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Expanding U.S.-China Decoupling Beyond Economic Relations Will Only Hurt U.S. Business More

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As Donald Trump’s re-election bid moves into high gear, with voting scheduled to take place in little more than three months, his campaign team now realizes his only real potential talking point for his much touted skill in conquering the country’s thorniest economic challenges—”he came and tamed China’s underhanded international trade practices where others before him barely tried and failed”—rings hollow. 

Bragging about the state of the domestic economy under Trump’s watch certainly would not. This week Mr. Trump’s Commerce Department reported that with the freefall in growth induced by the COVID-19 pandemic, 2020’s second quarter GDP is estimated to have shrunk at an annualized rate of -32.9%, the lowest rate for the U.S. economy on record. 

So, what is a U.S. President—who plays to his supporters’ anathema to Beijing and their fervent embrace of his objective for a forced decoupling of the U.S. from China’s—to do?  

Mr. Trump’s response is to pursue not only a more full-throated forced decoupling but expand it to areas outside the economic realm.  It is as if the President’s mantra is “if you can’t tame ‘em, just decouple from them.” (As discussed earlier in this space, firms enter and exit foreign markets all the time based on routine commercial decisions made endogenously; forced decoupling implies decisions resulting from the dictates of firms’ home governments.)

This may be just as well for the President, inasmuch as the biggest economic policy card Mr. Trump has tried to play with the Chinese is anything but a decoupling strategy. And, it has not turned out well.  

This is, of course, his vaunted ‘Phase One’ agreement, whose crown jewel is a series of huge state-to-state commodity transactions directly designed and managed by Washington and Beijing.  

Yes, under President Trump, U.S. trade policy has resembled more of a ‘command and control’ regime of deals that resembles more of Xi Jinping’s Communist Party apparatus rather than the converse.  In large part, this is driven by Mr. Trump’s single metric for U.S. international trade performance—reduction of the nation’s bilateral merchandise trade deficits with our partners, as if such a measure was economically meaningful. In and of itself, it is not.

Although this week China, owing to surging domestic demand for corn feed to fortify the revival of its pork industry, which was decimated by swine flu in 2019, made its largest-ever daily corn purchase from the U.S.—estimated at $US300 million—and earlier has made other agricultural purchases from the U.S., the Chinese will not meet Trump’s Phase One 2020 purchase target of $36.5 billion. If for no other reason, this outcome stems from the fact that the deal’s targets were defined in dollar terms: with the downdraft in commodity prices generated by the drop in demand due to the COVID19 pandemic, this means Beijing would have to purchase a significantly larger volume than could have ever been anticipated.  

Such it is that he tasked his Secretary of State, Mike Pompeo, to ratchet up our country’s foreign policy and diplomatic decoupling from China. The first major salvo in this regard, following a speech by Pompeo titled, “Communist China and the Free World’s Future” was Washington’s closure of the Chinese consulate in Houston. Beijing swiftly retaliated by shutting down the U.S. consulate in Chengdu, the capital city of Sichuan, the 4th largest province in China, which is the southwest heart of the country and whose population is over 80 million people.  

On its face, Houston provides a far more important opportunity for gathering economic intelligence for the Chinese than does Chengdu for the U.S. Chengdu is a listening post for China’s activities of the country’s minority groups in Xingjiang and Tibet. Houston, while historically a major energy hub of the U.S., is now a more significant center for advanced technology, aerospace and medicine, and it is a key U.S. port.  

In this regard, Beijing’s response to Washington’s was billed by the Chinese—and interpreted by the U.S. and the rest of the world—as measured.  But do not let that fool you. The Chinese do not rely heavily on their formal diplomatic missions to gather economic intelligence in the U.S. They do not need to:  America’s open society provides numerous other avenues for China (and other economic adversaries) to do so. 

In contrast, the U.S. and other countries cannot avail themselves of equivalent opportunities within China, where even the domestic population is more than mindful that the Party not only listens in to conversations, tracks electronic correspondence, but also watches citizens’ movements through a sophisticated network of remote cameras deploying facial recognition technologies. 

It is this asymmetry that Washington—at least in the area of policy-making towards global business matters—does not fully comprehend.  The result? U.S. firms operating in China have far more to lose by retaliatory actions in the foreign policy and diplomatic sphere than Chinese business interests do within the U.S. 

This is different from the impacts of forced U.S.-China decoupling in the economic realm, which as discussed in this space earlier, would be neither easy nor quick.  And it would not be costless to U.S. businesses, their workers, and their customers. China is referred to as the “world’s factory” for a reason, and the global network of tiered supply chains is far more complex than many—including some C-suite executives and corporate board directors—have recently learned during the COVID19 pandemic. At the same time, the notion that the globe’s growth would not be adversely affected if there were a bifurcation of technological standards (as forced decoupling would seem to imply) is questionable—even if such a bifurcation was sustainable.

But even in other ways, Trump’s more expansive forced diplomatic and foreign policy decoupling from China likely hurts U.S. business and economic interests more than China’s. It certainly would strengthen Xi Jinping’s authoritarian rule and provide ammunition for him to intensify his nationalistic domestic policies, reducing the already sparse chances for a democratic movement to emerge in China.

Moreover, as we are already seeing, it fortifies Xi’s ability to form a multilateral anti-U.S. coalition of other nations.

In contrast, Mr. Trump’s proclivity has been to deal with China (as well as with other countries) on a bilateral basis—no doubt a product of his career structuring real estate transactions, especially in New York City.  Curiously, Secretary Pompeo’s speech (and subsequent actions) seems be an incipient attempt to create a coalition of other democratic nations to take on China. The challenge there is, after almost four years of Trump’s chiding of fellow leaders of such countries, there will likely be few takers.

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Garmin paid multimillion dollar ransom to hackers: report

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  • Garmin paid a multimillion dollar ransom to recover its data from hackers after they held the files for ransom, Sky News reported Monday.
  • The GPS company was the victim of a major ransomware attack last month that led to a multi-day outage of its services including its smartwatches and aviation products.
  • Garmin paid the money through cybersecurity firm Arete IR after the first firm they sought out turned down the job due to concerns about dealing with sanctioned individuals, according to Sky News.
  • The malware used against Garmin has been attributed to Evil Corp, a Russia-based hacker group that was placed on a US sanctions list last year, according to Bleeping Computer.
  • Visit Business Insider’s homepage for more stories.

GPS and aviation tech company Garmin paid a multi-million dollar sum to hackers in an effort to recover data that the group had held hostage in a ransomware attack last month, Sky News reported on Monday.

On July 23, Garmin’s services, which range from smartwatches to aviation products, suffered a major outage. Several days later, the company confirmed that the outage was due to a cyberattack.

Several media reports said at the time that the attack involved ransomware, a type of software custom-tailored to encrypt a company’s files until a ransom is paid, though Garmin did not publicly name the type of attack.

Bleeping Computer reported that Garmin had been targeted by Wastedlocker, a specific ransomware virus that is attributed to a Russia-based hacking group called Evil Corp, and that the group had demanded $10 million for the files.

Since the US Treasury Department had sanctioned Evil Corp last year following its cyber heist of more than $100 million from banks around the world, Garmin risked running afoul of the sanctions and incurring fines by paying the ransom.

The first cybersecurity company Garmin asked to help it pay the ransom turned down the job, citing the sanctions as its reason for refusing to provide its services in cases involving Wastedlocker, Sky News reported.

Garmin then turned to another firm, Arete IR, which doesn’t believe Evil Corp is necessarily behind Wastedlocker and ultimately worked with the company to help it pay the ransom, according to Sky News.

As media reports circulated last month naming Wastedlocker as the ransomware used against Garmin, Arete tweeted a link to a report it had published that claimed security research linking the ransomware to Evil Corp was “not conclusive.”

Garmin and Arete IR did not immediately respond to requests for comment.

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Batten Kill business owner says he’s not the slob | Local

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Drawn by the river

Swimmers were drawn in May to the Rexleigh covered bridge on the Battenkill near Salem. 




A businessman who runs a tubing company down the Batten Kill says his business is not contributing to the problems with partying and littering on the river.

Tony DiDonna, co-owner of Big Big on the Battenkill Kayak and Tubing, said four outfitters are usually running on the river, but only two are open this summer.

DiDonna’s customers park their cars at the Route 313 service road in Salem and start their tubing journey in Arlington, Vermont. His customers are not parking on private property or littering, he said.

Two Washington County supervisors asked the Sheriff’s Office last week to intervene because of complaints about littering, garbage and trespassing on private property along the Batten Kill in Salem and Jackson.

“We see it all the time,” DiDonna said. “We clean probably 80 percent of the garbage out of the Route 313 pulloff that is open to the public.”

No garbage cans have been put out in that area, he said.

DiDonna said he is now being investigated by the state Department of Transportation for picking up his customers on the New York side.

His customers are told to bring out whatever they bring in and not to park on private property, he said.

“That place is a complete mess from the public,” DiDonna said. “It’s got nothing to do with the outfitters that are in there.”

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New business in Cedar Rapids hoping metal demand helps it survive during pandemic

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CEDAR RAPIDS, Iowa (KCRG) – A new business opening Monday in Cedar Rapids said it is meeting a demand that is growing during the coronavirus pandemic.

Metal Supermarkets is located at 6805 4th Street Southwest. It’s the first Metal Supermarkets to open in Iowa. Leaders say metal is still in demand during the pandemic.

They sell things like cutting material, and will deliver it to a person’s job site. Leaders feel confident opening during the pandemic.

They say people are staying at home more and starting home projects, and that’s driving the metal demand. There’s also essential businesses like manufacturing that need metal materials.

“Manufacturing services of say a company that makes mask for example,” explained Rick Heller, President of the Metal Supermakets Cedar Rapids location. “If they have any type of equipment that goes down, they may need to purchase a piece of material to get their equipment back online. That’s where we come into play.”

Face masks for customers and workers is optional in their store. They will do curbside pickup. They have four people on staff and hope to expand in the future. They are reaching out to local companies about their business.

The business can be reached at (319) 382-2325.

Copyright 2020 KCRG. All rights reserved.

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