When Donald Trump’s chief trade adviser went to Beijing in May with proposals to open up China’s vast domestic market to American goods – and thereby reduce a ballooning trade deficit with China – the mission was declared a failure.
Before Robert Lighthizer set off, the veteran rightwing economist told Congress: “It is not my objective to change the Chinese system. It seems to work for them … But I have to be in a position where the US can deal with it, where the US isn’t the victim of it. And that’s where our role is.”
Chinese officials wanted to appear flexible. They said China needed to protect domestic businesses from being crushed by foreign rivals, but agreed to loosen China’s rules on foreign ownership.
Lighthizer, who was accompanied by Trump’s top team, including treasury secretary Steven Mnuchin, commerce secretary Wilbur Ross, White House trade and manufacturing adviser Peter Navarro, and new White House economic adviser Larry Kudlow, deemed the offer insufficient.
Two months later and the world is gripped by fears of an all-out trade war, with higher tariffs already levied, or about to be, on almost $1 trillion of goods traded between the US and China, the US and Europe, and the US and its partners inside the Nafta trade area, Canada and Mexico. It shows how tough Lighthizer believes the US needs to be to force Beijing into action. It shows how his boss is prepared to back him, even when corporate America is telling him the opposite.
Chinese academics fear that Communist party officials have underestimated Trump and allowed a small problem to escalate out of control. After all, China has a trade surplus of around $340bn with the US and much more to lose. In that respect, the latest trade data is only making the US argument stronger: China’s trade surplus with the US in June stood at a record $28.97bn. China’s exports to the US climbed to $42.62bn, also a record high.
On one level this isn’t China’s fault. The US economy is booming and sucking in imports left, right and centre. It is the single largest destination for exports for dozens of countries, including the UK.
But there are more reasons for Lighthizer to fight hard. By most measures the dollar is overvalued in international currency markets, including against the yuan. It means Chinese goods are artificially cheap.
China, to keep the wheels of its industry turning, has driven down the yuan after reversing its tight monetary policy. It has done this by telling banks to loosen their credit criteria and cut loan interest rates.
This is going on while the Japanese continue to use their central bank to drive down the yen and Mario Draghi at the European Central Bank pumps money into the economies of the 19 eurozone countries with the clear side-effect of driving down the euro’s value.
From the White House, with the Federal Reserve around the corner doing the opposite of its foreign counterparts (it’s increasing interest rates and reversing quantitative easing), it must seem like an uphill battle to make America Great Again.
Yet Lighthizer’s version of winning strangely ignores the feedback loop that comes from hurting your rivals. The economies of Europe, Japan and China are already slowing. Once trade tariffs begin to bite and exports to the US falter, world growth will slow further, in turn harming US exporters. Even if the US continues to import as much as it did before, rising import costs will jack up inflation and hit workers’ living standards.
But as the US midterm elections approach, this has been good politics for the Trump base. The economic fallout will come later – which means team Trump is playing a clever game. China, and the rest of the world, should be wary.
The UK needs to get plugged in to creating a useful charging point network
Who could have predicted the humble plug socket taking such a starring role in public debate? People ranging from ministers and government advisers to the National Grid and industry leaders weighed in last week on charging infrastructure for electric cars: how many, where, how fast, who pays, how smartly they will work.
Transport secretary Chris Grayling, presenting the UK’s plan for zero-emission cars, envisaged a “massive expansion of the plug-in network”, helped by charging points in new lamp-posts. The government is even looking at requiring all new homes to have electric car chargers.
Today, there are around 14,000 public charging points. The “range anxiety” felt by electric-car sceptics is somewhat negated by improving battery capacity and the fact that 95% of car journeys are less than 25 miles. Yet perception is important. For motorists contemplating a first switch to a plug-in car, the availability of charging points matters, even if in practice they end up mostly charging at work and home.
And while the number of points is growing, and the entrance of players such as BP and Shell is welcome, there is a long way to go. Electric car drivers tell of faulty points, dedicated spaces blocked by conventional cars, and a fractured market requiring membership of multiple charging networks.
This is important to more than just owners of plug-in cars. A proper nationwide network will offer a “chance for the UK to get ahead”, government advisers said last week.
The national infrastructure commission reports that in the past the UK failed to adopt new infrastructure as quickly as other countries because of a lack of coordination, short-term interests, endless debate and delays. But it added: “This time can be different.”
In the Sky bidding war, it’s heads Murdoch wins – and tails he wins too
We learned last week that when Sky is sold, it will go for a princely sum, and Rupert Murdoch will benefit either way. The tussle is between Murdoch’s Fox, trying to buy the 61% of Sky it does not own, and the US cable group Comcast, which is also trying to snap up Sky.
Earlier last week, in a day of quickfire bidding, Murdoch upped his offer for Sky to £14 a share. Within hours this was trumped by Comcast, offering £14.75 a share, valuing the business at £25.9bn.
In the background is Disney, which has agreed to buy Fox and, ultimately, Sky. Whether Murdoch is a loser or a winner over Sky, with Comcast circling Fox as well, he will have no regrets whatever happens.
In the UK, Sky’s share price is running almost £1 higher than Comcast’s latest offer, which means investors believe there is more to come from Murdoch.
Because Fox has a takeover agreement in place with Disney, Fox has to ask Disney’s consent each time it makes a new bid for Sky. Disney, which has called Sky a “crown jewel”, has agreed to pay the cost of any new Sky bid over £13 a share. This means it will cost Disney just over £1bn for each £1 by which the bid is raised.
There is a theory that Disney and Comcast could compromise to avoid a costly bidding war and agree to share the spoils, with the former taking most of the Fox assets, including its film studio, and the latter landing Sky. That said, many observers are still betting that the bidding war will go the distance, with analysts forecasting that a knockout blow will require a bid valuing Sky at more than £31bn.
When Murdoch was first interviewed about agreeing a deal to sell off most of Fox to Disney, he said Sky would be the asset he would be saddest to see go.
Now, with his favourite business bound into an escalating bidding war, he’s set to be saying goodbye with a smile on his face.