January 29, 2020

Trump Expands Steel Tariffs, Saying They Are Short of Aim

Large steel companies have ramped up their investment since the tariffs came into effect, however. In the first nine months of 2019, United States Steel invested $978 million in its facilities, up more than 50 percent from the same period a year earlier, while capital investment at Nucor, a competitor, surged 58 percent.

But the companies have had to grapple with a steel price that is well off its recent high. U.S. Steel announced last month that it was indefinitely idling part of a plant near Detroit, sending layoff notices to roughly 1,500 employees. Some industry analysts continue to point at China, which produced steel at a record level in 2019.

At the same time, trade experts have questioned the legal basis for Mr. Trump’s continuing to make revisions to his metal tariffs.

The Trump administration has said Section 232 of a 1962 trade law, the legal provision it used to issue the tariffs, gives the president broad powers to impose tariffs to protect American industry for matters of national security. The administration has argued that domestic capacity to make iron and steel is essential for national defense and issued broad tariffs globally, before later carving out some exemptions for Argentina, Australia, Canada, Mexico, Brazil and South Korea.

But in a preliminary decision last year, the United States Court of International Trade gave a narrower interpretation of that statute, arguing that the president must act within certain periods that have already expired.

Ana Swanson reported from Washington, and Peter Eavis from New York.

Article source: https://www.nytimes.com/2020/01/27/business/economy/trump-steel-tariffs.html?emc=rss&partner=rss

Tougher Huawei Restrictions Stall After Defense Department Objects

A Pentagon spokeswoman, Sue Gough, said the department was aware of Commerce’s proposed rule change, but “will not prematurely discuss ongoing interagency collaboration.”

A spokesman for the Commerce Department said that “if or when we have something to announce, we will do so.”

The Trump administration has been leading a global offensive to try to discourage other leaders, including in Britain, Germany, the United Arab Emirates and India, from allowing Huawei to construct the next generation of telecom networks, with limited success.

Mr. Trump’s advisers warn that allowing Huawei — and other Chinese companies — to build fifth-generation, or 5G, networks could compromise intelligence sharing between the United States and its allies. But foreign officials have complained that the United States government has not provided evidence that Huawei poses a real threat.

The American crackdown has prompted Huawei to try to reduce its dependence on the United States.

It has recently produced handsets and telecom equipment that do not contain any American components. The company has found substitutes for some parts from suppliers in other countries, including Japan, and its in-house semiconductor unit, HiSilicon, has developed replacements for some advanced chips.

The proposed rule change would most likely accelerate these efforts, and could persuade companies like Taiwan Semiconductor Manufacturing Corporation, which uses many American parts, to halt purchases from the United States, at least temporarily, Paul Triolo, practice head of geo-technology for Eurasia Group, wrote in a note to clients.

Industry executives say other Chinese companies are concluding that American companies are also unreliable suppliers, given the administration’s China crackdown. Manufacturers of computers, air-conditioners, medical devices and other products are canceling their contracts with American firms and turning to European and Japanese products, they said.

Article source: https://www.nytimes.com/2020/01/24/business/economy/huawei-restrictions.html?emc=rss&partner=rss

China Poised to Buy More From U.S., at the Expense of U.S. Allies

For now, Chinese willingness to buy American goods could cover a wide range of industries.

The published text of last week’s agreement sets clear numerical targets for large increases in American exports to China in four categories: manufactured goods, agriculture, energy and services. But officials have described an unpublished annex that specifies large increases in a long list of subcategories.

Many of the subcategories highlight products that China currently imports from Europe and East Asia, in the case of manufactured goods, or Latin America, for many agricultural goods. The trade agreement does almost nothing to change China’s rules so as to increase its total purchases of foreign goods, instead leaving it to the Chinese government to reallocate orders toward American exporters.

Over the past quarter century, China has managed its trade so that it has fairly consistently sold about $4 worth of goods to the United States for each $1 of goods that it bought. China’s trade with Europe has been more balanced, in part because Europe has often been seen as a politically safer choice in Beijing given China’s often rocky relationship with the United States.

But in the last several months, China has concluded that its huge trade imbalance with the United States has become a source of danger and instability, people familiar with the bilateral relationship said in interviews while insisting on anonymity because of political sensitivities. The imbalance has produced demands from the United States for fundamental changes in the Chinese economy, like an end to many subsidies, that are unacceptable, they said.

Beijing’s conclusion, the people said, is that the trade imbalance with the United States must be narrowed sharply this year and next. While that narrowing may hurt the interests of companies and farmers in Europe and elsewhere, those affected by it should realize that they enjoyed extra sales to China over the past two years during the trade war with the United States, they added.

Beijing has already begun ramping up its broad interagency process for managing trade to make sure that American companies receive the extra orders promised under the agreement. In speeches, Chinese officials emphasized that they want to keep commitments to buy imports, although they have publicly glossed over the extent to which the Phase 1 agreement with the United States will divert trade away from other countries.

Article source: https://www.nytimes.com/2020/01/23/business/economy/china-us-trade-deal-allies.html?emc=rss&partner=rss

Trump Says the Fed Prevented 4% Growth. That Isn’t True.

So how did the Fed’s actual policies affect growth?

Relative to the economy’s structural growth path — the one driven by labor force expansion and productivity — the Fed’s rate-setting may have shaved about 0.1 percentage point from growth in 2019, according to an estimate from Julia Coronado, a founder of MacroPolicy Perspectives. Slower capital expenditures and trade probably shaved another 0.1 percentage point from growth. But those effects were offset by the aftereffect of ramped-up government spending and tax cuts, which she estimates probably lifted growth by about 0.4 percentage point.

But even here, there are uncertainties.

While it is clear that business investment fell sharply last year and manufacturing sagged, weighing down growth, it is hard to tell how much of that was a lagged response to higher interest rates and how much was a response to the trade war.

Anecdotally, businesses primarily blamed slower global growth and uncertainty stemming from the tariffs for that slump.

But interest rates probably had at least some economic impact. After the central bank cut them three times between July and December 2019, the wavering housing market perked back up, for instance.

“The slowdown in capital expenditures came along when the trade war escalated,” Torsten Slok, an economist at Deutsche Bank, said in an interview. “One cautious estimate is that the trade war played a bigger role,” he said, but “it’s just really difficult to wiggle out which was the cause.”

The upshot: The Fed matters around the edges, but, in the longer run, it is unlikely that the economy can achieve the 4 percent growth Mr. Trump has promised.

Tax cuts and higher government spending have helped to nudge growth temporarily above its potential — it came in at 2.8 percent in 2017 and 2.5 percent in 2018, decently above the roughly 2 percent sustainable growth rate.

Article source: https://www.nytimes.com/2020/01/22/business/economy/trump-fed-growth.html?emc=rss&partner=rss

The Trade War, Paused for Now, Is Still Wreaking Damage

Still, the factory sector remains the centerpiece of Mr. Trump’s economic appeal to voters, especially in the industrial states that lifted him to the White House in 2016. “This is a blue-collar boom,” Mr. Trump said on Tuesday in a speech in Davos, Switzerland. “We have created 1.2 million manufacturing and construction jobs — a number also unthinkable.”

Only 197,000 of those jobs were created last year, however, a sharp deceleration from the first two years of his administration. The United States created 1.1 million manufacturing and construction jobs in the three years before he took office.

There are signs that in the places most exposed to the trade war — particularly Wisconsin and other Midwestern states — those effects have spread beyond the industrial sector and begun to affect consumers. In a recent working paper, Michael E. Waugh, an economist at New York University, found that automobile sales were growing significantly more slowly in the counties most affected by the tariffs than in the rest of the country. Those places have also seen slower job growth in their retail sectors.

“Things are spilling over in these communities that are relatively more affected,” Mr. Waugh said. “New York is all fine. But there are places in the U.S. that are really struggling.”

The Midwest went through a similar economic soft patch in 2015 and 2016, when falling oil prices and other factors caused a mini-recession in the industrial sector. Mr. Waugh said he saw parallels — although it isn’t clear how they will play out given that this time Mr. Trump is the incumbent.

“Those places slowed down” in 2016, Mr. Waugh said. “Those places influenced the election. And now what do you have today? You have those same places slowing down, and they’re looking pivotal in the election again.”

While some of the effects of the trade war could soon be reversed, others may last longer.

“A lot of customers moved their production out of Asia to Europe and some of them moved their production from Asia to Mexico, so there’s a migration,” said Lidia Yan, the chief executive and co-founder of Next Trucking, a start-up that matches shippers and truckers.

Article source: https://www.nytimes.com/2020/01/22/business/economy/trade-economy.html?emc=rss&partner=rss

Trade War’s Pain May Deepen Even as Tensions Abate

Still, the factory sector remains the centerpiece of Mr. Trump’s economic appeal to voters, especially in the industrial states that lifted him to the White House in 2016. “This is a blue-collar boom,” Mr. Trump said on Tuesday in a speech in Davos, Switzerland. “We have created 1.2 million manufacturing and construction jobs — a number also unthinkable.”

Only 197,000 of those jobs were created last year, however, a sharp deceleration from the first two years of his administration. The United States created 1.1 million manufacturing and construction jobs in the three years before he took office.

There are signs that in the places most exposed to the trade war — particularly Wisconsin and other Midwestern states — those effects have spread beyond the industrial sector and begun to affect consumers. In a recent working paper, Michael E. Waugh, an economist at New York University, found that automobile sales were growing significantly more slowly in the counties most affected by the tariffs than in the rest of the country. Those places have also seen slower job growth in their retail sectors.

“Things are spilling over in these communities that are relatively more affected,” Mr. Waugh said. “New York is all fine. But there are places in the U.S. that are really struggling.”

The Midwest went through a similar economic soft patch in 2015 and 2016, when falling oil prices and other factors caused a mini-recession in the industrial sector. Mr. Waugh said he saw parallels — although it isn’t clear how they will play out given that this time Mr. Trump is the incumbent.

“Those places slowed down” in 2016, Mr. Waugh said. “Those places influenced the election. And now what do you have today? You have those same places slowing down, and they’re looking pivotal in the election again.”

While some of the effects of the trade war could soon be reversed, others may last longer.

“A lot of customers moved their production out of Asia to Europe and some of them moved their production from Asia to Mexico, so there’s a migration,” said Lidia Yan, the chief executive and co-founder of Next Trucking, a start-up that matches shippers and truckers.

Article source: https://www.nytimes.com/2020/01/22/business/economy/trade-economy.html?emc=rss&partner=rss

Uber Sells Food Delivery Business in India

In a statement on Monday, he said, “India remains an exceptionally important market to Uber and we will continue to invest in growing our local Rides business, which is already the clear category leader.”

Uber has recently ceded ground in several of the international markets where it operates. It pulled Uber Eats from South Korea in September and sold off its ride-hailing business in Southeast Asia to a local competitor in 2018.

Last March, Uber purchased its largest competitor in the Middle East, Careem, as a hedge against competition there. That deal has been approved by regulators in most of Careem’s markets.

For Zomato, buying the Uber Eats business in India will help it compete against Swiggy. Both companies have been raising money from investors — and burning through much of it — as they fight over the small orders that dominate India’s food delivery market.

“This acquisition significantly strengthens our position in the category,” said Deepinder Goyal, Zomato’s chief executive.

Zomato began in 2008 as an online guide that scanned menus from restaurants. It later added reviews and reservation features, and more recently, food delivery, which is now the core of its business. Its investors include Ant Financial, which added $150 million to Zomato’s coffers in a fund-raising round this month.

To increase revenue, Zomato began a loyalty program in 2017 called Zomato Gold that gave diners buy-one-get-one-free deals at thousands of restaurants. The program, which was very popular, was initially limited to in-person dining but later extended to delivery.

Article source: https://www.nytimes.com/2020/01/20/technology/uber-eats-zomato.html?emc=rss&partner=rss

Trump’s China Deal Creates Collateral Damage for Tech Firms

“To advance the Chinese government’s five-year economic plan, a company owned by the Chinese state allegedly stole Micron’s designs, valued at up to $8.7 billion,” the president said. “Soon, the Chinese company obtains patents for nearly an identical product, and Micron was banned from selling its own goods in China. But we are seeking justice.”

“For years, these abuses were tolerated, ignored or even encouraged,” Mr. Trump added. “But as far as America is concerned, those days are over.”

Chip makers initially supported the Trump administration’s willingness to take on China. Companies had long grumbled about intellectual property theft and unfair treatment in the Chinese market, but they had little recourse: Going public about their troubles could spook investors and invite Chinese retaliation.

Then, in April 2018, the administration announced $50 billion in tariffs that would directly hit semiconductor companies by raising prices for imported equipment and materials. A chip finished in China would be subject to a 25 percent tariff, even if its components had been made in America.

The tariffs caught the industry by surprise. The Semiconductor Industry Association, a trade group, pushed back, telling the United States trade representative in July 2018 that the tariffs would “undermine U.S. technological leadership, cost jobs, and adversely impact U.S. consumers of semiconductor products and the U.S. semiconductor producers.”

Some industry executives grew more nervous as Mr. Trump escalated his trade fight and the prospect of an economic rupture between the United States and China became more real. Chinese customers shifted their purchases to suppliers in South Korea, Taiwan and elsewhere.

Mr. Trump’s trade pact did ink some victories — it includes greater protections for companies like Micron, including preliminary injunctions and expanded legal recourse for theft of trade secrets. It also contains new promises from China to refrain from pressuring American businesses to transfer their technology to Chinese companies, and it allows American companies to sue individuals, including former employees and hackers.

Article source: https://www.nytimes.com/2020/01/20/business/economy/trump-us-china-deal-micron-trade-war.html?emc=rss&partner=rss

Hoping to Shape the Conversation at Davos

With some of the mixed perceptions about Davos, what are your expectations of the conference?

Davos may have the reputation of being a space where business and political leaders come together to sign deals, and perhaps forward their own short-term interests. However, there is no doubt that the decisions made today will affect our environment for centuries to come.

I wish to be a voice for future generations and young people, who will be the most impacted by these decisions. I seek to have empathetic and courageous conversations with those in power, and to advocate for a long-term, values-based lens in decision making.

What do you hope to accomplish at Davos?

Davos also brings together phenomenal leaders across sectors, and I believe they have a genuine desire to improve the world. One could call it idealistic, but I very much resonate with Margaret Mead’s notion “never doubt that a small group of thoughtful, committed citizens can change the world; indeed it is the only thing that ever has.”

I look forward to exchanging ideas, and forging relationships with those also committed to restoring the health of our planet, and fostering the self transformation of individuals with the intention that this will support greater collective action and impact.

With some of the mixed perceptions about Davos, what are your expectations of the conference?

The Davos 2020 meeting comes at the onset of a new, vital decade, and 2020 is also the year that countries are required to renew their commitments with even greater ambitions. I hope this meeting will coerce world leaders to take action, especially in reducing emissions by 7.6 percent in 2020 and every other year! I hope the world will look back at this meeting in 10 years as one among many that jolted world leaders to take action.

What do you hope to accomplish at Davos?

Deliberately leaving no one behind is the only way we will achieve the sustainable development goals by 2030. Over 70 percent of Africans still reside in rural areas and continue to be alienated from development.

Article source: https://www.nytimes.com/2020/01/19/business/economy/global-shapers-davos.html?emc=rss&partner=rss

As World Economy Shifts Gears, Trade Growth Slows

China’s scale and pace of development, its no-holds-barred approach to competition and the authoritarian regime that backs it fundamentally put in question the liberal model of globalism and win-win trade relations.

It is barely an exaggeration to say that the history of economic development, played out according to Western rules — the narrative that began with Adam Smith’s doctrine of free markets in the 18th century — starts to look like only a preface to an age of competition between large economic blocs.

The Europeans increasingly look like the last man standing when it comes to free trade. The United States, with its long history of protectionism, was always a somewhat reluctant recruit to the camp of free trade. In the 21st century, with the emergence of China and India, the United States has company on the global stage.

China, under its current rulers, is a resurgent and assertive nation-state that poses a fundamental challenge to the power position America built in Asia during the Cold War. What is at stake is more than trade. It is geopolitics.

This was made explicit by the Obama administration and its talk of an “Asia pivot,” with Mr. Obama focusing more on the rise of Asia and less on the Middle East. Superpower competition reduces Mr. Trump’s Phase 1 trade deal with its discussions about soy beans to a sideshow. What matters is the intersection of military and industrial policy in the tech arena — 5G and A.I., not steel and agriculture, will shape the future balance of power.

This new competition brings to mind the Cold War.

China is ruled by a Communist Party that pays lip service to the cult of Mao. America’s positions in Korea, Japan, Taiwan and the South China Sea are legacies of that era. But in the Cold War with the Soviet Union there was never the depth of economic, technological and cultural interconnection that the West has forged with China since the 1980s.

Article source: https://www.nytimes.com/2020/01/19/business/economy/davos-world-economic-forum-trade.html?emc=rss&partner=rss