&l;p&g;&l;img class=&q;dam-image getty size-large wp-image-997034130&q; src=&q;https://specials-images.forbesimg.com/dam/imageserve/997034130/960x0.jpg?fit=scale&q; data-height=&q;483&q; data-width=&q;960&q;&g; Hello friends! No one wants a trade war except for maybe Trump and his team of staunch China hawks. In the early stages of battle, they are winning. But for how long is anybody&a;rsquo;s guess. No one wants this to last long enough to get to the answer on whether a trade war with China is winnable. (Photo by TOLGA AKMEN/AFP/Getty Images)
China businesses are as aggravated about the trade war brewing between Beijing and Washington as their U.S. counterparts. But China companies may have more to sweat.
&a;ldquo;Our China partners are surprised and disappointed to see this happening,&a;rdquo; says Jim Sutter, the CEO of the U.S. Soybean Export Council, the main lobbying arm for one of the industries China hit with tariffs. &a;ldquo;They want to keep doing business with us. But they understand they have to follow the lead of their government.&a;rdquo;
Cosco, one of China&a;rsquo;s largest state-owned shippers of soy, will have to pay itself 25% more for importing U.S. beans. Of course, they will go to Brazil, instead. Otherwise, the government-owned shipper will apparently pay the extra duties to ... itself.
Shanghai companies are talking with exchange officials to figure out what&a;rsquo;s at stake. Mainland Chinese equities are in a bear market, despite Thursday&a;rsquo;s gains. The risk of some companies being banned from trading if their stock falls too much is a real possibility should the latest trade threats come to pass.
On Wednesday, investors woke up to $200 billion more of potential tariffs. Chemical imports are on the hit list, with ingredients used in making medicine part of it. Rosemary Gibson, author of the book &l;em&g;China Rx: Exposing the Risks of America&a;rsquo;s Dependence on China for Medicine&l;/em&g; and a senior advisor at the Hastings Center, a biotech ethics research institute in upstate New York, tweeted on Thursday that China&a;rsquo;s government-funded penicillin industry &a;ldquo;wiped out&a;rdquo; U.S. manufacturers of the key antibiotic.
From a market perspective, the trade war is being won by the U.S. The S&a;amp;P is down only 3% since the January 26 high: better than Europe, Japan, Canada and Mexico.
&l;img class=&q;dam-image bloomberg size-large wp-image-42640319&q; src=&q;https://specials-images.forbesimg.com/dam/imageserve/42640319/960x0.jpg?fit=scale&q; data-height=&q;640&q; data-width=&q;960&q;&g; Wang Shouwen, China&a;rsquo;s vice minister of commerce, at World Trade Organization headquarters in Geneva, Switzerland, on July 11, 2018. China fired back at President Donald Trump&a;rsquo;s latest tariff barrage, saying it won&a;rsquo;t back down in the trade war that was started unilaterally by the U.S. (Photographer: Stefan Wermuth/Bloomberg)
China is facing more pressure than the U.S.
The World Trade Organization is currently conducting its biannual review of China&s;s trade practices. The country is still subject to frequent criticism for allegedly unfair trade practices, such as state subsidies for companies.
Dennis Shea, U.S. ambassador to the WTO, accused China of causing &a;ldquo;serious harm&a;rdquo; by failing to live up to free-trade principles. &a;ldquo;It is clear that the WTO currently does not offer all of the tools necessary to remedy this situation,&a;rdquo; Shea told the WTO yesterday.
China is opening, but the Trump Administration is at least as interested in countering China&a;rsquo;s growth in Asia, where it can challenge U.S. market share, and remedy a decades-old hallowing out of blue-collar manufacturing jobs by tacking on higher prices for Made in China goods. In Trump&s;s world, some of that supply chain might move to the U.S.
A Chinese government advisor, who is familiar with the international trade talks, told the &l;em&g;South China Morning Post&l;/em&g; in an &l;a href=&q;https://www.scmp.com/news/china/diplomacy-defence/article/2154975/china-under-pressure-live-open-market-pledges-us-calls&q; target=&q;_blank&q;&g;article published Thursday&l;/a&g; that China needed to do more to respect WTO principles such as fairness and transparency.
&a;ldquo;China has not opened up enough yet and it does not take complaints by foreign companies very seriously, but the U.S. is too impatient,&a;rdquo; the advisor said.
Last month, &l;em&g;Frontpage&l;/em&g;, an advocacy magazine for mostly Republican causes, said Trump&a;rsquo;s trade tirades weren&a;rsquo;t just bringing countries to the table to rewrite trade rules. It was forcing political powers to nationalism. Even the Democrats here at home are now promoting their own progressive version of economic protectionism. Free traders are in retreat.
&a;ldquo;Trump hates reacting, he loves taking the initiative and forcing others, rivals, competitors, media syndicates or foreign dictators, to react to him,&a;rdquo;&a;nbsp;&l;a href=&q;https://www.frontpagemag.com/fpm/270456/trumps-5-rules-ruling-world-daniel-greenfield&q; target=&q;_blank&q;&g;writes Daniel Greenfield&l;/a&g;, a foreign affairs journalist more known for his attacks on radical Islam than trade. &a;ldquo;When U.K. Foreign Secretary Boris Johnson muttered that there was a &a;lsquo;method to Trump&a;rsquo;s madness,&a;rsquo; that was it. The method is becoming the driving force in an escalating conflict. Instead of reacting to attacks, Trump forces his attackers to react to him. He takes the initiative and leaves his opponents sputtering.&a;rdquo;
Trump is now in the U.K. where S&a;amp;P Global Market Intelligence analyst Chris Rogers thinks the president will call the shots on trade as Theresa May tries protecting her auto and pharmaceuticals market from tariffs.
The U.S. accounted for &a;euro;105 billion of trade with the U.K. in the 12 months to April 30, Eurostat data shows, making it the most important non-EU partner, at 21.6% of the U.K&s;s export market.
&l;img class=&q;dam-image getty size-large wp-image-997069180&q; src=&q;https://specials-images.forbesimg.com/dam/imageserve/997069180/960x0.jpg?fit=scale&q; data-height=&q;638&q; data-width=&q;960&q;&g; The interior of The Trump Arms public house, formally named The Jameson, which has embraced the arrival of President Donald Trump for a visit by changing its name and decorating it&a;rsquo;s interior with Trump memorabilia, in West London on July 12, 2018. (Photo by Niklas HALLE&s;N / AFP)
The U.S. also runs a $6.53 billion goods surplus vs. the U.K. over the same period, reducing the likelihood of hostility from President Trump towards striking a deal.
&a;ldquo;Trump is (most) serious about punishing China, (and) is picking on the areas where it would hurt the most,&a;rdquo; says Naeem Aslam, chief market strategist for ThinkMarkets in London and a &l;em&g;Forbes&l;/em&g; columnist &l;a href=&q;https://www.forbes.com/sites/naeemaslam/2018/07/12/trade-war-china-has-five-weapons-at-its-disposal/#237bfa6d5c1d&q;&g;writing on the topic here today.&l;/a&g;&a;nbsp;&a;ldquo;The market still isn&a;rsquo;t factoring in a full trade war.&a;rdquo;
Corporate America is getting antsy.
Yesterday, the biggest lobby for U.S. multinationals in China basically shouted at Trump through a press release, saying &a;ldquo;enough already.&a;rdquo;
&a;ldquo;Enough is enough. We need to stop the needless escalation of a tariff war and start working on solutions that will address the real concerns that American companies have about China&a;rsquo;s intellectual property protection and technology transfer policies,&a;rdquo; &l;a href=&q;https://www.forbes.com/sites/kenrapoza/2018/07/11/china-trade-war-us-companies-trump/#614abda5468a&q;&g;says U.S. China Business Council president John Frisbie.&l;/a&g; &a;ldquo;Those are the right issues to focus on, but tariffs are the wrong way to solve them.&a;rdquo;
Short term, the tariffs may temporarily keep some manufacturing jobs safe and wages rising. Long term is where the pressure points remain, says Cleveland, Ohio-based market research firm Freedonia.
Tariffs on chemicals used in pharmaceuticals will undermine Chinese drugmakers, but the consequences to U.S. patent-holders such as Johnson &a;amp; Johnson, Merck &a;amp; Co. and Pfizer may outweigh the potential benefits, Freedonia report authors wrote in a 21-pager released today.
&l;img class=&q;dam-image getty size-large wp-image-993064214&q; src=&q;https://specials-images.forbesimg.com/dam/imageserve/993064214/960x0.jpg?fit=scale&q; data-height=&q;595&q; data-width=&q;960&q;&g; A container delivery truck passes containers stacked at the Port of Long Beach in Long Beach, California, on July 6, 2018, including one from COSCO, the Chinese state-owned shipping and logistics company.&a;nbsp; (Photo by FREDERIC J. BROWN/AFP/Getty Images)
On the other hand, multinationals like Samsung and LG are proving Trump right.
For instance, the average cost of washing machines shot up 17% in the U.S. since April 2018. In June 2018, Credit Suisse upgraded Whirlpool&a;rsquo;s stock from &a;ldquo;neutral&a;rdquo; to &a;ldquo;outperform,&a;rdquo; projecting a strong year for the U.S. manufacturer as a result of the tariffs. LG and Samsung will continue to ramp up U.S. production operations to avoid the tariffs. In fact, both companies have opened or plan to open new U.S. plants this year.
This won&a;rsquo;t be the case for the majority of companies, but it appears to be part of the endgame. In the near term, the Trump Administration holds a better hand. The long term is risky business.
China will survive.
Shanghai &a;amp; Shenzhen indices rose 2.16% and 2.74% respectively Thursday on strong volumes and with a diversity of winners across industries. Only 43 companies fell on the Shanghai Composite Index. China&a;rsquo;s beloved tech stocks led the way, gaining 5% in Shanghai and around 4% in Shenzhen thanks to the once-sanctioned telecom giant ZTE, which rose 25% in Hong Kong and went limit-up by 10% on the Shenzhen.
Why is ZTE doing so well? It&a;rsquo;s absolutely another matter of Trump trade dealers driving China sentiment. ZTE is up because the Commerce Department and ZTE are closing in on an agreement on escrowing $400 million for its breach-of-trade sanctions against Iran and North Korea.
&a;ldquo;Investors cheered what appears to be the company regaining the ability to survive,&a;rdquo; says Brendan Ahern, CIO of China-centric KraneShares, an ETF company in New York. Investors see ZTE&a;rsquo;s survival as a positive signal for future trade talks.&l;/p&g;
Adecoagro S.A., an agricultural company, engages in farming crops and other agricultural products, dairy operations, sugar, ethanol and energy production, and land transformation activities in South America. The company is involved in planting, harvesting, and selling grains, oilseeds, and fibers, including wheat, corn, soybeans, cotton, sunflowers, and others; and providing grain warehousing/conditioning, and handling and drying services to third parties. It also engages in planting, harvesting, processing, and marketing rice; and producing and selling fluid milk and other dairy products. In addition, the company is involved in the cultivation and processing of sugar and ethanol, as well as cogeneration of electricity from sugarcane bagasse; and identification and acquisition of underdeveloped and undermanaged farmland, and realization of value through the strategic disposition of assets. Further, it is involved in leasing approximately 27,216 hectares of pasture land to cattle farmers in Argentina; and coffee plantation in the Rio de Janeiro farm located in Western Bahia to a third party. As of December 31, 2016, the company owned a total of 246,139 hectares, which comprised 19 farms in Argentina, 11 farms in Brazil, and 1 farm in Uruguay; 3 rice processing facilities in Argentina; 2 dairy facilities with approximately 6,880 milking cows in Argentina; 11 grain and rice conditioning and storage plants in Argentina; and 3 sugar and ethanol mills in Brazil with a sugarcane crushing capacity of 11.2 million tons, as well as had a total of 232 MW of installed cogeneration capacity. Adecoagro S.A. was founded in 2002 and is based in Luxembourg.
Alico, Inc., together with its subsidiaries, operates as an agribusiness and land management company in the United States. The company operates through three segments: Alico Citrus, Conservation and Environmental Resources, and Other Operations. The Alico Citrus segment engages in planting, owning, cultivating, and/or managing citrus groves to produce fruits for sale to fresh and processed citrus markets; and contracting for the harvesting, marketing, and hauling of citrus. The Conservation and Environmental Resources segment is involved in the activities related to cattle grazing, sod, native plant, and animal sales; and leasing, management, and/or conservation of unimproved native pasture land. The Other Operations segment engages in the activities related to rock mining royalties, oil exploration, and other lines of business; and ownership and/or lease of improved farmland. Alico, Inc. owned approximately 122,000 acres of land located in 12 counties in Florida, which include the Alachua, Charlotte, Collier, DeSoto, Glades, Hardee, Hendry, Highlands, Lee, Martin, Osceola, and Polk. The company was founded in 1960 and is based in Fort Myers, Florida. Alico, Inc. is a subsidiary of 734 Investors, LLC.
