Trade War

Newsletter 160 - April 16, 2023

Welcome to the 160th edition of Trade War.

Montana passes ban on TikTok which could trigger a “domino effect” in other states. China’s continuing crackdown on its wealthy entrepreneurs part of Xi’s push to assert ever more party control. And Brazil’s Lula heralds “new geopolitics” and calls for a rival currency to the U.S. dollar, in a visit to Beijing.

Central Bank governor Yi Gang criticizes Western protectionism in “on-shoring, nearshoring, and friend-shoring.” Beijing fires back at foreign companies in its tech and trade war with the U.S. And China returns to the old playbook of investment-led growth which could push a new surge in destabilizing debt.

• A new poll shows that 61 percent of Taiwanese approve of the recent meeting between president Tsai Ing-wen and House Speaker Kevin McCarthy, even when asked this question while Beijing was carrying out its latest threatening military exercises.

• And to make up for its demographic collapse, China would need wages to grow 9 percent annually to prevent consumer spending from falling.

Montana TikTok ban to ‘trigger a domino effect’?

Sparsely-populated Montana, home to just over one million people, has become the first state to pass legislation banning TikTok on personal devices, reports the BBC.

The House voted 54 to 43 to pass the bill blocking TikTok following an earlier affirmative vote by the State Senate. If signed by Governor Greg Gianforte, the ban would begin January 1st, 2024. App stores would be barred from offering TikTok and could be fined up to $10,000 for each violation of the law.

The state has already banned the use of the app on all government devices, including on state university campuses, and the Republican governor is expected to sign the new sweeping restriction into law.

"[The] bill's champions have admitted that they have no feasible plan for operationalizing this attempt to censor American voices and that the bill's constitutionality will be decided by the courts," a TikTok spokesperson responded.

“We will continue to fight for TikTok users and creators in Montana whose livelihoods and First Amendment rights are threatened by this egregious government overreach,” the spokesperson added.

TikTok, worried that a state ban in Montana could “trigger a domino effect,” spurring other states to follow, has hired lobbyists in the state capital of Helena and featured Montana-based TikTok users in media advertising, reports the Wall Street Journal.

50 percent of Americans support a TikTok ban, with 22 percent against, and 28 percent unsure, according to a new Pew Research Center survey. Some 150 million Americans use TikTok.

“A great day for freedom, American sovereignty, and the basic principle of trade reciprocity. The sky won’t fall. The world will keep turning. And America will be safer,” tweets Jacob Helberg, a commissioner at the bipartisan U.S.-China Commission that monitors trade, economic, and defense issues in the bilateral relationship. Facebook, Twitter, Instagram and other American apps are banned in China.

(What you see below is a screenshot, not a clickable link)

‘Cooking chicken in NyQuil’

China is an “adversary of the United States and Montana and has an interest in gathering information about Montanans, Montana companies, and the intellectual property of users to engage in corporate and international espionage,” the bill banning TikTok warns.

But the concerns Montana legislators have about the short video company go beyond spying and include how it has spread “dangerous content” directed at minors.

TikTok has failed to “remove and may even promote dangerous content directing minors to engage in dangerous activities,” including “throwing objects at moving vehicles,” lighting a fire and “attempting to extinguish it using only one's body parts,” as well as “cooking chicken in NyQuil,” the bill says.

TikTok's “continued operation in Montana serves as a valuable tool to the People's Republic of China to conduct corporate and international espionage in Montana,” using “real-time” tracking of officials, journalists, and others who are “adverse to the Chinese Communist Party's interests.”

Here is a link to the full text of the bill (pdf).

TikTok: ban to hurt small business

Meanwhile, TikTok has been busy in recent weeks running ads in Montana opposing the bill that highlight the supposed harm a ban would bring to small businesses in Montana.

(Again, a screenshot below, not a clickable link)

Xi party push behind ‘disappearing’ billionaires

“We’ve seen a string of disappearances of high profile business figures going back literally years. It seems we can’t go too long without another high profile figure being disappeared,” says Dexter Roberts, senior fellow at the Atlantic Council’s Indo-Pacific Security Initiative and director of China Affairs at the Mansfield Center.

“Xi Jinping has made it very clear and he’s pursued this goal of strengthening the role of the party throughout China. I think he used the phrase ‘East, West, North, South, the party rules it all.’ And all of this really signals a new era, where the party has far more control over the economy writ large, but also particularly over private business,” says Roberts.

For more of my thoughts, as well as those from other experts, on Xi Jinping's assault on private business, check out this CNBC special report “China’s ‘Disappearing’ Billionaires.”