"When You Make Enemies Everywhere, You Can't Sell Anything"

From a Guancha article

In a recent article before Trump’s tariff announcement, I mentioned the growing movement to boycott Made in USA because of its continuing to abet Genocide in Gaza. That has now spread even farther in defiance of the tariffs. But I would also have to add the stupendous level of arrogance emanating from Trump and his team. Trump is now the quintessential Ugly American. As demonstrated by the several Global Times editorials I provided, there are many things to learn about the Trade War from other perspectives than what we’re provided with by BigLie Media. After reading several of Guancha’s offerings, I chose the one associated with the above headline, which was also Guancha’s lead article for the reason that it explained the most in a non-convoluted manner. Its author is Zhang Xuanyu and is entitled “Overseas risks have intensified, and the US media is worried that the export of US services will become the target of tariff countermeasures”:

After taking office, U.S. President Trump wielded the "tariff stick" in an attempt to eliminate the U.S. trade deficit in goods in one fell swoop but deliberately ignored trade in services.

According to a report by the Wall Street Journal on the 10th, although the United States buys more goods from abroad than sells goods, in the field of trade in services, the U.S. trade surplus was close to a record high last year. U.S. services exports, which Trump didn't take into account when calculating tariffs, are being drawn into the trade war he provoked.

On the 9th, Trump announced that he would suspend the so-called "reciprocal tariffs" and impose only the same 10% "base tariff" for the next 90 days. However, the tariffs imposed on China have been increased to 125%.

Despite Trump's changes, the impact of tariffs has made countries nervous and markets have been volatile, the report said.

According to the report, although countries cannot easily impose tariffs on the service industry, they can impose taxes, fines and even ban sales on American companies. In response to Trump's threat of sweeping tariffs, the EU has begun targeting big US tech companies. Trump has also angered foreign consumers, putting U.S. services exports at risk. Many foreign consumers may choose to avoid U.S. banks, asset managers, and other companies. As markets grapple with Trump's extreme trade reforms, the slowdown won't help dampening demand.

For decades, countries exported cars, phones, clothes, and food to the United States, to which the United States provided bonds, software, and management consultants.

Data shows that in 2024, the United States will import $3.3 trillion in goods, export $2.1 trillion, and have a cumulative merchandise trade deficit of $1.21 trillion for the year. 2024 will be the year with the largest trade deficit in the nearly 250-year history of the United States.

At the same time, the United States trade surplus in services increased from $77 billion in 2000 to $295 billion last year. This is in stark contrast to the mid-20th century, when the United States was a manufacturing powerhouse with a surplus in exports of goods but a deficit in trade in services.

With the development of the United States, the service industry has gradually become the dominant force in the American economy. Software and financial products became major U.S. exports. For some of the largest service companies, foreign markets are now more important than the U.S. market.

Brad Setser, an economist at the Council on Foreign Relations, said corporate tax avoidance tactics had also boosted exports of services. Many U.S. companies register in other countries with lower taxes and then pay fees to their U.S. parent company. These fees are counted as intellectual property or asset management fees and are classified as services exports. This is why the United States has a large trade surplus in services with Ireland, Switzerland, and the Cayman Islands.

In some cases, while the U.S. imports far more goods from these places than it exports, it sells more services. Taking the EU as an example, if the trade in goods and services is comprehensively counted, the trade volume between the United States and the EU is basically balanced.

The head of China's Ministry of Commerce said in response to reporters' questions on the white paper "China's Position on Several Issues Concerning Sino-US Economic and Trade Relations" on the 9th that the United States is the source of China's largest deficit in trade in services, and the scale of the deficit is generally expanding, reaching US$26.57 billion in 2023, accounting for about 9.5% of the total U.S. trade surplus in services. Taking into account the three factors of trade in goods, trade in services, and the local sales of domestic enterprises in each other's countries, the benefits of economic and trade exchanges between China and the United States are roughly balanced.

Now, EU politicians have hinted that they may retaliate against the United States by imposing tariffs on American tech companies. European Commission President Ursula von der Leyen said earlier this month that Europe has many cards in its hands, from trade to technology to market size, "a force that is built on the fact that we are prepared to take resolute countermeasures." All means are on the table". The European Union suspended the countermeasures against the US tariffs, which were scheduled for April 15, for 90 days. But von der Leyen said the EU wanted to give the negotiations a chance. If the negotiations are not satisfactory, countermeasures will be taken. "Preparations for further countermeasures continue."

Countries and their consumers can slam the U.S. service sector in a variety of ways, the report said. Foreign tourists who book U.S. hotel rooms and flights are seen as an outlet for the U.S., but Mr. Trump's actions have stoked growing anti-American sentiment and deterred potential tourists. Another blow is that China's Ministry of Culture and Tourism issued a risk reminder for Chinese tourists to the United States on the 9th, reminding Chinese tourists to fully assess the risks of traveling to the United States and be cautious.

Recently, citizens of Canada, Germany, and France have been detained at airports for "unknown reasons" for several weeks. The U.S. is frequently featured in security advisories, which are issued by so-called U.S. allies such as Germany, the United Kingdom, Finland, and Denmark.

In addition, foreign consumers have begun to boycott American brands, and David Weinstein, a professor of economics at Columbia University, said that trade tensions with China during Mr. Trump's first term ultimately hurt American service companies doing business in China, "when you make enemies everywhere, you can't sell anything."

On Facebook, a Swedish group that boycotts American goods has more than 80,000 members, where users discuss how to buy non-American laptops, dog food and toothpaste. In a similar French group, members praised European laundry detergents and smartphone apps and debated whether cognac and scotch were better alternatives to bourbon.

Such protests have even prompted some businesses to make changes. Supermarket chains in Denmark and Canada have started to use special symbols to mark local products, making it easier for customers to identify local products when shopping. With the rise of the "Buy Canada" movement, a growing number of U.S. companies say Canadian retailers refuse to sell their products, and some have even canceled their orders. Swiss chocolatier Lindt said this month that it would start selling chocolate made in Europe rather than the United States in Canada to avoid tariffs and fend off the risk of a consumer backlash.

The boycott has also spread to the digital world. European consumers say they have canceled their subscriptions to US streaming services such as Netflix, Disney+ and Amazon Prime Video. [My Emphasis]

So, given the fact that corporate tax avoiders “fees” are counted as service exports, the genuine total of service exports is much lower than stated, although just how much is unknown and also constitutes another false addition to GDP. That overall trade between the Outlaw US Empire and China is “roughly balanced” contradicts Team Trump propaganda. As the last paragraph informs, a very easy target for global consumers are the very popular streaming services. The abrupt halt and 90-day moratorium announced yesterday was clearly caused by Trump’s Deep State controllers telling him what to do as they were getting harmed with more harm clearly on the way. So, the dead cat bounced, and the markets returned to red ink, while the shorting of gold also clearly failed.

China’s government has issued a White Paper on the issue, “China's Position on Some Issues Concerning China-US Economic and Trade Relations,” which is in English and is very comprehensive. Friday’s Global Times edition has an editorial, “China's 'fight to the end' is backed by strong confidence,” and details why that’s so. Here are some excerpts:

China has the ability and confidence to address various risks and challenges. Facing the unreasonable "reciprocal tariffs" imposed by the US, China has, on one hand, resolutely taken necessary countermeasures in accordance with World Trade Organization rules, firmly defending its legitimate rights and interests while safeguarding the multilateral trade system and international economic order. On the other hand, China issued a white paper entitled "China's Position on Some Issues Concerning China-US Economic and Trade Relations," once again clarifying to the US and the world that China-US economic and trade relations are mutually beneficial and win-win in nature, and that the two countries should find proper solutions to resolve the issues through dialogue and consultation….

In recent days, both the European Union and ASEAN have expressed their willingness to work with China to jointly support multilateralism and the healthy, stable development of global trade. The New York Times noted that the US' "barrage" of trade levies and unpredictability about what it might do next, in fact, have made China "a more appealing option" for companies scared to make a hasty decision amid upheaval in global trade. Many have decided to stay in China, which is completely contrary to the US' original intention of exerting maximum pressuring on China and calling for "investing in the US." Deutsche Welle, citing experts, stated that in the trade war, China is likely to be the more resilient side….

This confidence and resolve stem from a strong belief in China's path and a firm commitment to safeguarding the multilateral trading system. China is resolutely protecting a rules-based multilateral trade system, promoting trade and investment liberalization and facilitation, and expanding the "pie" of shared development. The growing consumption potential released by China is increasingly transforming "Chinese demand" into "global opportunities." By honoring its commitment to high-level opening-up, China continues to create a world-class business environment based on market principles, the rule of law, and international standards, making it a strong magnet for foreign investment. "Optimism for China," "upward revision to China's growth forecasts," and "more investment in China" have become buzzwords in the international business community. [My Emphasis]

Of course, Trump in his mania doesn’t want Win-Win outcomes; he wants Win-Lose/Zero-sum where the winner is always the Empire. In its concluding paragraph, it includes the sad lamentation by what was once The Outlaw US Empire’s biggest promoter:

Thomas Friedman, a columnist for The New York Times, recently lamented that the trade war has put the US into "a no-win war." In the face of US bullying tactics, which use tariffs as a maximum pressure weapon, China has demonstrated not only its ability to respond to crises but also its belief in seizing the trend of the times. [My Emphasis]

The declining Outlaw US Empire has a person on its throne that might soon be called America’s Nero or perhaps the American Croesus with the latter being more apt. As many have already noted, the 90-day moratorium will merely increase overall business uncertainty and do nothing to mitigate risk; so, we can expect the markets to fall further, gold to rise higher, and the flight from US Treasuries to continue. Meanwhile as another writer said, businesses will find ever more novel ways to circumvent the imposed tariffs with Apple already leading the way. Next up are the indirect negotiations between the Empire and Iran in Oman this Saturday where Trump again has fewer cards in his hand than he thinks.

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