Trump Poised To Escalate China Tensions With Uighur Bill As Markets Look On

Risk assets appeared poised to close the week on a tentative note as Donald Trump prepares to push back on China over human rights abuses, ratcheting tensions higher between the world’s two largest economies at a delicate juncture.

The House this week passed legislation opening the door to sanctions on Chinese officials in connection with the plight of the Uighurs and other minority Muslim minority groups in Xinjiang. This is a long-running saga, and the administration used it as an excuse to blacklist a hodgepodge of Chinese surveillance firms in October and again last Friday.

According to reports, Trump will announce that he intends to sign the bill.

Trump’s commitment to securing the rights of Muslim minorities in far-flung locales is questionable, at best, but signing the Uighurs bill gives the White House a way to take a hard line on China without crossing the Rubicon, as it were. That is, it’s a rebuke, but it stops short of more drastic measures, like revoking Hong Kong’s preferential tariff status or taking other unilateral action aimed at sending an unequivocal message directly from Trump to Xi about the new national security laws for the city.

Last year, Trump signed the Hong Kong Human Rights and Democracy Act into law despite the potential for the legislation to upend trade talks at the last minute. It was that law which compelled Mike Pompeo to declare this week that Hong Kong no longer enjoyed a sufficient degree of autonomy from the mainland.

Because it had already cleared both chambers, signing the Hong Kong bill in November was a relatively safe proposition for Trump, as he could tell Xi (if only in private or via intermediaries) that he had little choice, especially given the impeachment proceedings unfolding at the time (refusing to sign the bill would have potentially angered allies in the Senate).

It’s the same setup here. Trump will hold a press conference on Friday to discuss China and if, as expected, he simply says he’s going to sign legislation Congress has already sent to his desk, it could kill several birds with one stone by sending a message to Beijing while allowing Trump to retain plausible deniability with Xi and preserving the US president’s optionality (i.e., he can always take further steps with respect to Hong Kong later if he chooses).

“[Hong Kong’s] $4.9 trillion stock market, the world’s fourth largest, is now the most volatile since 2012, according to a measure of historical 100-day swings on the Hang Seng Index”, Bloomberg notes, adding that “options traders are preparing for more turbulence [as] eighteen of the 20 most-owned Hang Seng Index derivatives are puts protecting against losses”.

Despite holding up reasonably well in an absolute sense under the circumstances, the Hang Seng has underperformed global shares by the most in more than two decades in May.

“Any sanctions are a double-edged sword that will not only harm the interests of Hong Kong but also significantly those of the US”, Hong Kong’s government said late Thursday, on the prospect of punitive actions.

All of this comes amid virus recrimination, which has actually taken a backseat to the Hong Kong issue in recent days.

“All over the world, people are suffering — 186 countries, all over the world, they’re suffering. We’re not happy”, Trump said Thursday, asked about the future of the trade deal in light of the pandemic.

Most analysts and experts now see the agreement all but dead. The targets shown in blue are now unreachable and 2021 is barely worth discussing right now given the indeterminacy around the situation.

China has made it abundantly clear that there will be no “reparations” for COVID-19 and various proposals for punishing the country (e.g., Lindsey Graham’s debt repudiation idea) aren’t any semblance of feasible.

The House is also considering legislation aimed at delisting some Chinese shares from US exchanges, something Trump is seemingly on board with. The White House moved recently to ban federal retirement savings from being invested in Chinese stocks.

Those kinds of “soft” capital restrictions seem like good candidates for next steps.

But it’s possible Trump could take a harder line Friday, or pair his support for the Uighur bill with harsh rhetoric tipping imminent further action.

“Hong Kong is clearly losing its freedom, China is now breaking longstanding rules and laws and treaties, that means Hong Kong will be treated differently”, Larry Kudlow told CNBC Thursday. “[They] have made a huge mistake”.

Read more:

Protests, Tear Gas Return In Hong Kong. China Accuses US Of ‘Endangering World Peace’

‘Cursed’ Hong Kong Is ‘Half-Way Dead’ Locals Say

Beginning Of ‘The End’ For Hong Kong Sparks Massive Rout In Preview Of Coming Showdown

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6 thoughts on “Trump Poised To Escalate China Tensions With Uighur Bill As Markets Look On

  1. When you are a Master of propaganda like the US you obviously don’t have to worry about Minneapolis or issues in Iraq , Syria or Venezuela where you could be culpable ….What a world we live in….lol

    1. These are abnormal times, we will again be who we were before the Cons took over. The Republican Party has turned into a bunch of Cons doing Con jobs on anyone who will listen and thereby turned themselves into RepubliCons.

  2. Two thoughts-
    1. US should be inviting and welcoming any person from Hong Kong to the US- and offering a path to citizenship. We better hurry up before the Hong Kongers all go to the UK. This is a once in a lifetime opportunity to add hard working, democratic people to our citizenry.

    I have already written off next 4 Years- hoping and praying for a presidential candidate with presidential abilities, a vision for the US for the next few decades, and beyond and the guts to make it happen.

  3. So Trump used the Hong Kong issue to blame China and the WHO for 100,000 plus US deaths. It’s not his fault or responsibility.

  4. Two governments playing to their respective domestic audiences. It is easily argued that Xi considers the economic and social stability on the mainland his biggest issue. In order to deflect attention, he clamps down on Hong Kong. The last thing he wants to another year of demonstrations while the domestic anger is raging about the economic carnage on the mainland. High unemployment can lead to political instability and feed an undesirable insurgency.

  5. So far, the mainland is calm and cool. The riots is in Hong Kong, no big deal. They fight each other themselves. Who cares. Just like MN.

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