Huawei insanity

The Huawei Affair just keeps escalating. I hope this doesn’t lead to a Sino-American war. It’s really not worth it.

A second Canadian has just disappeared into detention in China – by sheer coincidence, of course.

Meantime, the permanent bureaucracy shows the president who’s boss:

Despite President Trump’s statement that he might intervene in a criminal case against the chief financial officer of Huawei Technologies Co., such a move would break from longstanding tradition and advisers have warned him that his options are limited, according to people familiar with the matter.

When news broke last week of the arrest of Meng Wanzhou, threatening the president’s trade talks with China, he asked for options, according to one person, and advisers told him the arrest and potential prosecution of Ms. Meng was essentially out of his hands.

The arrest was a Justice Department matter, they said, and the White House should stay out of it for now, this person said. There are no immediate plans to intervene in the matter, officials added.

Trump can and absolutely should make the DoJ drop this case:

Former Justice Department officials said that while Mr. Trump’s intervention in the Meng case would be a departure from the norms against White House involvement in criminal cases, there is nothing in the Constitution that bars it. Such actions are more common – though still unusual – if the action is framed as a national-security matter.

While the circumstances were different, President Obama pushed the Justice Department to drop cases against several alleged Iran-sanctions violators while negotiating a plan for that country to curb its nuclear program.

David Goldman is probably right that certain elements of the national security state are trying to sandbag Trump.

Here’s an explainer on the legal niceties of the case. All well and good, but it blithely ignores the insanely provocative nature of this move, how it is *perceived* outside the US (backlash is bad), as well as the selective way in which the law is being applied:

The arrest of Huawei chief financial officer Meng Wanzhou is a dangerous move by US President Donald Trump’s administration in its intensifying conflict with China. If, as Mark Twain reputedly said, history often rhymes, our era increasingly recalls the period preceding 1914. As with Europe’s great powers back then, the United States, led by an administration intent on asserting America’s dominance over China, is pushing the world toward disaster.

The context of the arrest matters enormously. The US requested that Canada arrest Meng in the Vancouver airport en route to Mexico from Hong Kong, and then extradite her to the US. Such a move is almost a US declaration of war on China’s business community. Nearly unprecedented, it puts American businesspeople traveling abroad at much greater risk of such actions by other countries.

It may not be kidnapping but it certainly looks like kidnapping. From FT:

To put the incident’s shock value in an American context, it was as if a daughter of Steve Jobs, who was following him up the corporate ladder at Apple, had been detained in Moscow pending her possible extradition to Beijing.

The hypocrisy of this move against an extremely high-profile Chinese businesswoman is a little hard to take:

Meng is charged with violating US sanctions on Iran. [Ed: Not quite.] Yet consider her arrest in the context of the large number of companies, US and non-US, that have violated US sanctions against Iran and other countries. In 2011, for example, JPMorgan Chase paid US$88.3 million in fines for violating US sanctions against Cuba, Iran and Sudan. Yet chief executive officer Jamie Dimon wasn’t grabbed off a plane and whisked into custody.

And JPMorgan Chase was hardly alone in violating US sanctions. Since 2010, the following major financial institutions paid fines for violating US sanctions: Banco do Brasil, Bank of America, Bank of Guam, Bank of Moscow, Bank of Tokyo-Mitsubishi, Barclays, BNP Paribas, Clearstream Banking, Commerzbank, Compass, Crédit Agricole, Deutsche Bank, HSBC, ING, Intesa Sanpaolo, JP Morgan Chase, National Bank of Abu Dhabi, National Bank of Pakistan, PayPal, RBS (ABN Amro), Société Générale, Toronto-Dominion Bank, Trans-Pacific National Bank (now known as Beacon Business Bank), Standard Chartered, and Wells Fargo.

None of the CEOs or CFOs of these sanction-busting banks was arrested and taken into custody for these violations. In all of these cases, the corporation – rather than an individual manager – was held accountable. Nor were they held accountable for the pervasive lawbreaking in the lead-up to or aftermath of the 2008 financial crisis, for which the banks paid a staggering $243 billion in fines, according to a recent tally.

The beatings will continue until morale improves

China port source BBC

From Axios, we learn that the Sino-American trade relationship will remain… strained… for a while:

President Trump has no intention of easing his tariffs on China, according to three sources with knowledge of his private conversations. Instead, these sources say he wants Chinese leaders to feel more pain from his tariffs — which he believes need more time to fully kick in.

What we’re hearing: “He wants them to suffer more” from tariffs on $200 billion of Chinese goods, said a source with direct knowledge of Trump’s thinking, and the president believes the longer his tariffs last, the more leverage he’ll have. […]

Behind the scenes: Trump has privately boasted that his China tariffs have driven down the country’s stock market. Experts say the trade war has hurt market sentiment, but the stock market has never been a reliable barometer of Chinese economic strength.

As 罗臻 points out:

A-shares are not a good measure of Chinese economic sentiment, it’s housing. In order to crack the housing market, however, Trump would need to inflict more pain for longer, to the point where China can’t contain the fallout and home prices start sinking 1 or 2 percent per month.

Trump is pursuing the right strategy for his intentions, even if he isn’t watching the right signals. Or maybe the stock market comments are for public (and China’s) consumption.

The Navarro effect

There’s no such thing as a free lunch — anymore:

President Donald Trump announced that the US would pull out of an obscure 144-year-old postal treaty, in what looks to be his latest direct shot at China.

The Trump administration announced Wednesday that the US would leave the the Universal Postal Union treaty, an agreement from 1874 that helps to standardize postal rules among the international community.

The interesting aspect of the UPU decision is a more recent addition to the agreement. The UPU, which is now under the United Nations’ purview, sets rates that national postal services pay to ship goods internationally. Under a deal reached in 1969, developing countries can ship smaller items at lower rates than developed nations like the US. The provision is designed to help facilitate exports from smaller countries to give a boost to growing economies.

But the provision also allows Chinese producers to ship items to the US at significantly low rates even compared to some US domestic shipping rates. The Trump administration says many companies even offer free shipping to the US from China because of these lower rates — and as a result, roughly 60% of inbound shipping to the US comes from China.

Trump’s trade adviser Peter Navarro appears to be the instigator of this move.