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US warns of ‘consequences’ if China abandons trade deal

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US Treasury Secretary Steven Mnuchin said on Monday he expects China to uphold a trade deal reached with Washington this year, and warned of “consequences” if the country did not.

The comments come amid a sharp drop in global trade caused by the coronavirus pandemic as well as a dispute between the two powers over fault for the spread of the virus, which first broke out in Wuhan, China.

The US and China in January signed an agreement to end a nearly two year-long trade war, that included a commitment by Beijing to buy an additional $200 billion in American goods over the next two years.

“I’m expecting them to meet their obligations,” Mnuchin said on Fox Business Network.

“I have every reason to expect that they honour this agreement and if they don’t, there would be very significant consequences in the relationship and in the global economy as to how people would do business with them.”

Ties strained

However, relations between Washington and Beijing have soured in recent weeks, with US President Donald Trump blaming China for the pandemic, and threatening tariffs.

The US has been hit with tens of millions of layoffs as the virus has spread, significantly weakening the previously solid economy, which Trump was counting on to win re-election in November.

The trade agreement signed in January includes $77.7 billion in additional purchases from the manufacturing sector, $52.4 billion from the energy sector and $32 billion in agricultural products.

The US currently runs a trade deficit with China, and the objective is to realign the trade balance between the two countries.

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Analysis

US Trade Representative Katherine Tai Criticizes China for Filing WTO Complaint Regarding Electric Vehicle (EV) Subsidies

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US Trade Representative Katherine Tai has denounced China for filing a complaint with the World Trade Organization (WTO) over electric vehicle (EV) subsidies. Tai has accused China of using “unfair, non-market policies and practices to undermine fair competition and pursue the dominance of the PRC’s manufacturers.” Beijing has objected to a US law that it says provides “discriminatory” subsidies for EVs.

Katherine Tai speaks out against China's WTO complaint on EV subsidies

Tai’s remarks come as tensions between the US and China continue to escalate, with both countries accusing each other of unfair trade practices. The US has previously accused China of stealing intellectual property and engaging in forced technology transfers, while China has accused the US of unfairly targeting its companies with sanctions and export controls.

The dispute over EV subsidies is just the latest in a series of trade disputes between the two countries, and it remains to be seen how it will be resolved. However, Tai’s strong words suggest that the US is prepared to take a tough stance against China’s trade practices, and that the dispute is unlikely to be resolved quickly or easily.

US Trade Representative Katherine Tai’s Statement

Katherine Tai condemns China's WTO complaint on EV subsidies

Denouncement of China’s WTO Complaint

US Trade Representative Katherine Tai has denounced China for filing a complaint with the World Trade Organization (WTO) over what it calls “discriminatory” subsidies for electric vehicles in the United States. Tai stated that “China continues to use unfair, non-market policies and practices to undermine fair competition and pursue the dominance of the PRC’s manufacturers”.

Tai’s statement comes after China filed a complaint with the WTO on March 22, 2024, alleging that a US law provides “discriminatory” subsidies for electric vehicles. The law in question, the Electric Vehicle Tax Credit, provides a tax credit of up to $7,500 for the purchase of a new electric vehicle. China argues that this tax credit is only available to US-made electric vehicles, and therefore discriminates against foreign-made electric vehicles, including those made in China.

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Criticism of China’s Non-Market Policies

Tai’s statement also criticized China’s non-market policies, which she says are designed to give Chinese companies an unfair advantage in the global marketplace. These policies include subsidies for domestic companies, restrictions on foreign investment, and intellectual property theft.

Tai’s denouncement of China’s WTO complaint is the latest in a series of moves by the Biden administration to confront China on trade issues. The administration has also taken steps to address China’s human rights abuses, including sanctions on Chinese officials and companies involved in the repression of Uyghur Muslims in Xinjiang province.

Overall, Tai’s statement reflects the US government’s commitment to fair competition and a level playing field for all companies, regardless of their country of origin.

China’s Objections to US EV Subsidies

US Trade Rep denounces China's WTO complaint over EV subsidies

Allegations of Discriminatory US Law

China has accused the US of providing “discriminatory” subsidies for electric vehicles (EVs) through a tax credit system that only applies to domestically produced vehicles. The US law in question, known as the Electric Vehicle Tax Credit, provides a tax credit of up to $7,500 for the purchase of a new EV. However, the credit is only available for EVs produced by manufacturers that have not yet sold 200,000 qualifying vehicles in the US. This has led to accusations that the law unfairly benefits US automakers, while discriminating against foreign manufacturers such as those from China.

China’s WTO Complaint Filing

China has filed a complaint with the World Trade Organization (WTO) over the US law, arguing that it violates WTO rules by providing “discriminatory subsidies” to US automakers. In response, US Trade Representative Katherine Tai has denounced China’s complaint, stating that “China continues to use unfair, non-market policies and practices to undermine fair competition and pursue the dominance of the PRC’s manufacturers.” Tai has also accused China of “continuing to use unfair trade practices to gain an unfair advantage in the global marketplace.”

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The US has countered China’s complaint by arguing that the Electric Vehicle Tax Credit is not discriminatory, as it applies equally to all automakers that meet the eligibility criteria. The US has also argued that the tax credit is intended to promote the adoption of EVs in the US, and is therefore consistent with WTO rules that allow for certain types of subsidies to promote environmental protection.

Overall, the dispute between the US and China over EV subsidies highlights the ongoing tensions between the two countries over trade policy, and the challenges of balancing domestic priorities with international trade obligations.

Implications for US-China Trade Relations

US Trade Rep denounces China over WTO complaint on EV subsidies

The recent filing of a WTO complaint by China over US subsidies for electric vehicles has the potential to further strain the already tense trade relations between the two nations. The US Trade Representative, Katherine Tai, has denounced China’s actions, stating that they are using “unfair, non-market policies and practices to undermine fair competition and pursue the dominance of the PRC’s manufacturers”.

This latest development is not the first time that the US and China have been at odds over trade policies. The two nations have been engaged in a trade war since 2018, with each imposing tariffs on the other’s goods. The dispute has had far-reaching effects, with both nations suffering economic losses as a result.

The filing of the WTO complaint by China is likely to escalate tensions even further. The complaint alleges that a US law providing subsidies for electric vehicles is discriminatory, and violates WTO rules. The US has denied these allegations, and has stated that the subsidies are intended to promote the use of electric vehicles, and are not discriminatory in any way.

The outcome of this dispute remains to be seen, but it is clear that it will have significant implications for US-China trade relations. If the WTO rules in China’s favor, it could lead to further trade restrictions and tariffs being imposed by the US. On the other hand, if the US is successful in defending its subsidies, it could embolden the nation to continue its current trade policies, further straining relations with China.

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The Battle Over TikTok: Can the Company Fight Back?

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pexels-photo-5081920.jpeg

The battle over TikTok has raged for months as the United States government has grown increasingly concerned about the potential security risks posed by the popular social media app’s Chinese ownership. In August 2020, President Trump signed an executive order that would have banned TikTok in the US unless its ownership was transferred to an American company. A federal judge later blocked the order, but the threat of a ban has loomed over the app ever since.

A tense standoff in Congress as lawmakers debate the fate of TikTok, with the app's Chinese owner at the center of the controversy

Recently, the US Congress took a first step towards forcing TikTok’s Chinese owner, ByteDance, to sell the app. The move came in the form of the Holding Foreign Companies Accountable Act, which was signed into law in December 2020. The law requires foreign companies listed on US stock exchanges to comply with US auditing regulations or face delisting. ByteDance is currently in the process of exploring options to comply with the law, including a possible sale of TikTok to a US buyer.

Key Takeaways

  • The US government has been concerned about the security risks posed by TikTok’s Chinese ownership, and the threat of a ban has loomed over the app for months.
  • The Holding Foreign Companies Accountable Act requires foreign companies listed on US stock exchanges to comply with US auditing regulations or face delisting, which could force ByteDance to sell TikTok to a US buyer.
  • The battle over TikTok highlights the economic and political stakes of technology ownership and raises important questions about legislative actions and corporate responses to national security concerns.

Legislative Actions

US Congress passed a bill targeting TikTok's Chinese owner. The scene shows lawmakers debating and voting on the legislation

The battle over TikTok has led to a series of legislative actions by the US Congress. In August 2020, Congress took the first step towards forcing the app’s Chinese owner, ByteDance, to divest TikTok’s US operations to a US-based company. This was in response to concerns over national security and the potential for user data to be accessed by the Chinese government.

Congressional Steps Toward Divestment

The divestment order was issued by the Committee on Foreign Investment in the United States (CFIUS), a government agency responsible for reviewing foreign investment in US companies. This order required ByteDance to sell TikTok’s US operations within 90 days, or face a ban on the app in the US.

In response, ByteDance filed a lawsuit challenging the divestment order, arguing that it was not given due process and that the order was politically motivated. However, the lawsuit was dismissed by a federal judge in December 2020.

Legal Implications

The battle over TikTok has raised important legal questions about the relationship between national security and foreign investment in the US. The divestment order issued by CFIUS was based on concerns over national security, but it is unclear whether such concerns can be used to justify forcing a foreign company to sell its US operations.

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Moreover, the battle over TikTok has highlighted the challenges of regulating social media platforms that are owned by foreign companies. TikTok’s Chinese ownership has raised concerns over the potential for user data to be accessed by the Chinese government, leading to calls for greater regulation of social media platforms.

Overall, the battle over TikTok has demonstrated the complex legal and regulatory challenges posed by foreign investment in the US, particularly in the technology sector. While Congress has taken steps towards divesting TikTok’s US operations, the legal implications of such actions remain unclear.

Corporate Response

US Congress confronts TikTok's Chinese owner in a corporate showdown

Company’s Defense Strategy

TikTok’s Chinese owner, ByteDance, has vowed to fight back against the US Congress’s decision to force it to sell off the app’s US operations. The company is reportedly considering several options to defend itself, including legal action, lobbying efforts, and potential partnerships with US companies.

ByteDance has argued that the move by Congress is politically motivated and violates the company’s rights. The company has also emphasized that TikTok’s US user data is stored in the US and is not subject to Chinese government control.

To bolster its defence, ByteDance has hired a team of high-profile lawyers, including former US Solicitor General Theodore Olson. The company is also reportedly exploring potential partnerships with US companies, such as Microsoft, to help address concerns about data security.

Public Relations Efforts

In addition to its legal and lobbying efforts, ByteDance has launched a public relations campaign to defend the app and its Chinese ownership. The company has emphasized TikTok’s popularity and cultural impact, highlighting its role in promoting diversity and creativity.

ByteDance has also sought to distance itself from the Chinese government, emphasizing that it operates independently and is not subject to Chinese censorship laws. The company has also emphasized its commitment to data privacy and security, noting that it stores user data in the US and other countries outside of China.

Despite these efforts, ByteDance faces an uphill battle to defend TikTok’s US operations. The company will need to address concerns about data security and potential Chinese government influence, while also convincing US lawmakers and regulators that it can operate independently and in the best interests of US users.

Economic and Political Stakes

US Congress debates TikTok's fate, symbolized by a scale weighing economic and political stakes

The battle over TikTok has major economic and political implications for both the United States and China. With more than 91 million users in the US alone, TikTok has become a significant player in the social media landscape, and its popularity has made it a target of concern for US lawmakers. The recent moves by the US Congress to force the app’s Chinese owner to sell it off have raised questions about the future of the app and its impact on US-China relations.

Impact on US-China Relations

The battle over TikTok has the potential to further strain already tense relations between the US and China. The Trump administration has been vocal in its criticism of China, and the move to force the sale of TikTok is just the latest in a series of actions taken against Chinese companies. The Chinese government has responded with its own set of measures, including new restrictions on US tech companies operating in China.

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The ongoing battle over TikTok has also highlighted concerns about data privacy and security. US lawmakers have raised concerns about the app’s data collection practices and the potential for the Chinese government to access user data. China has denied any wrongdoing and has accused the US of using national security concerns as a pretext for protectionism.

Consequences for Global Markets

The battle over TikTok has wider implications for global markets. The app’s popularity has made it a significant player in the social media landscape, and its forced sale could have ripple effects on the tech industry as a whole. The move could also have implications for other Chinese companies operating in the US, and could lead to a wider crackdown on Chinese investment in the US.

The battle over TikTok is likely to continue for some time, and the outcome is far from certain. However, the economic and political stakes are high, and the impact of the battle could be felt for years to come.

Frequently Asked Questions

US Congress confronts TikTok's Chinese owner in a battle

What is the rationale behind the US Congress’s move to force a sale of TikTok?

The US Congress has expressed concerns about the potential national security risks posed by TikTok’s ownership by Chinese company ByteDance. Lawmakers have cited fears that TikTok’s data collection practices may be used by the Chinese government to gather sensitive information on US citizens. The move to force a sale of TikTok is seen as a way to mitigate these risks.

What is the status of the legislation aimed at banning TikTok?

As of the current date, no legislation has been passed to ban TikTok in the US. However, the US Department of Commerce has taken steps to restrict the app’s use in the country. In September 2020, the Department announced that it would ban TikTok from US app stores, though this decision was later temporarily blocked by a federal judge.

How might TikTok’s ownership respond to the US legislative actions?

TikTok’s ownership has previously pushed back against US legislative actions aimed at restricting the app’s use. The company has argued that it operates independently of the Chinese government and has taken steps to distance itself from its Chinese roots, including hiring US-based executives and establishing a US-based subsidiary. However, it remains to be seen how the company will respond to the latest legislative actions aimed at forcing a sale of the app.

What are the potential consequences for users if TikTok is banned in the US?

If TikTok is banned in the US, users may lose access to the app’s social media features, including the ability to create and share short-form videos. However, it is worth noting that TikTok’s popularity has led to the emergence of several alternative social media apps that offer similar features, such as Instagram’s Reels and Byte, which was created by the co-founder of Vine.

Has any legislation been passed to date regarding the prohibition of TikTok?

As of the current date, no legislation has been passed to prohibit the use of TikTok in the US. However, the US government has taken steps to restrict the app’s use, including the aforementioned ban on TikTok in US app stores.

Which other countries have taken steps to ban or restrict TikTok?

Several other countries, including India and Pakistan, have taken steps to ban or restrict TikTok over concerns about national security and user privacy. In India, TikTok was banned in June 2020, along with several other Chinese-owned apps. In Pakistan, the government has announced plans to ban TikTok unless the app takes steps to address concerns about “obscenity and immorality.”

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Decoding China’s Consumer Price Rebound Amid Deflation Risks: Insights & Analysis

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Introduction

China’s consumer prices have shown signs of rebounding, thanks to a holiday boom. The Consumer Price Index (CPI) grew by 0.7% year on year in February, surpassing expectations and marking the first rise after six consecutive months of decline. However, amidst this positive development, there are looming concerns about deflation risks as factory gate prices continue to fall for the 17th consecutive month. This article delves into the intricacies of China’s current economic landscape, analyzing the factors contributing to the CPI growth and exploring the implications of persistent deflation risks.

1: Understanding China’s Consumer Price Index (CPI) Growth
The Consumer Price Index (CPI) serves as a key indicator of inflation and reflects changes in the prices paid by consumers for goods and services. The recent 0.7% year-on-year growth in China’s CPI in February has sparked optimism among economists and policymakers. This growth can be attributed to various factors, including increased consumer spending during holidays, rising demand for certain goods and services, and government stimulus measures aimed at boosting consumption.

2: Implications of CPI Growth on China’s Economy
The rebound in consumer prices has significant implications for China’s economy. A positive CPI growth indicates a healthier level of inflation, which can stimulate economic activity by encouraging spending and investment. It also reflects improved consumer confidence and overall economic stability. However, it is essential to monitor the sustainability of this growth and its impact on other economic indicators.

3: Analyzing Deflation Risks in China’s Economy
Despite the encouraging CPI growth, there are concerns about deflation risks looming over China’s economy. The continuous decline in factory gate prices for the 17th consecutive month is seen as a warning signal by analysts. Deflation can have detrimental effects on an economy, leading to reduced consumer spending, lower corporate profits, and potential economic stagnation. Policymakers must address these deflation risks proactively to prevent long-term negative consequences.

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4: Factors Contributing to Deflation Risks
Several factors contribute to the deflation risks faced by China’s economy. Overcapacity in certain industries, weak global demand, trade tensions, and technological advancements leading to cost reductions are some of the key factors driving down factory gate prices. Addressing these underlying issues requires a comprehensive approach that involves structural reforms, targeted stimulus measures, and strategic policy interventions.

5: Strategies to Mitigate Deflation Risks
To mitigate deflation risks and sustain economic growth, policymakers in China need to implement effective strategies. These may include promoting domestic consumption through incentives and subsidies, fostering innovation and technological advancement to enhance competitiveness, addressing overcapacity through industry restructuring, and maintaining a stable macroeconomic environment through prudent monetary and fiscal policies.

Conclusion
China’s consumer price rebound offers a glimmer of hope amidst challenging economic conditions. While the CPI growth signals positive momentum in the short term, it is essential to address the underlying deflation risks to ensure long-term economic stability and growth. By understanding the factors contributing to CPI growth and deflation risks, policymakers can formulate targeted strategies to navigate these challenges effectively. Monitoring economic indicators closely and implementing proactive measures will be crucial in safeguarding China’s economy against potential downturns.

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