The screws tighten on China

A quick survey of news from around the world show the screws are tightening on China. 

First, news broke that Chinese tech company Huawei is now likely to face a criminal probe for stealing trade secrets from T-Mobile.  This case is the result of civil lawsuits files against Huawei, primarily one where a Seattle jury found the Chinese company guilty of misappropriating robotic technology from T-Mobile.  Although the judgment was a modest $4.8 million, it set a precedent for the Justice Department to use Huawei's behavior that was previously outlined in civil lawsuits as a basis for criminal prosecution. 

Second, Chinese trade negotiators have offered a deal to go on a six-year buying spree to ramp up imports from the U.S. with a combined value of over one trillion dollars over that period.  This will, it is claimed, reduce the trade deficit to zero.  So far, the Trump administration is cool to the offer for being not enough and not addressing the matter of intellectual property theft.  Also, there is concern regarding what the Chinese might want to buy. Advanced technologies would be off the table.  There is also constant concern about China keeping its promises.  So far, the Red Dragon's record is not good.

Third, the U.S. campaign to shut Huawei out of Western markets took another step forward when it was reported that Germany is considering banning Huawei products from its coming 5G networks over security concerns.  If Berlin follows though, it will be a major blow to Huawei and would affect 3G and 4G networks, too.  Germany is one of that company's largest markets outside China, with Dusseldorf being Huawei's European headquarters.

Fourth, the European Union has set trade restrictions on steel imports in the form of quotas on 26 steel categories with a tariff of 25 percent on imports exceeding those quotas.  This move mostly affects China and is the indirect result of President Trump's 25% tariffs on steel imports.  As Chinese steel finds it harder to get into the American market, China is looking to dump its excess steel capacity wherever it can.  Europe is a plump target.  This type of trade restriction could cascade to include any country with a steel industry.  Not to do so would leave said countries open to being flooded by Chinese steel over-capacity, extinguishing their domestic steel industry. 

Fifth, the Polish Internal Security Agency arrested and charged a Huawei executive on suspicion of spying for China.  Huawei is the top supplier of smartphones in Poland with over a third of the market.  Huawei has denied knowledge of the activities of its employee and has fired him. 

These are not unrelated events.  Nor will this be the end of them.  They're happening because of one Donald Trump.  It's not that the president told the E.U. to restrict Chinese steel or called Poland to arrest the Huawei executive.  Trump isn't micromanaging.  What he's doing is more effective.  Leading by example, he has initiated a paradigm shift in how others look at Chinese misbehavior.  Prior to Trump taking strong exception to China's mercantile trade practices and intellectual property thefts, Chinese agents more or less skipped uninhibited throughout the West, picking up whatever goodies they could.  A greased palm here, a bought politician there, and before you know it, hundreds of billions of dollars a year of intellectual property and technology was flowing into China. 

Now that the Alpha Dog has bared his teeth to the Red Dragon, others are finding the courage to demand fairness in their China trade.  There is no other way to look at the situation but to conclude that China's free ride is rapidly ending.  This will force Chinese President Xi Jinping and the rest of his communist leadership to focus more on how to manage their country's astronomical debt, capital outflow, poverty, and upside-down demographic than trying to take America's position in the world.

A quick survey of news from around the world show the screws are tightening on China. 

First, news broke that Chinese tech company Huawei is now likely to face a criminal probe for stealing trade secrets from T-Mobile.  This case is the result of civil lawsuits files against Huawei, primarily one where a Seattle jury found the Chinese company guilty of misappropriating robotic technology from T-Mobile.  Although the judgment was a modest $4.8 million, it set a precedent for the Justice Department to use Huawei's behavior that was previously outlined in civil lawsuits as a basis for criminal prosecution. 

Second, Chinese trade negotiators have offered a deal to go on a six-year buying spree to ramp up imports from the U.S. with a combined value of over one trillion dollars over that period.  This will, it is claimed, reduce the trade deficit to zero.  So far, the Trump administration is cool to the offer for being not enough and not addressing the matter of intellectual property theft.  Also, there is concern regarding what the Chinese might want to buy. Advanced technologies would be off the table.  There is also constant concern about China keeping its promises.  So far, the Red Dragon's record is not good.

Third, the U.S. campaign to shut Huawei out of Western markets took another step forward when it was reported that Germany is considering banning Huawei products from its coming 5G networks over security concerns.  If Berlin follows though, it will be a major blow to Huawei and would affect 3G and 4G networks, too.  Germany is one of that company's largest markets outside China, with Dusseldorf being Huawei's European headquarters.

Fourth, the European Union has set trade restrictions on steel imports in the form of quotas on 26 steel categories with a tariff of 25 percent on imports exceeding those quotas.  This move mostly affects China and is the indirect result of President Trump's 25% tariffs on steel imports.  As Chinese steel finds it harder to get into the American market, China is looking to dump its excess steel capacity wherever it can.  Europe is a plump target.  This type of trade restriction could cascade to include any country with a steel industry.  Not to do so would leave said countries open to being flooded by Chinese steel over-capacity, extinguishing their domestic steel industry. 

Fifth, the Polish Internal Security Agency arrested and charged a Huawei executive on suspicion of spying for China.  Huawei is the top supplier of smartphones in Poland with over a third of the market.  Huawei has denied knowledge of the activities of its employee and has fired him. 

These are not unrelated events.  Nor will this be the end of them.  They're happening because of one Donald Trump.  It's not that the president told the E.U. to restrict Chinese steel or called Poland to arrest the Huawei executive.  Trump isn't micromanaging.  What he's doing is more effective.  Leading by example, he has initiated a paradigm shift in how others look at Chinese misbehavior.  Prior to Trump taking strong exception to China's mercantile trade practices and intellectual property thefts, Chinese agents more or less skipped uninhibited throughout the West, picking up whatever goodies they could.  A greased palm here, a bought politician there, and before you know it, hundreds of billions of dollars a year of intellectual property and technology was flowing into China. 

Now that the Alpha Dog has bared his teeth to the Red Dragon, others are finding the courage to demand fairness in their China trade.  There is no other way to look at the situation but to conclude that China's free ride is rapidly ending.  This will force Chinese President Xi Jinping and the rest of his communist leadership to focus more on how to manage their country's astronomical debt, capital outflow, poverty, and upside-down demographic than trying to take America's position in the world.