What does Trump want to prove with the new tariffs being levied on China?

Nobody really knows for sure. Probably not even Trump.

So far, the administration and Trump have not articulated what is realistic and what China could do that would lead the US to stop imposing tariffs.

It must be said that what Trump is doing with the tariff is not something — strictly speaking — new.

The US have a 25 percent tariff on imported trucks that goes back to the Chicken War” of 1963 with the European Union, where the European Union kept the US chicken out of their market, and in retaliation the US imposed a 25 percent tariff on trucks.

Trump’s tariffs reflect how the US used to advance its case for trade before the World Trade Organization (WTO) ushered in a more brittle regime which worked for nearly 25 years.

Citing WTO rules does not meet Trump’s visceral dismissiveness about the WTO: that’s because Trump knows his demands go beyond what the WTO can deliver.

We have moved roughly in a span of 20 years from using the WTO to open up trade with China through China joining, to then using it to justify punitive tariffs against Chinese goods and to force China to sell its own industrial raw materials.

What the global regime cannot handle however is the existence of massive trade surpluses. There are no rules for that. And what the WTO cannot do is to make China buy more because the WTO just has not addressed this issue: there is not a WTO rule addressing trading surpluses.

Once the rules are agreed by the WTO members, then it is a free market: if a WTO country is unable to compete for a certain set of products, it will sell less and slide into trade deficit.

The last time a round of market-opening global trade talks ended successfully was 1994, before the WTO. That is why Trump now wants to go back in time, to the system we had pre-1994 and, with an excuse, recently back-tracked to commit to a “rules-based trading system” communique already agreed at the last Canada G7.

The Chinese, on the opposite, want to preserve the WTO and so do the American Allies (the EU / all remaining G7 nations) as they have heavily invested in its system of rules (which the US originally created).

For this reason, the Chinese are not likely to negotiate with President Trump because he imposed retaliatory tariffs and national security tariffs on Chinese goods in violation of WTO rules to which the United States, China, and 162 other WTO member countries are bound.

In trade diplomacy governments will not negotiate to stop a country from taking WTO-illegal actions, for two reasons.

  1. The first reason is illustrated by the two guys who walk into a car dealership. First guy tells the salesman, “If you don’t lower the price of that car by $2,000, I’ll take my money down the street.” Second guys says to the salesman, “If you don’t lower the price of that car by $2,000, I’ll break your legs.” The first is negotiation. The second is extortion. Why? Because the first guy is threatening to do something he is legally entitled to do. The second is threatening to do something that he is not legally entitled to do. The United States’ retaliatory tariffs are WTO-illegal because Trump failed to follow the WTO’s retaliation process, to which the US is legally bound. Following that process would have guaranteed that China would not have retaliated against our retaliation. Instead, China would have negotiated for a solution during the process, or the US would ultimately have been granted the legal right to retaliate. Trump’s unprecedented refusal to follow this process precluded the Chinese from negotiating (outside the WTO’s regime), guaranteed that they would retaliate to the US retaliation, and undermines all of the global trade agreements on which the global economy relies.
  2. The second reason is illustrated by the guy and his 12-year-old son who walk into the television store. The guy pays the owner $800 cash for a TV. But when he and his son try to carry it out of the store, the owner and a security guard stop them. “I own this TV now,” says the guy. “That is correct,” says the owner. “You paid $800. So you now own it. But, you have to pay me another $800 cash if you want to take it out of the store.” What are the chances that the guy, in front of his son, is going to just pay another $800? Pretty much zero. He will call the police if he thinks they will be effective. He will try to handle it on his own, if he thinks the police will not be effective. But, there is virtually no chance that he is going to just reach into his pocket and pay a second time. China previously “paid” the United States by making concessions to the US in exchange for which the United States took on the obligations in the WTO’s Dispute Settlement Understanding — which require us to follow the WTO’s retaliation process. China also previously “paid” the United States by making concessions to us in exchange for which we took on the obligations of the General Agreement on Tariffs and Trade, Articles II and XX – which preclude the US from imposing the recent national security tariffs on Chinese steel and aluminum.

Thus, Trump is telling China that, even though the Chinese already paid the US to take on certain obligations, they now have to pay the US again to get them to fulfil those obligations.

What are the chances that China is going to just sit down and negotiate the amount they’re going to pay to secure US fulfilment of obligations China’s already paid for?

Pretty much zero.

Will the $185k fine against the Airbnb host in NY make people afraid of using Airbnb?

I doubt so.

This is an example of what in political science goes under the name of “the authoritarian illusion of the powerful” whereby those in power pretend to prohibit something by simply out-lawing it and issuing a fine or penalty against a behaviour which is believed by a critical mass of the people in the community to be a legitimate and/or un-harmful service or exploit of resources.

Whenever the authorities tried the “draconian penalty” route in the attempt to prohibit something (lessons can be learned from (a) the war on drugs, (b) the prohibition of alcohol, (c) outlawing sex workers, (d) outlawing of abortion rights) — instead of working out a way to regulate the matter and finding a way to balance the different interests at stake — they have consistently failed and failed again (as we know very well by now, outlawing drugs did not had any effect on drug usage, ditto for prohibition of alcohol or prostitution).

This does not mean that the authority will not go to extraordinary great lengths to (even severely) punish the behaviour of those contravening it: we know, for example, that in US, approximately 20% of the people in jail are there because of crimes related to the sale and consumption of marijuana (which is by now considered perfectly legitimate and un-harmful by the vast majority of the people).

Coming back to the Airbnb case in New York City: obviously the fine against Airbnb hosts is issued exclusively as a deterrent to protect the healthy profits of the “Hotel owners” interest groups. With different luck, the same route has been tried — for example — in Berlin (de facto killing the temporary rent market in the German capital) or Hong Kong (with no effect on the Airbnb market which remains prosperous).

The Municipality of New York, instead of trying to find a way to regulate the opposing interests of 1) the Hotel owners (who do not want further competition in the hospitality market) and 2) the Airbnb hosts (who want to offer a legitimate service, exploiting resources which would remain otherwise unused), preferred to bend to the Hotel owners desires and simply outlawed Airbnb hosts altogether.

This may de facto kill the Airbnb market in NYC or temporarily reduce its usage, but once the genie is out of bottle (i.e.: this behaviour has been tried-and-tested worldwide and it has been considered legitimate and un-harmful by millions of people worldwide), it is only a matter of time until these same people will find a new way to provide this kind of service and to exploit these resources, against the (illusory) authoritarian order of the political class.

Thanks Jonathan Brill for the A2A.

Why do people from Hong Kong dislike being called Chinese?

Legendary Italian writer Tiziano Terzani (who travelled extensively across Asia while being a correspondent for Der Spiegel) once said that Hong-Kongers are somewhat like Florentines: they have a superiority complex.

Like the Florentines who, for a multitude of reasons (e.g. having invented the Renaissance, the banking system, blah blah blah), believe themselves to be better than the rest of their fellow Italians, Hong-Kongers believe themselves to be better than the rest and so they think it is important to remark their identity so not to be confused with the rest.

Mr. Terzani was a Florentine himself and was quite ironic in judging this “superiority complex” but still there may be a grain of truth behind it…

Who is the best tailor in Hong Kong?

I come from Milan – and I am thus used to Milanese-style tailor made suits – and I deem necessary that my tailors must be in the “reasonable” price range regardless of brand or “big names”: i.e. what I consider exceptionally good value for money.

I have tried many tailors in Hong Kong in the last three years and, as always, your mileage may vary but these are my favorite two:

A. SuitsPractical Tailor at 8th Floor, AIE Building, 33 Connaught Road Central, Central, Hong Kong (Practical Tailor). Two-piece suits with fabric by Vitale Barberis Canonico (Italian fabric, stunning value for money) start at 7,000 HKD. Prices increase if you choose Loro Piana (above 9,000 HKD) or Zegna (above 11,000 HKD). Their cut is fantastic, quite modern and understated (you won’t look like your grandpa, but neither like a Rock Star) while their finishing is on par with some of the best Milanese tailors, for a fraction of the price. If you ask for a rush service they can probably make your suit in 1 week (with 1 fitting session only). They take photos of you before, during and after each fitting session so to guide their tailors during the cutting process to make sure that their suits will perfectly fit your body structure. If you need any changes they will accommodate most of the requests promptly.

B. ShirtsWilliam Cheng & Sons at 38 Hankow Road, TST, Kowloon (William Cheng & Son). They mostly use Japanese cotton fabrics (which are very good and competitively priced), starting at 380 HKD. Their fabrics’ selection is quite ok and their price is competitive. I have used their shirts daily and they hold the test of time beautifully. Their tailors are very good, quick and they can even deliver your shirts to your flat or your hotel in less than a week (so you don’t need to go back to TST if this is too time-consuming for you).

Let me know in the comments if you want any more details.

A few updates:
1. As with most tailors in Hong Kong, the two tailors above will give you little-to-zero recommendations regarding style, details, fashion, etc.: I would advise you to do your own research first and have already a fairly detailed idea of what you want before even stepping in their shops.

2. Be extremely detailed if you want a particular fabric, hand-made finishing, inner lining, etc.: these shops are really busy and if you don’t give them the details, they will go with the most “plain vanilla” option without even asking, which may not be the best for you.

3. If you go for a suit (and you’re not in a rush) always ask to have a supplemental fitting session: it will take approximately 24/48h more but this suit will last you a lifetime and you better have it done properly.

4. Check carefully the length of the arms of your shirts/jacket as occasionally they cut them a bit too shorts (William Chen) or a bit too long (Practical), but maybe this is just my taste.