From Bloomberg

First time Asian nation didn’t import from U.S. since 2016: refiners still worried about U.S. crude import tariff

Even though Beijing hasn’t sanctioned American oil imports yet, Chinese buyers aren’t taking any chances.

The world’s second largest economy halted purchases of U.S. crude in August for the first time since September 2016, according to U.S. Census Bureau data released Friday. In July, Chinese buyers received nearly 12 million barrels of crude from the U.S.

Beijing, once an enthusiastic buyer of U.S. crude after Washington lifted its restrictions on exports in December 2015, has even jockeyed with Canada for the position of top importer at times. Yet, China’s interest in American oil has diminished amid the escalating trade spat between the two nations.

Trade halt

In June, Beijing threatened to slap a 25 percent tariff on crude imports in response to U.S. President Donald Trump’s $50 billion levy on Chinese imports. China’s largest refiner Sinopec then suspended its incoming shipments of U.S. crude, yet eventually resumed some purchases after crude was removed from that list.

The future of American crude shipments into China remains uncertain and there is still no guarantee that threats of a U.S. crude tariff won’t resurface as the trade conflict persists. American oil producers, particularly those who operate in the key Permian Basin of West Texas and New Mexico, risk feeling the pain from the ongoing tensions as they increasingly look to foreign shores to market their supplies, as local demand becomes saturated.


Trump Expands Anti-China Effort

From The Hill

The Trump administration is pushing forward with an aggressive and public effort to condemn China for a wide series of transgressions, a strategy that risks intensifying an already high-stakes standoff with Beijing.

President Trump has long denounced U.S. trade policies with China, a centerpiece of his 2016 campaign that was a critical reason for his victories in the states of Michigan, Wisconsin and Pennsylvania.

But over the last few months, the administration’s conflicts with China have gone well beyond trade to include signs of military flare-ups over the South China Sea and public allegations that Beijing is interfering in U.S. elections.

These widening areas of conflict have happened even as the trade fight with China has deepened, with Trump announcing $200 billion in new tariffs on Chinese imports just last month.

Trump has criticized past U.S. governments led by Republican and Democratic presidents as dealing with China from too weak a position.

Officials argue that the more muscular approach will actually make a real conflict with China less likely.

“In part, we are educating the American public, but we are also trying to help China understand where they are overreaching in ways that could lead down a very bad path,” said one senior administration official.

The tougher rhetoric and policies, at least when it comes to trade, follow changes within the administration. Former chief economic adviser Gary Cohn’s exit has been widely seen as empowering figures within the administration who have backed imposing tariffs on China.

Trump has also brought on a China hawk in national security adviser John Bolton.

Previous administrations tended to prefer a publicly cordial relationship with China that allowed grievances to be addressed behind closed doors. The Trump administration argues that approach failed.

“We’ve spoken with the Chinese behind closed doors and found that it’s had very little to no impact on China’s actual behavior,” the official said. “And so, in the interest of helping them understand where we are coming from, stabilizing our relationship, and ensuring that we can have a cooperative relationship over the long term, we are calling out those activities publicly that threaten American interests.”

The tougher approach on China was best reflected in a forceful public address last week by Vice President Pence, who accused Beijing of initiating “an unprecedented effort to influence American public opinion, the 2018 elections, and the environment leading into the 2020 presidential elections” in order to hurt Trump and the Republican Party.

Pence cited China’s use of newspaper advertisements and public information campaigns, as well as retaliatory tariffs on agricultural goods, to target voters in districts won by Trump, alleging that the Russian effort to influence the 2016 election “pales in comparison” to the broad scope of actions undertaken by China.

“These and other actions, taken as a whole, constitute an intensifying effort to shift American public opinion and public policy away from the America First leadership of President Donald Trump,” Pence said. “But our message to China’s rulers is this: This president will not back down — and the American people will not be swayed.”

Critics were quick to point out that there is no evidence of China engaging in a hacking and disinformation campaign akin to Russia’s in 2016.

The remarks reverberated on the international stage, with Secretary of State Mike Pompeo on Monday engaging in a crusty exchange in Beijing with Chinese Foreign Minister Wang Yi.

Wang told Pompeo that the administration’s “groundless” accusations of election meddling by China coupled with sweeping U.S. tariffs constitute a “direct attack on our mutual trust and has cast a shadow over China-U.S. relations,” according to Reuters.

Pompeo, who was briefing Chinese officials on his talks with North Korean leader Kim Jong Un, said the issues Wang raised show “we have a fundamental disagreement and “grave concerns about the actions that China has taken.”

“I look forward to having the opportunity to discuss each of those today because this is an incredibly important relationship,” the secretary of State added.

The administration has also increasingly clashed with China in the South China Sea, where Beijing has made expansive territorial claims and constructed artificial islands the U.S. says can be used for military purposes. Last week, the Pentagon accused a Chinese warship of making an “unsafe” pass of the USS Decatur.

The accusation against China of election meddling has not been accompanied by new policy changes, though Bolton appeared to suggest last week that the administration could soon take steps designed to counter China’s political activities in the U.S.

“We expect there will be more on this subject in the days and weeks ahead,” Bolton told reporters Thursday.

A source close to the administration said the National Security Council has begun the process of asking government agencies to develop options designed to limit Chinese technology companies’ involvement in the coming rollout of a new 5G network in the U.S.

The measures could be aimed at companies such as Huawei and ZTE, whose technology Trump banned the government from using over security concerns.

Australia, a close U.S. ally and intelligence-sharing partner, has blocked the two companies from participating in its 5G rollout.

The efforts could help fulfill Trump’s campaign promise to crack down on China, which he has accused of carrying out one of the “greatest thefts in the history of the world” against the U.S. on trade.

Regional experts worry the public rancor and escalating trade fight could dampen the world economy. Some also warn it could make it difficult for the U.S. to secure China’s cooperation on issues like North Korea, where Beijing in the past has been a key partner in enforcing sanctions against Pyongyang.

“There is a cost associated with taking a more aggressive approach towards China,” said Ryan Hass, a China expert at the Brookings Institution and former National Security Council official during the Obama administration.

“The question I have is, what are the benefits? That to date is very hard to articulate,” Hass added. “I can’t tell you what we have gained, and I don’t think the vice president can tell you either.”

Administration officials, like Director of National Intelligence Dan Coats, say China represents a broader and more methodical threat when it comes to foreign influence, one that encompasses malicious cyberactivity but also includes media manipulation and pressure tactics targeting businesses and university students designed to boost China’s image.

“With China, there has been a broad effort underway for a long time, but now that effort is better resourced and has been prioritized by the Chinese leadership to condition the way Americans think about China’s expansion and activities generally around the globe,” said the official.

Trump has given himself the ability to take decisive action against China for the alleged meddling, but it remains unclear if he plans to use it. Trump signed an executive order in September that allows the administration to level sanctions on foreign entities or individuals who interfere in U.S. elections.

The administration’s stark rhetoric toward Beijing is a sign China hawks within the administration are growing even more wary of Beijing’s willingness to infringe on the U.S. in the economic and digital realm.

On the same day as Pence’s address, Bloomberg reported that the Chinese government had secretly implanted spy chips into servers that eventually made their way to Apple, Amazon and the U.S. government. Apple has denied many of the article’s claims.

China’s decision to arrest the head of Interpol, Chinese national Meng Hongwei, also stunned world leaders and shined a light on President Xi Jinping’s sweeping anti-corruption crackdown that some experts have dismissed as a thinly veiled attempt to consolidate power.

“This administration is pushing a very broad set of charges and making a broad set of moves on China,” said Dean Cheng, a China expert at the conservative Heritage Foundation. “Pence’s speech, coming from the vice president himself, is basically saying, look, there is actually this underlying view in this administration of China: ‘You are a bad actor.’”

 

 


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