Photo: Fred DuFour/Agence France-Presse/Getty Images
What does the truce consist of? The U.S. and China reached a temporary trade truce over the weekend at the G20 Summit in Buenos Aires. The U.S. agreed to postpone its plan to increase the tariff rate on some $250 billion of Chinese goods from the current rate of 10%, to 25% on January 1. The agreement puts a freeze for both countries on any additional tariff increases or punitive measures for at least ninety days. Until then, the U.S. and China will be negotiating a possible trade deal.
After the truce, President Trump said that American farmers would be the beneficiary of the trade truce, claiming that China “intends to start purchasing agricultural product immediately.” Furthermore, Trump said that China will reduce and remove tariffs on car imports coming from the U.S. to China. China has yet to confirm these statements by President Trump. As a whole, much of the possible trade deal remains unclear, as the truce agreement itself, and the follow-up comments have been vague and devoid of detail.
Developments since the trade truce President Trump appointed U.S. Trade Representative Robert Lighthizer to lead the negotiations. Lighthizer is known to be a hardliner and deeply skeptical when it comes to China’s trade practices. After the temporary truce was forged over the weekend, investors responded positively on Monday as financial markets had good days. However, as investors looked more closely at some of the agreement’s details, optimism waned, and on Tuesday markets dove as investors fear a trade agreement in the coming months will be difficult to forge.
Furthermore, by a U.S. extradition order on Wednesday, Canadian authorities arrested Meng Wanzhou, CFO and daughter of the founder of Huawei Technologies, for alleged violations of U.S. sanctions against Iran. Chinese authorities have demanded Wanzhou’s release. Huawei is a leading Chinese tech company and a pivotal point of contention for a trade deal, as the U.S. fears Huawei imposes a cyber security threat. The arrest is likely to further complicate any possible trade deal.
What are the U.S. and China trying to negotiate? Since President Trump took office, he has been intent on re-negotiating a trade deal with China, frequently criticizing Beijing for its unfair trade practices that he claims have hurt the U.S. for too long. In response, Trump launched a back-and-forth tariff battle that has persisted for many months, attempting to bring Beijing to the bargaining table. Concerns over slowing economic growth in both countries is an important reason both sides are intent on negotiating a new trade deal.
Why are the U.S. and China at odds? The U.S. is grappling with a number of difficult issues with China, such as the trade balance and unfair trade practices. The Trump administration released a report in March of 2018, which concluded that China was employing unfair trade practices, such as requiring U.S. companies to release intellectual property in order to gain access to Chinese markets, the WSJ reports. The Chinese government rejected the findings. Last, the U.S. and China are in a race to establish technological dominance in the digital age.
What are tariffs and why are they used? Tariffs are taxes on imported goods - in this case, taxes on U.S. companies who import goods from China. They are intended to increase the price of imports to a level at which companies find it more profitable to produce or purchase the good in the U.S. instead of importing it. This can help protect and promote domestic industries, as some U.S. firms will experience increased demand for their product. However, tariffs also often lead to an increase in the price of consumer goods, as companies who typically import goods can no longer make use of the less-expensive imports from abroad, and must pay a higher price for goods produced in the U.S. Often times, this increase in the cost of production is passed along by companies to the consumer, which is why tariffs are often seen as a tax on American consumers. The figure below from the Pew Research Center, shows how tariff rates on all U.S. imports have changed across time:
“Yellow Vests” Riot in France Over Fuel Taxes
Photo by AFP
What’s Going On? In France, massive groups of protesters across the country are storming the streets in protest of a proposed “fuel tax” by the French Government. In three major cities, the “Yellow Vests Movement” have burned cars, destroyed statues and forced soccer games and other events to be canceled due to disruption. The protests have occurred over the past three weekends, with more than 150,000 protesters participating this past weekend, causing millions of dollars in damage. They have become increasingly violent; last weekend, at least three people died, more than 260 were injured, and over 400 were arrested during the riots. Amidst the chaos, Prime Minister Edouard Philippe officially postponed the next fuel tax increase - which was scheduled for Jan. 1, 2019 - for six months in order to seek a better solution.
Who Are the Yellow Vests, and Why Are They Angry? The “Gilets Jaunes” or “Yellow Vests” are a diverse group of protesters, ranging from the nationalist far right to far left, and many people in-between. Most of the participants live in rural areas and typically rely on cars for transportation, and say the fuel taxes are eating away their already small paychecks. They call themselves the “Yellow Vests” in reference to the yellow vests that French law requires drivers to carry in their vehicles at all times. There is no clear leadership amongst the Yellow Vests, and the protests have largely expanded through social media attention. The diesel tax proposal backfired for a couple different reasons. First, the majority of motorists in France use diesel fuel, which has risen in price by 23% over the past 12 months. The next proposed tax increase by 6.5 cents on diesel and 2.9 cents on Petrol tipped the scale and drew protesters into the streets. French President Emmanuel Macron defended the proposal, citing the need to fund more renewable energy; protesters, however, have claimed the fuel tax is hurting the middle and lower classes, and that Macron is the “President for the rich.” Secondly, the protests follow from a long period of unrest with President Macron and the French Government in general, who seem out of touch with the people, according to the protesters. While the protests began in opposition to the fuel taxes, some have expanded to include other issues, including education reform. Yellow Vest spokesman Benjamin Cauchy, spoke to the BBC to explain their frustration: "We're sick and tired of taxes being raised and the quality of public services going down. There are more and more people out there who can't make ends meet each month, more and more people are sleeping rough and yet we continue to raise taxes. Where is the money going? Where is it being used?" Even with the 6-month postponement, the Yellow vest movement continues to protest, seeking a permanent cancel of the fuel tax. How are the PM and President Macron Responding? The Prime Minister of France announced the decision to abandon the proposed tax hike for 6 months in order to stall the chaos. He responded in a televised statement saying, "The French who have donned yellow vests want taxes to drop, and work to pay. That's also what we want. If I didn't manage to explain it, if the ruling majority didn't manage to convince the French, then something must change." He also said that the protests must become peaceful, "If there is another day of protests, it must be declared in advance and must take place calmly." As of Thursday, the French Government will deploy around 89,000 troops in order to facilitate and control what is expected to be a huge protest this coming Saturday. Many tourists sites will be closed to avoid potential violence. President Macron sits in a difficult place, as he attempts to fulfill his promises to make France a more climate-friendly nation while battling the image of being a “President for the rich.”
Former President George H.W. Bush Dies at Age 94
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On November 30th, the 41st President and father of the 43rd, George H.W. Bush, died at the age of 94 in his home in Houston. Bush suffered for many years from a form of Parkinson’s disease. His final words were “I love you too,” in response to his son George W. Bush expressing his last words to his father. Barbara Bush, the wife of George H.W., recently passed away this past April.
George H.W. Bush served as the President of the United States from January 20, 1989 – January 20, 1993. He also carried an impressive background in the Navy, serving as a Naval officer in World War II. The funeral for Bush was held on Wednesday at the Washington National Cathedral in D.C. President Trump and First Lady Melania, along with the Obamas, the Clintons, and Carters were in attendance and sat in the same pew. His son George W. Bush gave the eulogy, and he drew both laughter and tears. At one point he said, “Through our tears, let us see the blessings of knowing and loving you — a great and noble man, and the best father a son or daughter could have,” he said. “And in our grief, let us smile knowing Dad is hugging Robin and holding Mom’s hand again.” President Bush’s body was flown to Houston for another funeral service on Thursday. His remains were interred at the George Bush Presidential Library at Texas A&M University.
Update on Khashoggi Killings
Photo: Drew Angerer/Getty Images. CIA director, Gina Haspel
What happened? CIA director Gina Haspel briefed several U.S. Senators on Tuesday regarding developments in the murder of Saudi journalist Jamal Khashoggi. Senators emerged from the briefing more convinced that the crown prince was complicit in the murder. Mohammad bin Salman (MBS) is the crown prince of Saudi Arabia and the day-to-day ruler of the kingdom. While Saudi officials have arrested eleven people in connection with the murder, they have repeatedly denied the crown prince had any involvement. To learn more about the context surrounding the murder, read the Memo from October.
What has been the response from Senators? Senator Bob Corker (R., Tenn) said “I have zero question in my mind that the crown prince directed the murder and was kept apprised of the situation all the way through.” Lindsey Graham, Republican Senator from South Carolina, said, “There is not a smoking gun - there is smoking saw,” referring to the alleged bone saw that was used to dismember Khashoggi.
Senators are debating a few legislative options to punish Saudi Arabia over the murder. One would involve the U.S. removing support for Saudi military efforts in Yemen. Another would involve suspending weapon sales to Saudi Arabia and sanctioning those responsible for the murder. Senator Richard Shelby (R,. Ala) said “Somebody should be punished, but the question is: how do you separate the Saudi crown prince from the nation itself?”
Why has there been debate over the crown prince’s involvement? President Trump has been slow to directly implicate the crown prince in the murder, attempting to preserve the alliance between the U.S. and Saudi Arabia. The relationship provides economic benefits for both countries, and is important for encouraging stability in the Middle East. Further, Defense Secretary James Mattis and Secretary of State Mike Pompeo told Senators last week there was no direct link between the crown prince and the murder. After Tuesday however, Senators appeared convinced that the evidence from the CIA contradicts the statements by Mattis and Pompeo. Who was Jamal Khashoggi? A U.S. resident and Washington Post contributor, Khashoggi was a Saudi journalist and vocal critic of the Saudi regime. He was murdered by Saudi operatives at the Saudi consulate in Turkey on October 2nd. Khashoggi entered the consulate to retrieve marriage documents and never returned.