Trump fires up cooking oil embargo on China in worsening trade spat | East Asia Tonight (Oct 15)

Key Concepts US-China Trade Tensions, Used Cooking Oil Embargo, Soybean Imports, Rare Earth Minerals Export Controls, Shipping Industry Levies, EU-China Relations, Chinese Dumping Practices, Multilateralism, Tokenized Securities/Stocks, Blockchain Technology, Fractional Ownership, BNO Visa Scheme (British National Overseas), Indefinite Leave to Remain (ILR), South China Sea Disputes, Military Diplomacy, Deflationary Pressure, Producer Price Downturn, IMF World Economic Outlook, Global Financial Stability Report, Natural Disaster Insurance Losses, Fake Job Scams.

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US-China Trade Tensions Escalate

Trade tensions between the US and China are intensifying. President Donald Trump has threatened Beijing with a used cooking oil embargo in retaliation for China's cessation of American soybean purchases, labeling it an "economically hostile act" that harms US farmers. Soybeans were the largest US export to China by value last year, totaling nearly $13 billion, but China's imports fell by almost 40% by volume in the first half of this year as Beijing shifted to Brazil and Argentina for supply. Trump is also considering other trade retributions.

Further escalation includes both countries imposing additional port fees on ocean shipping firms. Beijing claims these levies protect its shipping industry from "discriminatory measures," while Washington states its charges on Chinese vessels support American shipping companies. Last week, China announced expanded export controls on rare earth minerals, a sector it dominates, prompting Trump to threaten additional tariffs of up to 100% on Chinese goods. Despite these tensions, Trump maintains a "great relationship" with Chinese President Xi Jinping, and a meeting at the APEC Summit in South Korea is anticipated, though unconfirmed by Beijing.

The aviation sector is also affected, with China's largest state-owned airlines (including Air China, China Eastern, and China Southern) objecting to Washington's plan to bar them from flying over Russia when traveling to and from the US. They warn this could raise fares, increase flight times, and disrupt routes, impacting thousands of passengers. The US argues Chinese airlines have an "unfair advantage" as American and most European carriers are barred from Russian airspace following Moscow's 2022 invasion of Ukraine.

Expert Perspective: Jeff Moon, China Moon Strategies Jeff Moon, former Assistant US Trade Representative for China, noted that the current "tariff threat cycle" is "nothing new," with issues like soybeans, shipbuilding subsidies, and rare earths being long-standing. He highlighted China's failure to meet its 2020 Phase One deal commitments for agricultural goods. Moon described China's rare earth export controls, which date back to 2010, as an effort to "codify its informal coercion economically." He found the detailed plan for rare earths "alarming," suggesting China "overreached" by sharing a plan that could "paralyze the entire global electronic supply chain," which will damage confidence in China. He believes these moves are "very deliberate," especially the rare earth measures, and China is signaling to Trump that "if Trump wants a trade war, it's really going to get a trade war." Moon concluded that both sides possess "very strong weapons" and this is a "race to the bottom" that needs to stop, though he noted optimism for a potential summit in South Korea.

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EU-China Relations and Spain's Diplomatic Push

Spain's Foreign Minister, Jose Emanuel Alberes Bueno, is on a two-day official visit to China, aiming to deepen ties. This visit, which included meetings with the Spanish business diaspora and the inauguration of a new university campus in Hjo City, follows Prime Minister Pedro Sanchez's meeting with President Xi Jinping in April. Spain is advocating for the EU to "pivot to China" to counter US tariffs, but concerns persist within the EU regarding "Chinese dumping practices."

Expert Perspective: Philip Lakura, Asia Society Philip Lakura, Senior Fellow on Foreign Policy at Asia Society, downplayed the significance of Spain's visit, noting it's just one of 27 EU members. He emphasized that EU-China trade discussions are primarily handled by the European Commission, not individual states, dismissing the idea of Spain acting as "Europe's middleman." Lakura stressed the importance of a "joint approach from the EU" to navigate the "dangerous" US-China rivalry, especially given that 98% of most minerals in Europe are imported from China, making Europe vulnerable to China's rare earth export controls. He called for a "grand bargain" at the EU level.

Lakura clarified that the EU's stance on China remains "clear," viewing it as a "partner, as a competitor and a systemic rival." He noted that the last EU-China summit in July was "not very successful," failing to secure agreements on market access for European companies, which face "red tape." European businesses are concerned about China's desire to sell more steel and electric vehicles in Europe, fearing "dumping of Chinese vehicles at very cheap prices and without technology transfer" could harm Europe's car industry and jobs.

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South Korea Addresses Cambodia Job Scams

South Korea has banned travel to parts of Cambodia and dispatched a special response team following reports that over 1,000 South Korean nationals have been lured into fake job scams and detention centers. This action comes after the torture and death of a Korean student in Cambodia linked to an employment scam. Police reported that 4 of 63 detained South Koreans have returned home, with others expected to follow. An estimated 200,000 people of various nationalities are believed to be involved in scam operations in Cambodia. Between January and August, 330 South Koreans were reported missing or detained against their will, with 80 still unaccounted for. One escapee recounted paying $2,000 for a visa to flee.

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Japan's Political Shift

Japan's parliament will convene an extraordinary session next Tuesday to elect a new prime minister. The ruling Liberal Democratic Party's (LDP) new leader, Sana Takayichi, is seeking support from opposition leaders after Kito abruptly ended its 26-year alliance due to a political funding scandal. The largest opposition bloc has proposed Yurichiro Tamaki, leader of the Democratic Party for the People, as a potential unity candidate, hoping to end 13 years of LDP coalition rule. Tamaki's campaign slogan, "increase take-home pay," resonates amid a cost of living crisis.

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China's Economic Landscape and Deflationary Pressures

China continues to grapple with deflationary pressures, marking its longest streak of economy-wide price declines since the late 1970s. While consumer prices saw a slight pickup in transport costs ahead of a long holiday, underlying deflationary pressure persists despite government efforts to curb "crushing price wars and competition among manufacturers." Factory gate prices (producer prices) fell at a slower pace for the second consecutive month in September, cushioned by higher prices and a favorable base of comparison. However, the producer price downturn has lasted almost three years, impacting manufacturers' profits due to lukewarm consumer confidence and US tariffs.

Mainland Chinese and Hong Kong stocks rebounded, with the Shanghai composite up 1.2%, Shenzhen up 1.7%, and the Hang Seng index snapping a long losing streak, driven by hopes for a Fed rate cut despite renewed trade tensions.

Apple's Investment and Market Performance Apple CEO Tim Cook reaffirmed the company's long-term commitment to the Chinese market, announcing increased investment and deeper cooperation. This comes as Apple expands its US spending to $600 billion over the next four years to offset US tariffs. Earlier this year, Apple also launched an $11 million clean energy fund in China. Apple's sales are gaining momentum in China's sluggish smartphone market, with shipments growing 0.6% year-on-year to 11 million units in Q3, making it the only top-three vendor to achieve growth. Analysts attribute this to the new iPhone 17's appeal to China's price-sensitive consumers.

Japanese e-commerce and finance giant Rakuten rallied nearly 5% on reports it may list its credit card unit, Rakuten Card (which issued over 30 million cards in Japan and earned nearly $410 million last year), in the US.

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IMF Warnings on Global Economy and Financial Stability

The International Monetary Fund (IMF) warns that renewed US-China trade tensions could "significantly slow output," with continued protectionism and increased risk pointing to "tougher times ahead." The word "uncertainty" appeared 102 times in the IMF's World Economic Outlook report, with tariffs identified as the root cause. The IMF stated that tariff effects are already being felt, with worse to come, noting that US growth has been revised down, the labor market is weakening, and inflation remains persistently above target, indicating a "negative supply shock."

While the IMF upgraded growth projections for emerging and developing Asia by 0.1% to 5.2% for this year, it expects growth to fall further next year. China's 2025 forecast remains steady at 4.8% annual growth. The IMF warns that continued tariffs could lead to prolonged uncertainty, more protectionism, and labor supply shocks, resulting in lower growth for many countries in 2026.

The IMF's Global Financial Stability Report noted that global markets have been largely resilient but warned of potential threats:

1. AI Expectations: Changing investor expectations about AI's impact on the economy could trigger asset repricing.
2. Government Debt: Growing government debt is pressuring bond markets.
3. Interconnectedness: Increased interconnectedness between banks and non-banks could spread financial stress. The IMF concluded that while the global economy has shown resilience to past tariffs, an escalation of the tariff war remains a "significant risk to global growth."

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Natural Disasters and Insurance Losses

Global insurance losses from natural disasters have already exceeded $100 billion this year, marking the sixth consecutive year this threshold has been crossed. A report by Gallagher Re estimates insured losses for the first nine months at approximately $105 billion, primarily driven by major wildfires in Los Angeles and severe storms across the US earlier in the year. The third quarter, however, brought some relief, with losses below $15 billion—the lowest quarterly figure since 2016—due to subdued hurricane activity. Experts attribute the overall high losses to rising global temperatures fueling more frequent and intense natural disasters. 2025 is expected to rank among the three hottest years on record. A relatively calm final quarter could help replenish the reinsurance industry's financial buffers for the coming year.

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China-Malaysia Military Drills in South China Sea

Chinese and Malaysian militaries have commenced joint drills in and around Malaysian waters, marking the first time an air force exchange is included. Three Chinese vessels, including a destroyer, arrived in Port Klang, with over 1,000 personnel participating in the nine-day exercise featuring helicopters and unmanned systems. The drills will simulate search and rescue missions and maritime operations, with the Chinese Defense Ministry stating a focus on humanitarian assistance, disaster relief, and maritime security. This is the sixth such exercise and follows a recent Japan-Philippines drill.

Expert Perspective: Dr. Owi Sun, Singapore Institute of International Affairs Dr. Owi Sun noted that China is sending a message that it has "partners in Southeast Asia" for joint military drills, part of an ongoing "military diplomacy" to familiarize militaries. He observed that this year's exercise is scaled down compared to 2023, which featured more troops and multiple ASEAN states. This reduction signals that heightened US-China confrontations make it harder to rally many Southeast Asian countries for multilateral drills. Instead, China is focusing on deepening bilateral military ties, conducting drills with individual countries like Thailand, Singapore, and Cambodia this year.

Regarding smaller states like Singapore, Dr. Sun explained that such drills, framed as humanitarian and disaster relief, also serve to "normalize" the Chinese military presence in the region. He highlighted the challenge to ASEAN cohesion, with Malaysia and Vietnam seeking to balance relations with China, while the Philippines takes a harder line. Most ASEAN countries, including Malaysia, aim to "strike a balance" between the US and China economically, strategically, and militarily. Despite intimate military collaborations between the US and countries like Malaysia and Thailand, China's "huge presence" in the region cannot be ignored, even with Malaysia-China territorial disputes in the South China Sea. Malaysia, for instance, must balance carefully handling these disputes with continuing military collaborations with China.

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Canada's Evolving Foreign Policy and Multilateralism

Canadian Foreign Minister Anita Anand, following a visit to India, is scheduled to visit China to engage with her counterpart, Wang Yi. She described Canada's relationship with China as "complex," spanning numerous sectors, and emphasized the need for dialogue to address concerns and identify areas for cooperation, approaching the relationship "eyes wide open."

Anand affirmed Canada's "full commitment to multilateralism," defining it as the "rules-based international order" (including the UN, WTO, and NATO) that has ensured safety since WWII. She outlined three pillars of Canada's foreign policy:

1. Defense and security for Canadian citizens at home and abroad.
2. Economic resilience, committing to the multilateral order and domestic economic growth, countering protectionism.
3. Core values, including human rights and gender equality.

Acknowledging Prime Minister Justin Trudeau's concession on the erosion of the rules-based order, Anand asserted that countries are most effective when they cooperate. She stated that while aspects of multilateral organizations may require examination due to geopolitical conflict and protectionism, Canada will be a leader in promoting and improving these organizations, declaring, "We will not retreat." This marks a shift from Trudeau's 2015 stance of Canada being a "modest country" "here to help, not to lead," reflecting a new prime minister, foreign minister, foreign policy, and a different geopolitical environment characterized by intense economic stress and protectionism.

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Tokenized Securities: Bridging Traditional Finance and Blockchain

Tokenized stocks are emerging as a new investment method, representing securities as digital tokens on a blockchain, held in a digital wallet, mirroring the price of a real share. This technology allows for direct digital trading between investors without a traditional exchange, potentially enabling instant settlement (compared to the current two-day process) and 24/7 trading.

Key benefits include fractional ownership, allowing investors to buy small portions of company shares, lowering barriers to entry, boosting diversification, and providing easier access to global stocks for emerging market investors without foreign brokerage accounts. Platforms like Robinhood and Solana already offer tokenized US stocks in Europe, and major banks are experimenting with tokenizing bonds and funds, benefiting from faster settlement that frees up capital.

However, traditional financial firms and regulatory experts raise concerns. Token holders typically do not have voting rights and only gain price exposure without actual ownership and redemption rights. Regulators in Singapore, Hong Kong, and Europe are actively working to clarify rules. While still in early stages, as regulatory frameworks mature, tokenized assets could bridge traditional finance and the blockchain economy, offering lower trading costs and convenience for everyday investors, alongside new risks to navigate.

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Hong Kong Migrants Face UK Immigration Uncertainty

Hong Kong migrants in the UK are expressing alarm over proposed changes to immigration rules. The Labour government is debating doubling the qualifying period for Indefinite Leave to Remain (ILR), or permanent residency, from the current 5 years to 10 years, as part of broader plans to cut immigration. While the government states current settlement rules apply for now, it is consulting on whether British National Overseas (BNO) visa holders will be included in these changes, creating significant uncertainty.

Member of Parliament Luke Taylor expressed concern about "moving the goalposts" for those who have made plans based on the current 5-year rule. Simon Hoe, who arrived with his family in 2021 and would be eligible for permanent residency next year, fears added financial costs and a longer wait to access his Hong Kong pension. He emphasized that leaving Hong Kong was "forced" after Beijing imposed a national security law in 2020, which critics argue silences dissent. In response, the Boris Johnson government offered BNO status holders a visa route to permanent residency and eventual citizenship within six years, leading to over 160,000 Hong Kongers arriving in the UK.

Councillor Richard Choy is campaigning for BNO holders to be exempt, arguing it is a "moral lifeline" and a "moral promise" from the UK government, not a regular immigration rule. The proposed changes also affect other migrant groups, with the Labour government ending overseas recruitment of social care workers and skilled worker visa holders potentially facing a 10-year wait. A charity assisting Filipinos in the UK warns that these restrictive measures could deter foreign health workers.

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Synthesis and Conclusion

The East Asia Tonight broadcast highlights a complex and interconnected global landscape. US-China trade tensions are escalating with specific retaliatory measures and threats, impacting critical sectors like agriculture, shipping, and rare earth minerals, and extending into aviation. Europe, particularly Spain, is attempting to navigate this rivalry by seeking closer ties with China, while the EU struggles to present a unified front against Chinese economic practices. Regionally, China is asserting its presence through military diplomacy in Southeast Asia, conducting joint drills that signal its influence and foster bilateral partnerships amidst South China Sea disputes. Domestically, Japan is undergoing a significant political transition, South Korea is actively combating international job scams, and China faces persistent deflationary pressures despite some positive economic indicators like Apple's continued investment. Globally, the IMF issues stark warnings about the economic risks posed by renewed trade protectionism and rising government debt, while the increasing frequency and intensity of natural disasters continue to drive high insurance losses. Finally, the UK's proposed tightening of immigration rules is causing considerable anxiety among Hong Kong migrants, underscoring the human impact of shifting geopolitical and domestic policies. These diverse developments collectively paint a picture of a world grappling with economic uncertainty, geopolitical competition, and evolving social challenges.