Trade trouble

[admin]

President Trump’s trade wars are expected to reduce the average U.S. household’s income by $580 by 2020, according to a new study by the Congressional Budget Office (CBO). That figure — which does not include new tariffs scheduled to go into effect in September and December — amounts to a significant chunk of economic growth. It is the equivalent of roughly $60 billion in lost economic activity.

 Trade war costing average household $580, CBO says | TheHill

[admin]

In the current case many of the goods imported into the US are made by US corporations in China. Of the US$539 billion exports from China to the United States, a substantial portion is from US companies shipping inputs for assembly in China. Another 20 percent are OEM products produced for US corporations. The tariffs are not paid by China. They are either absorbed by US corporations, which reduces profits, or passed onto consumers who pay higher prices for goods, which adds to inflation.

According to estimates made by JP Morgan Chase, the tariffs will cost the average American family around US$1,000 per year. This is expected to deeply dampen Christmas spending. The major US retailer Macy’s share value dropped by 13 percent late last week. Share prices of other US retailers also fell. The only thing that will hurt China is a reduction in demand for goods bound to the US, thus reducing some employment. However, China is reducing the value of its currency, the yuan, to compensate for the new tariffs..

 The US’s Trade War Fallacy – Asia Sentinel

[admin]

A host of U.S. consumer companies have warned that costs related to tariffs on goods imported from China would weigh on their results. The United States increased tariffs on $200 billion worth of Chinese goods to 25% from 10% in May. President Donald Trump has also threatened an additional round of tariffs on $300 billion worth of goods that would cover nearly everything imported from China to the United States.

 Factbox: U.S. companies warn Trump's tariffs could hit results - Reuters

An early look at U.S. trade patterns in May points to wider-than-expected trade deficit. The advance trade deficit in goods widened 5.1% to $74.5 billion, according to the Commerce Department. Economists polled by MarketWatch has expected the deficit to narrow to $70.7 billion. The government’s advance report on wholesale inventories showed a 0.4% rise in May. And advanced retail inventories increased 0.5%. What happened: Both imports and exports rose in May, but imports rose at a faster pace. The gain in imports was led by autos and industrial supplies. Exports were led by food and consumer goods.

 U.S. trade deficit in goods widens 5.1% to $74.5 billion in May - MarketWatch

And a not so good prediction:

President Donald Trump will likely reach a deal with China this summer given his “deeply underwater polling in key 2020 states,” Pantheon Macroeconomics Chief Economist Ian Shepherdson writes in a new note. Trump has a net-zero or negative approval rating in eight crucial swing states that he won in 2016, including Iowa and Ohio, which are big exporters of soybeans. Swing states are among the hardest hit by the trade war because of its impact on agriculture.

 Why Trump will likely reach a China deal by the end of summer

[admin]

President Donald Trump’s tariffs on foreign steel have sped the decline of some of the U.S. mills he vowed to help. Exuberance over the levies dramatically boosted U.S. output just as the global economy was cooling, undercutting demand. That dropped prices, creating a stark divide between companies like Nucor Corp., which use cheaper-to-run electric-arc furnaces to recycle scrap into steel products, and those including U.S. Steel Corp. with more costly legacy blast furnaces.

 The Trump Tariff Twist That Has Cost U.S. Steel $5.6 Billion - Bloomberg

And more trouble.. a new trade war?

Transatlantic trade ties face renewed disruption this week when global arbiters are expected to grant the United States a record award allowing it to hit European imports with billions of dollars of tariffs in a long-running aircraft subsidy dispute. The World Trade Organization (WTO) has found that both European planemaker Airbus and its U.S. rival Boeing received billions of dollars of illegal subsidies in a pair of cases that have run for 15 years.

 Record U.S. tariff award over Airbus aid could fuel trade tensions - Reuters

[admin]

A new front:

The World Trade Organization was poised on Wednesday to open the door to hefty U.S. tariffs on European goods over illegal subsidies for Airbus, pushing a 15-year-old row over support for plane giants to the center of fraught global trade relations.

 WTO to back U.S. tariffs on Europe in clash over Airbus subsidies - Reuters

[admin]

Trump appears to have opened a new front in the tariff war. In a September 3 tweet, he warned the EU about unfair trade practices. The timing of this decision might adversely impact the global economy, and business investment decisions could be impacted around the world. According to IHS Markit data, world real GDP could be reduced by 0.8% and 1.4% in 2019 and 2020, respectively. Moreover, this model assumes a “protectionism scenario.” In nominal GDP terms, this decline could worth over $1 trillion. 

In 2018, the total trade between the US and the EU was $1.3 trillion. Moreover, the trade deficit for the last year was $109 billion. US top exports to the EU comprised aircraft, machinery, oil, and optical and medical instruments. Total exports in these categories were $46.5 billion, $34.2 billion, $28.5 billion, and $27.7 billion, respectively. So, the EU is a very important market for Boeing, and the WTO’s ruling could benefit Boeing’s stock price. Moreover, US agricultural exports to the EU totaled $13.5 billion, as the EU is the third-largest market for US farmers. 

In 2018, US exports to the EU grew 9.2%. Also, US exports of goods and services to the EU represented 2.5 million workers in 2015. Last year, EU exports to the US grew by 9.1%. Germany exported goods worth nearly $125.9 billion. The United Kingdom, France, and Italy’s exports to the US totaled $60.8 billion, $54.7 billion, and $52.5 billion, respectively. Machinery, pharmaceuticals, and vehicles are the top product categories of these exports. The trade value of these categories totaled $80.2 billion, $71.9 billion, and $56.4 billion, respectively. The EU is a more important market for Boeing than the US is for Airbus (EADSY), based on trade flow data. Based on vehicle import figures, US car manufacturers such as General Motors and Ford could see their stock prices react to Trump’s new tariff war on the EU.

 Trump's $7.5 Billion Victory Could Cost Trillions - Market Realist

[admin]

The decision, which drew a sharp rebuke from Beijing, targets 20 Chinese public security bureaus and eight companies including video surveillance firm Hikvision, as well as leaders in facial recognition technology SenseTime Group Ltd and Megvii Technology Ltd. The action bars the firms from buying components from U.S. companies without U.S. government approval - a potentially crippling move for some of them. It follows the same blueprint used by Washington in its attempt to limit the influence of Huawei Technologies Co Ltd [HWT.UL] for what it says are national security reasons.

 U.S. expands blacklist to include China's top AI startups ahead of trade talks - Reuters

[admin]

Seeking to strike a deal that ends the pain, Chinese government officials could “try to hint at a potential exchange of policy concessions for information, if the information is damaging at all,” Victor Shih, a Chinese political economy professor at the University of California San Diego, told Reuters. To seal a favorable deal, China could publicly open an investigation into the Bidens, or could secretly share information on their China dealings with Trump or his emissaries. They could even fabricate business dealings about the Bidens to damage one of Trump’s top rivals. Given its extensive surveillance capabilities, China would likely already have any compromising information on the Bidens’ dealings without needing to publicly open an investigation, according to Mary Lovely, a China expert at the Peterson Institute of International Economics.

 Trump’s stunning call for China to investigate Joe Biden may have given Xi Jinping all the leverage he needs in the trade war

[admin]

The tariffs imposed by president Donald Trump and his Chinese counterpart Xi Jinping have hit firms in their own countries almost as much as the ones they were aiming at, according to research that shows the trade war has partly backfired on both nations.
Academics scrutinised stock market responses in order the gain a real-time assessment of the impact of the trade war that was harder to retrieve from economic data that were often out of date or affected by other events.

Since February 2018, the US has slapped tariffs on $550bn (£420bn) worth of Chinese products. China, in turn, has set tariffs on $185bn (£140bn) worth of US goods. Peter Egger a professor at ETH-Zurich university and Jiaqing Zhu at Guangdong University of Foreign Studies, found that while the trade war tariffs of the US and China directly hurt targeted firms and sectors abroad as intended, they indirectly affect stock prices through global value chain linkages in the US, China, and in third economies which do not directly participate in the trade war.

 US-China trade war backfires as domestic firms suffer | The Independent

[admin]

President Donald Trump’s trade war is projected to reduce the average family’s real income by $1,277, according to a new report from the Congressional Budget Office (CBO). The CBO, a nonpartisan congressional research arm, projected that the tariffs imposed by the Trump administration and retaliatory tariffs imposed by countries like China will reduce economic growth while increasing prices to consumers. “Tariffs are expected to reduce the level of real GDP by roughly 0.5 percent and raise consumer prices by 0.5 percent in 2020. As a result, tariffs are also projected to reduce average real household income by $1,277 (in 2019 dollars) in 2020,” the report said. The figure is more than double the $580 projection in last year’s CBO report.

 New government report finds Trump’s trade war is hurting American families’ incomes – Alternet.org

US exports to China fell by $20 billion (to $137 billion) but US imports from China plunged by $89 billion, to $457 billion, the lowest since 2013. This 16% plunge in imports was a result of the threatened and actual US tariffs imposed on imports from China. In response, Corporate America rerouted its supply chains through other countries. In percentage terms, it was the biggest plunge in imports from China in at least three decades. In dollar terms, it was the steepest plunge in US-China trade history.

 US Imports from China Plunged Most Ever in 2019, Shifted to Other Countries, and the Goods Trade Deficit Improved Only a Tad from Worst Level Ever | Wolf Street