China Goes for the Gut

On Wednesday, China sharply upped the ante in the trade conflict with President Trump by unveiling new tariffs on US goods worth about $50 billion. Yesterday, Trump appeared to threaten an additional $100 billion in tariffs, beyond the $50 billion the White House has already announced.


Leverage: When it comes to a US-China trade fight, President Trump is right that China is more vulnerable than the US. But President Xi is right that Trump is more vulnerable than Xi, because China’s government can help struggling Chinese industries in ways the US can’t, by directing banks to loan money to targeted companies and industries or spreading losses among state-owned companies, for example, and because Xi doesn’t have to worry about swing states and electoral votes. Among the US products China has so far targeted for sanctions are soybeans, orange juice, and pork. Xi knows that Trump can’t win re-election without winning the states that produce large volumes of these commodities (see graphic below).

Changing China: China’s vulnerability on trade is not what it was. In 2006, Chinese trade amounted to 65.2 percent of GDP. In 2016, that number had fallen to just 37 percent. That’s still higher than the US (27 percent), but China now has less reason to shy away from a trade fight if its government feels it must persuade Trump that trade wars aren’t “easy to win.”

A hopeful sign: Neither side’s tariffs take immediate effect. The US proposal allows for a 60-day period for public feedback. Chinese officials say the timing of China’s trade actions depends on the outcome of negotiations between the two countries.

The bottom line: There’s a serious risk of escalation here, but we should think of this week’s announcements, from both sides, as threats rather than plans. Let the bargaining begin.

In 2012, the United States created the Deferred Action for Childhood Arrivals (DACA) program to protect these young people from being deported. Yet just five years later, the program was rescinded, putting close to 700,000 DACA recipients at risk of being banished from the only home they've ever known. More than five dozen of these DACA recipients at risk are Microsoft employees. These young people contribute to the company and serve its customers. They help create products, secure services, and manage finances. And like so many young people across our nation, they dream of making an honest living and a real difference in the communities in which they reside. Yet they now live in uncertainty.

Microsoft has told its Dreamers that it will stand up for them along with all the nation's DACA recipients. It will represent them in court and litigate on their behalf. That's why Microsoft joined Princeton University and Princeton student Maria De La Cruz Perales Sanchez to file one of the three cases challenging the DACA rescission that was heard on Nov. 12 by the United States Supreme Court.

Read more on Microsoft On The Issues.

What do people think is driving the stock market's recent record high gains?


Well, there's really no precise answer, but analysts point to several factors. So, number one is strong third quarter earnings. Companies have reported stronger than expected results so far this season. The second is the jobs market. You saw the October jobs numbers exceed economists' expectations. And the third is the Federal Reserve cutting interest rates three times this year. That lowers borrowing costs for consumers and businesses and encourages them to spend more.

More Show less

In the predawn hours of Tuesday morning, Israel launched a precision attack in the Gaza Strip, targeting and killing a Palestinian Islamic Jihad (PIJ) commander. In response, the terror group fired more than 220 rockets at southern Israel. Exchanges of fire have brought cities on both sides of the Gaza border to a standstill and at least 19 Palestinians are dead and dozens of Israelis wounded. With this latest escalation, Israel now faces national security crises on multiple fronts. Here's what's going on:

More Show less

Last week, French President Emmanuel Macron said that NATO was experiencing "brain death," citing a lack of coordination and America's fickleness under Donald Trump as reasons to doubt the alliance's commitment to mutual defense. NATO – the North Atlantic Treaty Organization – was formed in the wake of World War II as a counterweight against Soviet dominance in Europe and beyond. Its cornerstone is that an attack on one member is considered an attack on all. But disagreements over sharing the cost of maintaining military readiness have caused friction between the alliance's members in recent years. In 2014, the bloc agreed that each member state would increase their own defense spending to 2% of their respective GDP over the next decade. But so far, only seven of 29 members have forked out the money. Here's a look at who pays what.