Crypto News: Supply Lines: A test for US trade strategy

At the midpoint of President Joe Biden's initial term in office it's clear there is one overriding priority that drives all economy policy: Competition with China.

For years, policymakers in Washington have contemplated the idea that China's economy would surpass that of the US by 2035.

For many, China became the bogeyman for shuttered factories in the American heartland and its cheap, subsidized products symbolized US economic capitulation.

"The one clear area of White House and Congressional alignment after the mid-term election remains alignment on the need to counter China," Peterson Institute for International Economics Fellow Alan Wolff — a former deputy director-general of the World Trade Organization — recently told European lawmakers.

In this environment, Biden has largely picked up his predecessor's baton and redoubled the US trade war with China in new and more muscular ways.

First, Biden maintained Donald Trump's tariffs, and pushed back against multiple WTO rulings that found them incompatible with US international trade commitments.

Second, the Biden administration imposed stiff new export restrictions on Chinese imports of advanced semiconductor chips and the tools needed to manufacture them.

Third, Biden's party passed two major pieces of legislation that provide massive new subsidies to encourage domestic manufacturing of semiconductors and green-energy technologies.

Going forward, we can expect to see the Biden administration to pursue a two-pronged China strategy that involves:

Running faster by supporting job-creating American industries, and
Slowing China by imposing new trade barriers and export controls.

A major looming question for the administration in the coming year is whether it can convince US allies to fully embrace Biden's China strategy.

At this point, "most countries do not buy fully into a Manichean world, divided into two camps, one to conform policies with and the other to shun," according to Wolff.

Furthermore, Europe, and other US allies remain about the discriminatory nature of various subsidy schemes in the Inflation Reduction Act, even after the Biden administration's shift on electric-vehicle eligibility rules.

Massaging those concerns will be an important priority for the Biden administration if it wants to successfully craft a unified alliance to confront China's trade abuses.

For Europe, these issues will be hashed out through successive rounds of the Trade and Technology Council — forum for aligning the more technical and mundane aspects of transatlantic trade policy.

Likewise, some Asian allies of the US can engage with Biden's Indo-Pacific Economic Framework, which provides important forum to align US policies with the world's most dynamic economic region.

Getting this right is critical to shaping a more just and secure economic future for the US and the world.

No pressure.

—Bryce Baschuk in Geneva

House of cards | Mills that churn out cardboard are slashing production worldwide, a worrying sign that global trade is slowing down. North American companies that make the raw material for corrugated boxes shut down nearly 1 million tons of capacity in the third quarter and a similar scenario is expected for the fourth quarter, Bloomberg Intelligence analyst Ryan Fox said. Prices are falling for the first time since 2020. Investors are watching closely for any harbingers of what is to come as fears mount that many of the world's biggest economies will tip into recession next year. Paper boxes are present at nearly every step of a good's journey through the supply chain, which makes paper a key indicator of how economies are faring. The signals are not encouraging.

Next-gen chips | Taiwan Semiconductor Manufacturing Co. kicked off mass production of next-generation chips on Dec. 29, ensuring the island remains the linchpin of a critical technology fought over by governments from Washington to Beijing.
Solar-price war | Solar-equipment makers are in a fierce competition to cut wafer prices, providing some relief for China's efforts to install a massive amount of renewable power and reach ambitious climate targets.
Fewer deliveries | Tesla delivered fewer vehicles than analysts expected last quarter, missing estimates despite taking the unusual step of offering hefty incentives in its two biggest markets.
Flight disruptions | The Philippines restored air traffic control operations after hundreds of flights were cancelled or diverted following technical issues that forced authorities to close the country's airspace.
Stick with it | Southwest Airlines says it's sparing nothing in an operations review after a Christmastime meltdown stranded tens of thousands of passengers. But that's not likely to include junking its network or losing its top executive.

Green light | The Senate confirmed President Joe Biden's pick for chief US agricultural trade negotiator — a relief for trade watchers concerned by barriers to export markets around the world.
Little support | Containerliner spot rates whipsawed in 2022, and there's little encouraging news to help support them in 2023, given the influx of new supply expected to hit the market, coupled with moderating economic demand, Bloomberg Intelligence says.
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