The World’s Big Trade Disputes Take Different Turns

(Bloomberg) --

As U.S.-China negotiations in Shanghai ended with a pledge to meet again after an August break, the other big trade dispute threatening economic stability in Asia appeared to be evolving at a faster pace.

Trump administration officials, breaking their silence on the issue, are asking Japan and South Korea to call a timeout in their feud over whether Japan has sufficiently compensated Koreans who suffered under the country’s 1910-45 occupation of the peninsula. Long-simmering resentment over history is spilling over into the business and security ties between two of the region’s biggest trading partners.

The two disputes are not unrelated. One problem for the Americans: The Japan-Korea conflict threatens to disrupt the global supply chain for memory chips and other components vital for smartphones, laptops and servers, even as their tariff war with China does the same.

U.S. Secretary of State Michael Pompeo told reporters Tuesday while heading to a regional conference in Bangkok that he’d urge the feuding allies to ease the tensions and “find a path forward.” It’s too soon to say U.S. involvement worked.

Japan is rebuffing that request and may decide this week to remove South Korea from a list of trusted export destinations. If Tokyo approves the plan, hundreds of products could be affected by the removal of the existing blanket approval.

Neither trade-reliant economy can afford more trouble. Japanese shipments abroad have fallen for seven consecutive months. South Korean exports likely slid for an eighth in July, figures slated for release Thursday may show.  

Meanwhile, U.S. and Chinese officials ended their discussions Wednesday with a handshake, a photo op and signs they’ll meet again in September. The atmosphere was described as cordial and efficient: The Washington delegation’s stay in China's bustling port city lasted a little more than 24 hours.

Charting the Trade War

Hong Kong’s relevance as China’s gateway to global markets is diminishing, according to Bloomberg Economics. Still, it retains a distinctive role as staging post for outbound investment, and source of equity and bond finance. 

Today’s Must Reads

• 2020 politics | Democratic candidates tore into President Donald Trump’s tariffs in a televised debate Tuesday, citing higher costs for consumers and the need for better trade deals.
• WTO scramble | Trump’s assault on the global rules that guide international business may be poised to quietly score a victory in Geneva, upending the WTO dispute-resolution process.
• Easy does it | The People’s Bank of China may reduce some borrowing costs by the end of this quarter, a step that would put it in the slipstream of the U.S. Fed’s possible rate cuts.
• Pound foolish | As the U.K. hurtles toward an untidy exit from the EU, a plummeting pound may not provide the traditional boost to exports as it fans inflation by lifting import costs.
• Samsung stumbles | The world’s largest maker of memory chips and smartphones is having a rough time navigating its way through trade wars and a wireless slump.

Economic Analysis

• Korean exports | Shipments abroad probably slid an eighth straight month as trade pain deepens.
• Germany’s slump | Europe’s biggest economy shrank further in July, according to Bloomberg Economics.

Coming Up

• Aug. 1: South Korea trade balance
• Aug. 2: U.S. trade balance 
• Aug. 9: Germany trade balance 

--With assistance from Isabel Reynolds.

To contact the editor responsible for this story: Brendan Murray at brmurray@bloomberg.net, Zoe Schneeweiss

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