with having supported any establishment political party, and then also likely become very angry with all Western leaders including fake President Trump and particularly with the Western establishment and deep state pulling his strings and our chain, whether you are on the left or the right.
If you cannot TRUST the US, the UK, or Israel in what they say or do as nations, then there is absolutely no basis to trust any of their currencies. That is what the rest of the world is waking up to. These three powerful nations are without resources of their own and they constantly plunder and destroy other weaker nations killing and displacing millions of people for their own advancement. Kick them out of all the trading loops and make them pay for the devastation and suffering they have caused before even considering letting them back in.
The Israeli bombings of Syria yesterday were done under the auspices of the US strategic military command with Trump warhawk administrative approval. Israel would not budge without US assurances. Israel is of course largely to blame, but like Al Qaeda and ISIS, it is mainly a proxy nation for the US-UK based Zio-Nazi establishment stranglehold on everything in the West.
It is populists in the middle who must now unite and take back their nations.
In reply to I empathize. My wife is… by GeezerGeek
Not only that, but China is completely trustworthy and has a great record on human rights!
/sarc
lmfao
In reply to Buy Yuan. Dump the dollar. … by FBaggins
only rivaling the usa.....
In reply to Not only that, but China is… by The_Juggernaut
And China REALLY respects property rights too!!
It's all yours until it's NOT.
Course' same is GRADUALLY happenin' here too!
In reply to only rivaling the usa..... by besnook
Has anyone even looked at China's treasury holdings since 2009? They have added a grand total of 200 billion in 9 years.. Meanwhile, we have sold about 9 trillion.. They haven't been buying for a while..
In reply to And China REALLY respects… by Creative_Destruct
Unlike the US, China's business model is not to go around the World to murder and maim people while stealing their stuff.
Re. Sell dollars buy Yuan, wait until the Chinese devalue it first.
In reply to And China REALLY respects… by Creative_Destruct
Haa haa, you must be kidding, right?
Advocating for China now is like advocating for Hitler taking over Sudetenland. Surely China will be a greatful victor when your son or daughter start speaking mandarin. Look at jokerberg, rejected by China, but he tried.
In reply to Buy Yuan. Dump the dollar. … by FBaggins
As if the Chinese government is any better or more righteous? They're just as bad as our own!
In reply to Buy Yuan. Dump the dollar. … by FBaggins
And as bad as we are, they're potentially FAR worse.
In reply to As if the Chinese government… by therealestg9
and you know what after all that
bs ...the US is still light years ahead of the Renmibi in terms of creditability ....THE CHINESE HAVE NO DOMESTIC OIL SUPPLY THEY IMPORT 90% OF THEIR OIL!!!!!
So you can say what you want but it is all bullshit
In reply to Buy Yuan. Dump the dollar. … by FBaggins
You better warn all the wealthy Chinese hoping to move their money to the US, Canada, NZ and Australia. Yes, I left out UKistan.
In reply to Buy Yuan. Dump the dollar. … by FBaggins
THE SO CALLED "NEW TESTAMENT" IS NOTHING BUT A DOCUMENT OF CONTEMPT TOWARDS THE JOOISH FOLK
*********************************************
SHAME ON ALL OF YOU FOR DENIGRATING THE JOOS...YOU SPAWN...GET A LIFE...MAYBE 20 MILL JOOS IN THE WORLD OUT OF 7 BILLION? ARE U KIDDING ME? ALL THIS FOCUS AT THE U.N.--ALL THIS HATRED? WHAT THE F IS WRONG WITH YOU?...YOU FILTH...LOOK DEEP DEEP WITHIN YOURSELF...JESUS WAS A JOO, SO WHY NOT YOU?
*******************************
Teaching of Contempt Primary Source Sampler
https://www.bc.edu/content/dam/files/research_sites/cjl/texts/.../conte…
**********************************
The Christian Teaching of Contempt for Jews and Judaism: A Primary Source Sampler. Introduction. The debate over the Mel Gibson movie, The Passion of the Christ, has made it clear that most Christians simply are not aware of the history of Christian anti-Jewish teachings. These teachings were conveyed in several ways ...
Jules Isaac - Wikipedia
https://en.wikipedia.org/wiki/Jules_Isaac
********************************************
Jules Isaac was “a well known and highly respected Jewish historian in France with an impressive career in the world of education” by the time World War II began. Internationally, Isaac was most well known for his tireless work after the War in the field of Jewish-Christian relations, culminating in his decisive key role in the ...
Life · Career · Judaeo-Christian relations · Death and legacy
The teaching of contempt returns | David Brog | The Blogs | The Times ...
blogs.timesofisrael.com/the-teaching-of-contempt-returns/
In reply to Buy Yuan. Dump the dollar. … by FBaggins
THE SO CALLED "NEW TESTAMENT" IS NOTHING BUT A DOCUMENT OF CONTEMPT TOWARDS THE JOOISH FOLK
*********************************************
SHAME ON ALL OF YOU FOR DENIGRATING THE JOOS...YOU SPAWN...GET A LIFE...MAYBE 20 MILL JOOS IN THE WORLD OUT OF 7 BILLION? ARE U KIDDING ME? ALL THIS FOCUS AT THE U.N.--ALL THIS HATRED? WHAT THE F IS WRONG WITH YOU?...YOU FILTH...LOOK DEEP DEEP WITHIN YOURSELF...JESUS WAS A JOO, SO WHY NOT YOU?
*******************************
Teaching of Contempt Primary Source Sampler
https://www.bc.edu/content/dam/files/research_sites/cjl/texts/.../conte…
**********************************
The Christian Teaching of Contempt for Jews and Judaism: A Primary Source Sampler. Introduction. The debate over the Mel Gibson movie, The Passion of the Christ, has made it clear that most Christians simply are not aware of the history of Christian anti-Jewish teachings. These teachings were conveyed in several ways ...
Jules Isaac - Wikipedia
https://en.wikipedia.org/wiki/Jules_Isaac
********************************************
Jules Isaac was “a well known and highly respected Jewish historian in France with an impressive career in the world of education” by the time World War II began. Internationally, Isaac was most well known for his tireless work after the War in the field of Jewish-Christian relations, culminating in his decisive key role in the ...
Life · Career · Judaeo-Christian relations · Death and legacy
The teaching of contempt returns | David Brog | The Blogs | The Times ...
blogs.timesofisrael.com/the-teaching-of-contempt-returns/
In reply to Buy Yuan. Dump the dollar. … by FBaggins
the thing about chinese women(and all other east asian women) is 2 hours later you want more.
In reply to I empathize. My wife is… by GeezerGeek
Oh....No..... what will they now use for toilet paper.
In reply to the thing about chinese… by besnook
Little bundles of twigs.
In reply to Oh....No..... what will they… by Pol Pot
panda hides?
In reply to Oh....No..... what will they… by Pol Pot
frbny - tell jacob on the third floor to click his mouse a couple of more times. done.
In reply to I empathize. My wife is… by GeezerGeek
without u.s. buying junk from china - they'd have like 1,000,000,000 unemployed slaves
guess they'd better start working those rice patties again
In reply to I empathize. My wife is… by GeezerGeek
The Chinese seem unaware that most of the agricultural workers in the USA are migrants from Mexico who, as citizens of Mexico, cannot technically vote in US elections.
Even if the farm workers could vote, most would vote for Democrats to get more free stuff from governent for womb productivity, not that Republicans fail to give out plenty of womb-productivity-based welfare to citizens and noncitizens.
The Chinese also seem unaware that most small, independently owned farms were driven out of business decades ago by things like NAFTA, leaving just a handful of big corporate farms with wealthy owners who got a big tax cut under Trump.
In reply to Thing about news on China is… by ParkAveFlasher
that's "veli"
In reply to . by Sir Edge
Bang Ding Ow!
In reply to . by Sir Edge
US pol fks up, retires.
Chicom fks up, death.
But The Party is loved by the billion, and within The Party it is all brotherly, and each wanting to sacrifice for the other.
In reply to World's superpower is not so… by nope-1004
Pagination