Welcome to Newsletter 21 of Trade War. Apologies for this edition arriving one day late, following the Memorial Day weekend. That however gives us one more day of news to consider - and a lot is happening..
The thing to watch this week and far beyond is China’s plans to push a national security law in Hong Kong, likely to prove a devastating blow to the territory’s autonomy, likely to lead to even more social unrest, while at the same time further worsening the U.S.-China business and trade relationship.
The response to Friday’s announcement has been immediate, with thousands of protesters taking to the streets on Sunday in Hong Kong. Meanwhile, U.S. officials including national security adviser Robert O’Brien have warned of the possibility of retaliatory measures that would slam the Hong Kong economy and damage prospects for any future trade agreement between the U.S. and China.
Beijing will not back down
Even as the U.S. government continues to ratchet up pressure on China, further restricting its technology champion Huawei from getting the critical components it needs to survive and threatening to force its big enterprises to delist from exchanges, China is signaling with Hong Kong it won’t back down.
“Rather than abandon their recent ‘wolf warrior’ approach to foreign relations and step back from their statist-economic inclinations, Beijing seems intent on doubling down on its hardline approach,” I write in a commentary in the Los Angeles Times.
And one more from me: on Memorial Day, I went on Fox News to talk about what Beijing’s decision to push the national security law in Hong Kong means for the future of the territory and the U.S.-China relationship. Video link in the tweet below.
U.S. economic sanctions to hit Hong Kong and China?
The U.S. government may put economic sanctions on Hong Kong and China in response the proposed national security law, White House national security adviser Robert O'Brien said in an interview with NBC’s “Meet the Press,” Axios reports.
Controversial national anthem bill
Meanwhile, Hong Kong’s government is discussing passing a national anthem law, a move likely to spawn more protests, a prospect its police are preparing for.
“About 3,000 police officers will be deployed across Hong Kong on Wednesday when protesters are expected to stage a rally outside the legislature and try to paralyze traffic in an attempt to derail debate on a controversial national anthem bill,” the South China Morning Post reports.
“Lawmakers will carry out a second reading of the national anthem bill, which penalizes anyone for misusing or insulting March of the Volunteers with a fine of up to HK$50,000 (US$6,450) and three years in prison.”
Dissension on Trump’s China policy?
Watch this remarkable ten minutes of TV where Lou Dobbs attacks Trump’s China strategy and accuses White House China advisor Peter Navarro of “peddling pablum and BS.” Hat tip to Bloomberg’s Shawn Donnan for spotting this interesting exchange.
Adding to the entity list
The U.S. Commerce Department has put eight more Chinese companies and one research institute on its “entity list” for their involvement in human rights abuses in Xinjiang, tweets New York Times reporter Ana Swanson.
From Popeyes to Walmart
Even as some companies question their reliance on China, others are moving to expand their operations, the Wall Street Journal reports. “From Popeyes to Walmart Inc., Tesla Inc. to Exxon Mobil Corp., companies are betting that the country’s long-term growth potential still outweighs the mounting case against further expansion—including geopolitical tensions and slowing growth.”
WTO moves swiftly
The Word Trade Organization aims to quickly fill its soon-to-be-vacant director general position, tweets the South China Morning Post’s Jodi Xu Klein. “WTO members have established a month-long period in which candidates seeking to succeed Roberto Azevêdo as Director-General may submit their nomination bids,” according to an announcement on the WTO website.
And Spain’s foreign minister Arancha Gonzalez has the European Union’s support to become the next head of the organization, Bloomberg News reports citing German magazine WirtschaftsWoche.
Notable/In Depth
Diversification and regionalization, not deglobalization are the important trends now in international trade, a report by Trade Vistas argues,
Fears of a rising China have been overstated, Damien Ma of MacroPolo China argues in an interesting essay.
Tune in Thursday for a talk by yours truly on “The Future of Chinese Capitalism,” hosted by the Berlin-based Mercator Institute for China Studies (MERICS). Sign up for the zoom event below.