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Trade ban for you and export to us

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This article is an on-site version of the Trade Secrets newsletter. Participation here Get our newsletter sent straight to your inbox every Monday

Welcome to the latest trade secrets of 2022. It’s a little shorter than usual to let you all skip over and celebrate another spin around the sun in which the global trade system never actually exploded, despite giving it time. Today’s main article takes a look at recent events on one of the big topics of the year, with the Biden administration purporting to be a friend that doesn’t make many friends with its ideas on trade and national security. Charted Waters has good news on supply chains. I will be back on Jan 9th. In the meantime, let me wish you all the best Strategically Independent Christmas and a Worker-centric New Year.

keep in touch. Send me an email to alan.beattie@ft.com

When European chips go down

Launching a massive subsidy program with (possibly illegal) domestic content provisions, ignoring a WTO ruling against its national security protections, and micromanaging Europe-Japan’s semiconductor trade with China: You can’t argue that the Biden administration has spent 2022 bidding easy. Popular in ministries of commerce in the world.

It followed a round of US export controls announced on 7 October Diplomatic pressure to deter allies (especially Japan and the Netherlands, home of world leader ASML) from selling lithographic tools to China for use in semiconductor manufacturing.

The Dutch ministers took on a defiant tone of resistance. But Hoseok Lee-Makiyama of the think tank ECIPE and Robin Baker of the London School of Economics argue, in A post really worth readingthat The Hague is already allowing Washington to run its own export controls through treaties and to cooperate closely with the United States.

They believe that the campaign will not achieve its goal in the long run, because China will be able to manufacture its own chips and circumvent export controls. Meanwhile, Chinese chip makers have replaced the Dutch lithography technique with “etching and etching” (deposition and etching) processes, using tools made by—guess who? – American companies. Even after the post-October 7 restrictions were imposed, US companies still exported advanced chips themselves to China.

We’ve been somewhere like here before. The Trump and Biden administrations have spent a great deal of time trying to bully European governments into not using the Huawei group in their 5G networks, which has been successful in some cases (the UK). There is a big difference in semiconductors. In the 5G network, the United States does not yet have a competitive alternative supplier of its own. Other big players are European (Ericsson and Nokia), South Korean (Samsung) and the United States Try to build a competitor (Open RAN) You haven’t effectively challenged them yet.

By contrast, Makiyama and Baker in semiconductors point out to me that US companies have benefited from the US government’s security-related trade diplomacy. It might be called national security: it’s a lot like export promotion. It’s not just the thinkers, the academics are suspicious either. Last week, ASML CEO Peter Weinink had some blunt things to say on the matter to Dutch newspaper NRC (The original interview in Dutch is hereWith Reuters’ transcript of the interview in English here), noting that “US chip manufacturers have no problem with China as a customer”.

For an administration eager to make friends, the Biden White House is very careless about alienating its friends. Domestic protectionism for steel cars or electric cars unconvincingly badged as advancing national security goals is controversial enough. Blocking Allied Sales to a Presumed Foreign Policy Enemy While American Companies Continue to Export There is a new level of provocation.

In addition to this newsletter, I write the Trade Secrets column for FT.com every Thursday. Click here to read the latest and visit ft.com/trade-secrets To see all my previous columns and newsletters too.

suspended water

Is there cause for joy in 2023? Well, this one. As did Alan Note it expertly In previous editions of Trade Secrets, the supply chain crisis was on the wane. Here is the graph that shows that.

As Alan also notes, it has always been a mistake to talk about supply chains as if there were bilateral ties holding international trade together. A network of interconnected connections ensures the supply of raw materials and commodities between countries around the world. Just like the World Wide Web, this supply network is robust because it can handle breakdowns in individual links – unlike a chain. This is another thing to be elated, or perhaps thankful for. (Jonathan Moles)

Speaking of the ban on trade with China, the United States has placed 36 other Chinese companies on the Entity Listwhich means that US companies will need hard-to-obtain licenses to sell them.

Speaking of semiconductors and superpower rivalry, Nikkei Asia reported that the CEO of Taiwan-based giant TSMC said on Saturday that Geopolitics has been distorting the semiconductor industry in the entire world erasing the benefits of globalization. Maurice Chang, founder of TSMC, recently said that globalization is “on the brink of death.”

There are two elements about American voices that resist the near-uniform anti-Chinese sentiment in Washington – this New Yorker profile on academic Jessica Chen Weiss and this is Column in Politico by thinker John Bateman.

Despite the seemingly hawkish European Central Bank and the possibility of a recession in the eurozone, the closely watched PMI Indicates moderate deceleration in the European Union.

It has been reported in the British media that the government will allow the bill that dismantles the Northern Ireland Protocol to calm down in Parliament He suggests that Britain is heading to another Post-Brexit capitulation to Brussels. Meanwhile, Sir Robert Chote, L.L.C The head of the British Statistics Authority, called it “misleading” Pathetic and embarrassing (my description, not Chote’s) Tory attempts to spin its post-Brexit trade deals as creating the £800 billion in trade that was already there.


Trade secrets from the editor Jonathan Moles


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Economic

We need to pay more attention to skewed economic signals

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The writer is chair of Queen’s College, Cambridge and advisor to Allianz and Gramercy

Inflation was the dominant economic and financial issue of 2022 for most countries around the world, especially for advanced economies that have a consequential impact on the global economy and markets.

The effects have been seen in declining living standards, increasing inequality, increasing borrowing costs, stock and bond market losses, and occasional financial mishaps (fortunately small and so far contained).

In this new year, recession, both actual and feared, has joined inflation in the driving seat of the global economy and is likely to replace it. It’s a development that makes the global economy and investment portfolios subject to a wide range of possible outcomes — something that a growing number of bond investors seem to be aware of more than their equity counterparts.

International Monetary Fund iYou will likely review soon Her economic growth forecasts again, predicting that “a third of the world will be hit by recession this year”. What is particularly notable to me about these worsening global prospects is not only that the world’s three major economic regions – China, the European Union and the United States – are slowing down together, but also that this is happening for different reasons.

In China, a chaotic exit from the wrong Covid-19 policy is undermining demand and causing more supply disruptions. Such headwinds to domestic and global economic well-being will continue as long as China fails to improve the coverage and effectiveness of its vaccination efforts. The strength and sustainability of the subsequent recovery will also require that the country more vigorously renew a growth model that can no longer rely on greater globalization.

The European Union continues to deal with energy supply disruptions as the Russian invasion of Ukraine continues. Strengthening inventory management and reorientation of energy supplies is well advanced in many countries. However, it is not yet sufficient to lift immediate constraints on growth, let alone resolve long-term structural headwinds.

The United States has the least problematic view. The headwinds to growth are due to the Fed’s struggle to contain inflation after mischaracterizing rate increases as fleeting and then initially being too timid to adjust monetary policy.

The Fed’s shift to an aggressive front-load of interest rate hikes came too late to prevent the spread of inflation in the services sector and wages. As such, inflation is likely to remain stubborn at around 4 percent, be less sensitive to interest rate policies and expose the economy to greater risk for accidents from additional policy errors that undermine growth.

The uncertainties facing each of these three economic areas suggest that analysts should be more careful in reassuring us that recessionary pressures will be “short and shallow”. They need to be open, if only to avoid repeating the mistake of prematurely dismissing inflation as transient.

This is especially important because these diverse drivers of recessionary risk make financial fragility more threatening and policy shifts more difficult, including potentially Japan. Get out of interest rate control Policy. The range of possible outcomes is extraordinarily large.

On the one hand, a better policy response, including improving the supply response and protecting the most vulnerable populations, can counteract the global economic slowdown and, in the case of the United States, avert a recession.

On the other hand, additional policy errors and market turmoil can lead to self-reinforcing vicious cycles with rising inflation and rising interest rates, weakening credit and compressed earnings, and stressing market performance.

Judging by market prices, more bond investors are better understanding this, including by refusing to follow the Fed’s interest rate guidance this year. Instead of a sustainable path to higher rates for 2023, they believe recessionary pressures will lead to cuts later this year. If true, government bonds would provide the yield and potential for badly missed portfolio risk mitigation in 2022.

However, parts of the stock market is still weakly bearish pricing. Reconciling these different scenarios is more important than investors. Without better alignment within markets and with policy signals, the positive economic and financial outcomes we all desire will be no less likely. They will also be challenged by the risk of more unpleasant outcomes at a time of less economic and human resilience.

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Economic

Macro hedge funds end 2022 higher, investors say, while many others take big losses By Reuters

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© Reuters. FILE PHOTO: Traders work on the trading floor of the New York Stock Exchange (NYSE) in New York City, US, January 5, 2023. REUTERS/Andrew Kelly

By Svea Herbst Baylis

NEW YORK (Reuters) – Some hedge funds betting on macroeconomic trends have boasted of double and even triple-digit gains for 2022, while other high-profile companies that have long been on technology stocks have suffered heavy losses in volatile markets, investors said.

Rokos Capital, run by Chris Rokos and one of a handful of so-called global macro companies, gained 51% last year. Fund investors this week, who asked not to be identified, said Brevan Howard Asset Management, the company where Rokos once worked, posted a gain of 20.14% and Caxton Associates returned 16.73%.

Haider Capital Management’s Haider Jupiter Fund rose 193%, an investor said.

Data from hedge fund research showed that many macro managers have avoided crumbling stock markets that have been rocked by rapid interest rate increases and geopolitical turmoil, including the war in Ukraine, to rank among the best performers in the hedge fund industry. The company’s macro index rose 14.2% while the general index of hedge funds fell 4.25%, its first loss since 2018.

Equity hedge funds, where the bulk of the industry’s roughly $3.7 trillion in assets are invested, fared worse with a loss of 10.4%, according to HFR data. And while that beat the broader stock market’s loss of 19.4%, some high-profile funds posted even bigger losses.

Tiger Global Management lost 56% while Whale Rock Capital Management ended the year with a 43% loss and Maverick Capital lost 23%. Coatue Management ended 2022 with a loss of 19%.

But not all companies that bet on technology stocks suffered. John Thaler JAT Capital finished the year with a 3.7% gain after fees after a 33% increase in 2021 and a 46% gain in 2020.

Sculptor Capital Management (NYSE::), where founder Dan Och is fighting the company’s current CEO in court over his salary increase, posted a 13% drop.

David Einhorn’s Greenlight Capital, which bet that Elon Musk would be forced to buy Twitter, ended the year up 37% while Rick Sandler’s Eminence Capital rose 7%.

A number of so-called multi-manager companies where teams of portfolio managers bet on a variety of sectors also boast positive returns and have been able to deliver on their promise that hedge funds can deliver better returns in distressed markets.

Balyasny’s Atlas Fund (NYSE: Enhanced) gained 9.7%, while Point72 Asset Management gained 10%. Millennium Management gained 12% while Carlson Capital ended the year with a 7% gain.

Representatives for the companies either did not respond to requests for comment or declined to comment.

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German automakers point to easing supply chain problems

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Sales at BMW and Mercedes-Benz jumped in the final months of 2022 as the German premium auto brands indicated supply chain problems plaguing the industry were abating.

Automakers around the world have experienced parts shortages since the pandemic, especially semiconductors, leaving many of them with large fleets of incomplete vehicles that can’t be delivered to customers.

BMW and Mercedes each said their full-year vehicle deliveries fell last year by 4.8 percent and 1 percent, respectively, due to Suppliers Bottlenecks as well as lockdowns in China and the war in Ukraine.

But supply pressures eased in the last quarter of the year, as BMW recorded a 10.6 percent jump in sales, with 651,798 vehicles delivered, and Mercedes fulfilling 540,800 orders, up 17 percent from the same period in 2022.

BMW He said the main effects of supply chain bottlenecks and continued lockdowns were felt in the first six months of the year, adding that “sales were steadily picking up in the second half.”

Mercedes boss Ula Kallenius told the Financial Times last week that the list of problems in the auto supply chain was declining, but added that long waits for cars would continue into 2023.

“One chip is enough to be vital [ . . .] Missing, and then you can’t finish the car, even if you have everything else.

Both brands recorded strong sales growth electric car. Mercedes, which last week announced a plan to build 10,000 charging docks, said EV shipments grew 124 percent to 117,800 last year compared with its predecessor.

Similarly, BMW reported strong growth in electric vehicle sales, with deliveries of fully electric vehicles doubling last year to 215,755.

Analysts at Bank of America said that sales of electric vehicles, including hybrid cars, reached a historic peak last November, with 1.1 million units sold. They attributed this largely to the upcoming phase-out of customer subsidies in Germany.

Participate in Mercedes BMW and BMW prices held steady Tuesday morning as investors priced in an image of an improving showing.

Rolls-Royce, a subsidiary of BMW, announced Monday that sales have hit a 119-year record, driven by strong demand in the United States, its largest market.

The luxury brand has been largely unaffected by the semiconductor pressure, mainly because it makes relatively few compounds and therefore needs fewer chips.

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