Nov 8, 2018

China figures out how to live without U.S. lobster and soybeans

Soy farming in Owings, MD, which already sells its crop to U.S. chicken farmers. Photo: Mark Wilson/Getty

Three weeks ahead of a meeting between President Trump and China's Xi Jinping, Beijing is notching record exports and figuring out how to manage without American goods.

Why it matters: Despite tariffs on $250 billion in Chinese goods, Trump has appeared to fail to budge Xi on his determination to do whatever it takes to dominate the technologies of the future.

In August, we flagged an upcoming year-long trade war between the U.S. and China. Now, there is no indication that it will end even then.

  • Trump says he will tariff the rest of China's $510 billion in trade with the U.S. if he and Xi cannot strike a deal in Buenos Aires on Nov. 29.
  • In remarks today, Xi indicated little flexibility, suggesting that Trump needs to respect China's strategic choices, Reuters reports.

Meanwhile, while China's economy is flagging a bit — in the third quarter, its GDP growth was 6.5% year-on-year, the slowest since the financial crash — it is still humming: Chinese exports keep rising, report the WSJ's Liyan Qi and Grace Zhu.

  • The acrimonious U.S.-China trade gap is up 15% from a year ago and China is on pace to post another record surplus.

One of the trade war's most immediate U.S. victims is Maine lobster fishing, writes Bloomberg's Shawn Donnan. In line with Trump's tariffs, China slapped 25% levies on $128 million-a-year in U.S. lobster imports, and Maine's industry — cultivated over a decade and more — got hit.

  • China is simply buying its lobsters elsewhere — such as just over the border in Nova Scotia, Canada.

The list goes on. Parag Khanna, author of the forthcoming, "The Future is Asian," tells Axios that China is finding ways to permanently substitute for American imports.

  • Last summer, China slashed U.S. oil imports and started to buy more Russia and Saudi Arabia.
  • It has all but halted purchases of U.S. soybeans, buying them instead from Brazil and Argentina. Brad Setser, an economist at the Council on Foreign Relations, said Russia could emerge as another soybean supplier.
  • China very much wants to make and design its own high-end semiconductors as part of its aspirational Made in China 2025 program. For now, Khanna said a third of its high-tech imports come from U.S. companies. But it can begin to replace these from its Asian neighbors.
“Imagine China decides to cancel or diminish orders of Boeing aircraft. Of course, it can just boost orders from Airbus.”
— Parag Khanna

Trump is said to want to decouple the U.S. and Chinese economies — and increasing numbers of establishment experts think he is right given China's aggressive economic tactics.

And the administration pushback is having an impact: In a report by the American Chamber of Commerce in Shanghai, more than 70% of U.S. firms surveyed in southern China said they were moving some or all their manufacturing out of the country, mostly to southeast Asia, Reuters reports.

But trade experts note that there could be a price for such all-or-nothing brinksmanship should the U.S. decide that it wants trade with China after all.

“Once the U.S. loses the Chinese market for a product, it is unlikely to get it back even if this round of the trade war ends and tariffs are lifted," said Edward Alden, a trade expert at the Council on Foreign Relations. "This is both because it will establish new sourcing patterns, which tend to be sticky, and because Chinese buyers will not want to run the risk of future U.S. tariffs."

Go deeper:

Soybeans are an unlikely political ground zero in Trump's trade war

Go deeper

Biden says he's starting VP search this month

Joe Biden. Photo: Scott Olson / Staff

Joe Biden said he's spoken to Sen. Bernie Sanders and former President Barack Obama about selecting a running mate — and that he wants to build "a bench of younger, really qualified people" who can lead the nation over the course of the next four presidential cycles.

Driving the news: Biden spoke about the state of the 2020 race during a virtual fundraiser on Friday night that was opened to pooled coverage.

Trump ousting intelligence community inspector general

Michael Atkinson, inspector general of the intelligence community. Photo: Bill Clark / Getty Images

President Trump notified key lawmakers on Friday that he’s firing Michael Atkinson, the intelligence community's inspector general, who first alerted Congress last September of an "urgent" complaint from an official involving Trump's correspondence with the Ukrainian president.

Why it matters: The move, to take effect in 30 days, comes amid a broader initiative to purge the administration of officials seen as disloyal to the president.

Coronavirus dashboard

Illustration: Axios Visuals

  1. Global: Total confirmed cases as of 10 p.m. ET: 1,097,909 — Total deaths: 59,131 — Total recoveries: 226,106Map.
  2. U.S.: Total confirmed cases as of 10 p.m. ET: 277,828 — Total deaths: 7,406 — Total recoveries: 9,772Map.
  3. Public health latest: The CDC is recommending Americans wear face coverings in public to help stop the spread of the coronavirus. The federal government will cover the costs of COVID-19 treatment for the uninsured, Health and Human Services Secretary Alex Azar said.
  4. 2020 latest: "I think a lot of people cheat with mail-in voting," President Trump said of the 2020 election, as more states hold primary elections by mail. Montana Gov. Steve Bullock said Friday that every county in the state opted to expand mail-in voting for the state's June 2 primary.
  5. Business updates: America's small business bailout is off to a bad start. The DOT is urging airlines to refund passengers due to canceled or rescheduled flights, but won't take action against airlines that provide vouchers or credits.
  6. Oil latest: The amount of gas American drivers are consuming dropped to levels not seen in more than 25 years, government data shows. Trump is calling on the Energy Department to find more places to store oil.
  7. Tech updates: Twitter will allow ads containing references to the coronavirus under certain use cases.
  8. U.S.S. Theodore Roosevelt: Senators call for independent investigation into firing of Navy captain.
  9. What should I do? Answers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk.
  10. Other resources: CDC on how to avoid the virus, what to do if you get it.

Subscribe to Mike Allen's Axios AM to follow our coronavirus coverage each morning from your inbox.