June 23, 2018

Europe Retaliates Against Trump Tariffs

“Fewer than expected S.U.V. sales and higher than expected costs — not completely passed on to the customers — must be assumed because of increased import tariffs for U.S. vehicles into the Chinese market,” Daimler said in a statement late Wednesday.

Last year, BMW exported about 80,000 vehicles to China, including its X5 S.U.V., from the Spartanburg plant, its largest factory in the world. BMW said in a statement on Thursday that it did not need to revise its outlook for profit because of trade tensions, but the company added that it “continues to observe international developments closely.”

Shares of major German and American carmakers fell sharply Thursday on worries of a trade-related slowdown. Daimler shares closed off more than 4 percent in Frankfurt trading, and BMW shares slipped 3 percent.

If the trade conflict continues, companies could consider relocating assembly lines to other countries, leading to job losses in the United States. BMW already has factories in South Africa and China, among other countries.

Carmakers would not make such a decision lightly. Moving manufacturing is expensive and takes years to carry out. The German carmakers continue to hope that the conflict will blow over and perhaps even provide a catalyst for removing trade barriers with the United States.

Currently the United States charges a 2.5 percent levy on imported foreign cars while Europe imposes a tariff of 10 percent on cars from the United States. German automakers would be happy if tariffs fell to zero in both directions, though only as part of a broad trade pact, Eckehart Rotter, a spokesman for the German Association of the Automotive Industry, said Thursday.

Ironically, the tariffs could have a small — if somewhat short-lived — upside for Europe. Local steel and aluminum may eventually fall in price because producers in countries like Russia or Japan will divert supplies that otherwise would have gone to the United States, creating a glut in the market. That would be bad for steel producers but good for machinery makers and other companies that use a lot of steel, potentially giving them an edge over their American competitors in overseas markets.

Article source: https://www.nytimes.com/2018/06/21/business/economy/europe-tariffs-trump-trade.html?partner=rss&emc=rss

Greece Prepares to Stagger Back From Debt Crisis, the End of Bailouts in Sight

But Greece still faces daunting challenges.

Unemployment is no longer at historic highs, but one-fifth of Greeks are jobless. The economy is growing, though at a relatively slow pace of 1.4 percent last year. Households have seen their incomes chopped by a third, hundreds of thousands of Greeks work low-paying temporary jobs, and more pension cuts and tax increases lie ahead. The country had to impose credit controls in 2015, and there are still limits on how much cash Greeks can withdraw from shaky banks, although those restrictions have been gradually relaxed in recent years.

“If you look at the past three years, the Greek economy recovered, jobs were created,” said Zsolt Darvas, a senior fellow at Bruegel, a Brussels think tank. “But I think you can’t just look at the past three years. You have to look at what happened in 2010, and clearly it was a huge disaster.”

Prime Minister Alexis Tsipras, who rose to power vowing to reverse austerity, has acknowledged that the end of Greece’s third bailout program will not bring about a magical transformation. “When you take a patient out of intensive care,” he told a group of Greek entrepreneurs last month, “you don’t make him run a sprint.”

Managing the country’s debt, which is equal to nearly 180 percent of its gross domestic product, remains a herculean task. Severe belt-tightening will still be necessary if Greece is to have any hope of regaining credibility with international investors. The country is still years away from being able to sell new debt on financial markets; it still owes staggering sums to banks, financial institutions and other countries, which will be looking over Athens’s shoulder for years to come.

Mr. Tsipras’s political opponents, who have been gaining ground in opinion polls, have noted that the country will remain under foreign supervision for years to come and will still be subject to harsh austerity measures, including a package approved by Parliament last week that includes further pension cuts, tax increases and privatization of state assets.

That view is often echoed by regular Greeks. “What exit? This is a life sentence,” said Giorgos Amanatidis, a 67-year-old pensioner in Athens. He added, “Taxes, taxes and more taxes.”

Article source: https://www.nytimes.com/2018/06/21/business/economy/greece-europe-bailout.html?partner=rss&emc=rss

Europe Strikes Back Against Trump Tariffs as Global Trade War Escalates

“Fewer than expected S.U.V. sales and higher than expected costs — not completely passed on to the customers — must be assumed because of increased import tariffs for U.S. vehicles into the Chinese market,” Daimler said in a statement late Wednesday.

Last year, BMW exported about 80,000 vehicles to China, including its X5 S.U.V., from the Spartanburg plant, its largest factory in the world. BMW said in a statement on Thursday that it did not need to revise its outlook for profit because of trade tensions, but the company added that it “continues to observe international developments closely.”

Shares of major German and American carmakers fell sharply Thursday on worries of a trade-related slowdown. Daimler shares closed off more than 4 percent in Frankfurt trading, and BMW shares slipped 3 percent.

If the trade conflict continues, companies could consider relocating assembly lines to other countries, leading to job losses in the United States. BMW already has factories in South Africa and China, among other countries.

Carmakers would not make such a decision lightly. Moving manufacturing is expensive and takes years to carry out. The German carmakers continue to hope that the conflict will blow over and perhaps even provide a catalyst for removing trade barriers with the United States.

Currently the United States charges a 2.5 percent levy on imported foreign cars while Europe imposes a tariff of 10 percent on cars from the United States. German automakers would be happy if tariffs fell to zero in both directions, though only as part of a broad trade pact, Eckehart Rotter, a spokesman for the German Association of the Automotive Industry, said Thursday.

Ironically, the tariffs could have a small — if somewhat short-lived — upside for Europe. Local steel and aluminum may eventually fall in price because producers in countries like Russia or Japan will divert supplies that otherwise would have gone to the United States, creating a glut in the market. That would be bad for steel producers but good for machinery makers and other companies that use a lot of steel, potentially giving them an edge over their American competitors in overseas markets.

Article source: https://www.nytimes.com/2018/06/21/business/economy/europe-tariffs-trump-trade.html?partner=rss&emc=rss

Trump’s Ace in the Hole in Trade War: A Strong Economy

Trade wars won’t sharply curtail economic activity, unless they cause businesses to lose confidence, said Spencer Dale, chief economist for BP, the energy giant. The bigger problem, he said, is that trade wars could “eat away at trend growth” by reducing G.D.P. by a fraction of a percent a year. That might not seem meaningful in any given year, but compounded over a decade or two, it could leave the economy noticeably short of what it might otherwise have achieved.

The Fed chairman, Jerome H. Powell, has also noted those risks. “Changes in trade policy could cause us to have to question the outlook,” he said on Wednesday at a European Central Bank conference in Portugal.

Still, the United States remains more insulated from a trade shock than other countries. Exports account for just 12 percent of American gross domestic product. That’s the lowest share among the 35 members of the Organization for Economic Cooperation and Development, a group of industrialized countries. By contrast, the figure is 31 percent in Canada, 37 percent in Mexico and 44 percent in the European Union.

In the United States, consumer spending accounts for nearly 70 percent of G.D.P. And recent surveys and other data show that people are bullish about the economy’s trajectory, according to Ian Shepherdson of Pantheon Macroeconomics. Owners of small businesses are also confident — about their own prospects and about the overall economy.

When Mr. Shepherdson put out a note to clients on May 14 highlighting the possibility of 5 percent growth in the quarter, he was quick to add that his forecast looked outlandish. “I was being tongue in cheek, looking at what would happen if everything goes right,” he said. “But it’s become more like the base case.”

Despite the improving consensus, Mr. Shepherdson said the quarter’s pace “is not sustainable,” but he does expect consumer spending to be solid in the second half of the year.

Sean McCartney, an executive vice president at Radial, a fulfillment and logistics business, agrees, and he’s putting his money to work. Radial will hire about 24,000 temporary workers later this year for the company’s fulfillment centers, call centers and warehouses to prepare for back-to-school demand and the holiday shopping season. That’s up by roughly 1,000 from last year.

Article source: https://www.nytimes.com/2018/06/20/business/economy/trump-trade-economy.html?partner=rss&emc=rss

State of the Art: How Tech Companies Conquered America’s Cities

Is tech power so bad?

You might argue that this is all to the good: Cities are drowning in red tape, local leaders are naturally averse to change, and tech companies are doing exactly what innovative companies should do. Shouldn’t we be celebrating these innovators?

But tech power, at the local level, feels increasingly indomitable. With the mere threat of halting growth, Amazon can send shudders through cities across the country. Even Mr. De Blasio, once seen as a critic of tech, now swoons for Amazon; he lit up New York’s landmarks in “Amazon orange” to woo Jeff Bezos to open the company’s second headquarters there.

Or, consider the scooters. Some people love our new e-scooter overlords, and others hate them. But whatever your position, the real problem is that they just appeared out of nowhere one day, suddenly seizing the sidewalks, and many citizens felt they had no real agency in the decision. They were here to stay, whatever nonusers felt about them.

Which was all by design. The scooter companies were just following Travis’s Law. In Santa Monica, Bird’s scooters appeared on city streets in September. Lawmakers balked; in December, the city filed a nine-count criminal complaint against Bird.

Bird responded with a button in its app to flood local lawmakers with emails of support. The city yielded: Bird signed a $300,000 settlement with Santa Monica, a pittance of its funding haul, and lawmakers authorized its operations.

If you love the scooters, you see nothing wrong with this. But there was a time, in America, when the government paid for infrastructure and the public had a say in important local services. With Ubers ruling the roads, Birds ruling the sidewalks, Elon Musk running our subways and Domino’s paving our roads, that age is gone.

Article source: https://www.nytimes.com/2018/06/20/technology/tech-companies-conquered-cities.html?partner=rss&emc=rss

As Greece Ends a Decade of Bailouts, Problems Linger for Europe

To play it safe, Greece won’t start selling bonds until well after it exits the bailout. Instead, the government, which is being advised by Paris-based Rothschild Company, will pick a moment in the next two years when market conditions seem favorable. A cash buffer of up to €18 billion, funded by creditors, may help Greece secure the liquidity it needs in the meantime.

Much also depends on how Greece’s recovery unfolds. The economy has expanded modestly since last summer, and protests are now fewer and farther between as glimmers of a rebound emerge. In Athens and on the sunny Greek islands, tourists are packing hotels, bars and tavernas. Chinese and Russian investors are plonking money down on discounted residential and commercial real estate. Exports are rising, mainly on the back of refined oil products.

But those gains have yet to filter more broadly through the economy. Unemployment, which has fallen from a peak of 28 percent, is still stuck above 20 percent, the highest in the eurozone. Over half a million Greeks left during the crisis in a brain drain that has hampered a recovery.

Worryingly, more people are at risk of poverty, including large families and workers struggling with sharply reduced salaries and an explosion of precarious contracts. The Organization for Economic Cooperation and Development, a group of rich nations, warned recently that poverty in Greece had “risen dramatically.”

As part of his growth plan, Mr. Tsipras has vowed to reverse some of the harshest austerity after August. He wants to raise the minimum wage and possibly restore unions’ collective bargaining power, which was cut under the terms of the bailouts.

With creditors seeking to strike a deal ahead of their meetings on Thursday, though, the Greek parliament last week rushed to pass scores of additional austerity laws that the government had been delaying. They include deeper pension cuts, a broadening of the tax base to low-wage earners and new property and value-added tax increases. Those measures will kick in even after the bailout ends.

Throughout, Greece’s creditors will be watching to make sure it doesn’t backslide.

Klaus Regling, the German chief of the European Stability Mechanism, one of Greece’s lenders, told Mr. Tsipras during a visit to Athens last week that Greece had the potential to be Europe’s next “success” story.

“As long,” Mr. Regling added, “as it sticks to the agreed economic reforms even after the end of the third memorandum.”

Article source: https://www.nytimes.com/2018/06/19/business/economy/greece-europe-bailout.html?partner=rss&emc=rss

Disability Applications Plunge as the Economy Strengthens

“When the economy gets better, employers are more willing to look to other labor pools and be more accommodating,” said Eric Kingson, a professor of social work at Syracuse University. “Some people with disabilities also have a sense there may be something out there that fits with their needs.”

Of course, other factors have contributed to the decline in disability applications. As aging baby boomers receive Social Security retirement benefits and Medicare, fewer require disability benefits. People in the disability program receive an average of $1,200 a month and get health insurance through Medicare.

What’s more, with the expansion of Medicaid in 33 states and the District of Columbia as well as improved access to insurance coverage under the Affordable Care Act, many experts argue, fewer people see the disability program as a way to obtain health care.

Finally, the Social Security Administration has been making it harder to qualify for benefits, according to scholars and advocates.

In some cases, just applying has become more arduous, said T.J. Sutcliffe, senior director of income and housing policy at the Arc, an advocacy group for people with disabilities. Budget cuts have taken a toll, she said, with 67 Social Security field offices closing since 2010.

A 2017 study by Manasi Deshpande of the University of Chicago and Yue Li of the State University of New York at Albany found that “field office closings lead to large and persistent reductions in the number of disability recipients.” Applicants with “moderately severe conditions, low education levels and low pre-application earnings” were hardest hit.

Applicants also face an increasingly uphill battle appealing rejections, with the administrative law judges who handle these cases taking a much more skeptical stance.

Article source: https://www.nytimes.com/2018/06/19/business/economy/social-security-applications.html?partner=rss&emc=rss

The Week Ahead: Central Bankers Will Debate Policy, and OPEC Meets on Output

Economic data that was published last week gave a mixed picture on the British economy. Retail sales, bolstered by sunny weather and royal wedding celebrations in May, rose 1.3 percent from the month before. But industrial production slipped 0.8 percent in April from the month before.

The committee’s vote will give some indication of how its members view the numbers, according to Peter Dixon, a senior economist at Commerzbank. “Obviously the weakness of industrial production argues for a change of view, but the strength of retail sales may well confirm them in their belief that the soft patch in the early months of the year was a temporary effect driven by the weather,” Mr. Dixon wrote.

— Amie Tsang


Economy

The Fed will release results of stress tests of big banks.

The Federal Reserve is scheduled to release on Thursday the results of its annual stress tests of major banks, a measure of whether the banks can withstand an economic downturn or an unexpected financial market calamity. Last year’s tests strained one bank but did not produce any failures; this year’s are expected to be harder. Six foreign banks will have their United States operations publicly evaluated for the first time: Barclays, BNP Paribas, Credit Suisse, Deutsche Bank, RBS and UBS. All eyes are on Deutsche Bank, which is in the midst of a major restructuring.

— Emily Flitter


Economy

Europe’s finance ministers will discuss a Greek bailout.

Greece and its creditors will try to agree Thursday on a blueprint to help the beleaguered country stand on its own once it comes off its third, and final, international bailout later this summer. As Greece emerges from a ruinous crisis, its creditors are drawing up plans to prevent another wide-ranging economic disaster.

— Prashant S. Rao


Energy

OPEC faces pressure to increase output.

Pressure is building on the Organization of the Petroleum Exporting Countries to ease the 18-month production curbs that have helped prices of Brent crude more than double to around $73 a barrel since their lows in early 2016. OPEC and other major oil producers including Russia plan to meet in Vienna on Friday and Saturday, and the group is already in the sights of President Trump, who has called prices artificially high. But how much the producers will lift output remains under debate.

— Stanley Reed

Article source: https://www.nytimes.com/2018/06/17/business/central-bankers-opec-output.html?partner=rss&emc=rss

Feeling Good About the Economy? You’re Probably a Republican

Steven Saenz, who is Hispanic, graduated from college in the teeth of the recession, and went to architecture school in part to avoid entering the weak labor market. Even so, it took him nine months after completing his degree to find a job, and two more years to feel stable.

Now, however, Mr. Saenz has a good job at a Dallas architecture firm, and last year bought his first home with his wife. Still, Mr. Saenz, 32, said he and his wife watched their spending closely.

“Just being a product of graduating in the recession, I tend to focus more on saving,” he said.

Tax Support Stalls

Ever since they passed their $1.5 trillion tax-cut bill in December, Republicans have predicted that voters would come to love it. They were buoyed in February when, according to a previous survey, the law briefly earned the support of a majority of Americans. But the surge in support has stalled, and the law now evenly divides Americans, with 48 percent in favor and 47 percent opposed. There is no sign in the polling that the law will help Republicans court independent voters, who oppose the law by 54 percent to 40 percent, in the fall.

But the law appears to have helped Republicans’ election prospects in one important way: It appears to have made Republican voters feel better about the economy.

The share of Americans who say they and their families are better off financially than they were a year ago has jumped since December, to 36 percent from 29 percent. That jump is almost entirely concentrated among Republicans, and it coincides with the signing of the tax cuts. The improved sentiment could give Republican voters a reason to turn out in November — to reward the lawmakers they see as having given them a financial lift.

“It’s clear that the tax bill did have a significant impact on Republican confidence,” said Laura Wronski, a research scientist at SurveyMonkey.

Nancy Steele, a retired psychologist near Allentown, Pa., said she saw more cynical motives in the tax bill.

Article source: https://www.nytimes.com/2018/06/15/business/economy/survey-trump-economy.html?partner=rss&emc=rss

As China Curbs Borrowing, Growth Shows Signs of Faltering

The downgrades were among many reasons the government has tightened some curbs on borrowing since the end of the autumn. Beijing has particularly clamped down on lending by online finance companies and other private sector businesses that bypass the state-controlled banking system.

While commercial banks have continued to lend the money they hold from deposits, these conventional loans go mainly to state-owned enterprises. Private lenders, meanwhile, charge interest rates that are double or triple the 6 percent charged by banks, but they are often the only source of financing for small businesses.

Despite the higher interest rates, “we should also fully affirm the significance of private loans, which are an important supplement” to bank lending in the Chinese economy, said Mr. Yi, speaking at the Lujiazui Forum, an annual gathering in Shanghai of China’s top financial regulators. The forum, held at the start of each summer, is one of the Chinese government’s main channels for signaling the direction of Chinese monetary and financial policy.

Even before deciding on Thursday morning not to match the Fed’s rate increase, though, the Chinese government had already made a pair of moves that appear to have been elaborately crafted to channel more money to smaller, more entrepreneurial businesses.

At the start of this month, the central bank said that commercial banks could use some of their small business loans as collateral for borrowing money at low interest rates directly from the central bank. And on April 17, it told commercial banks that they could reduce the amount of money they set aside unprofitably as reserves, provided that they took actions that would leave them with more cash to lend to small and midsize businesses.

Gary Liu, the president of the China Financial Reform Institute, a Shanghai-based research group, said on the sidelines of the Lujiazui Forum that China’s private-sector companies of all sizes, even large ones, had long faced challenges in obtaining loans. But the credit squeeze on them this spring has been particularly painful.

“It’s very bad, and we see not just small and medium-sized enterprises defaulting but even big companies defaulting,” he said.

Article source: https://www.nytimes.com/2018/06/14/business/economy/china-economy-debt-interest-rates.html?partner=rss&emc=rss