February 16, 2020

U.S. to Start Trade Talks With Kenya to Counter China’s Influence

Mr. Lighthizer said in a radio interview in early 2018 that Africa was only a few years away from being the world’s population center, “and if we don’t figure out a way to move them right, then China and others are going move them in the wrong direction,” according to the publication Inside U.S. Trade.

China has lent vast sums of money to African governments and built ports, roads, airports and bridges around the continent as part of its Belt and Road Initiative. The projects include a 300-mile, $4 billion railway in Kenya that has linked Nairobi and Mombasa.

China says its investments in Africa are aimed purely at driving economic development, and many countries have welcomed improvements to their infrastructure that have aided the flow of commerce. But some projects have left governments, including Kenya’s, saddled with billions of dollars of debt to China and sparked distrust and resentment.

In a 2018 speech in Washington attended by many African officials, Mr. Lighthizer said that many African countries had signed free-trade agreements with some of America’s largest “competitors,” like the European Union and China, and that these governments were investing heavily.

“My sense, however, is that many of you recognize the value of diversifying your commercial ties, and I know you recognize what American companies bring to the table,” Mr. Lighthizer told the African officials.

Scott Eisner, the president of the U.S.-Africa Business Center at the U.S. Chamber of Commerce, said in a call with reporters on Wednesday that Kenya had made the most forceful case to the administration for starting trade talks.

“It really is who was willing to raise their hand and who had the most political will behind it,” he said.

Article source: https://www.nytimes.com/2020/02/06/business/economy/trump-kenya-trade-talks.html?emc=rss&partner=rss

U.S. Trade Deficit Shrinks, but Not Because Factories Are Returning

Economists say the hefty tariffs Mr. Trump has placed on China have encouraged American consumers to purchase goods from other countries and have not led to an American manufacturing renaissance.

“Tariffs to date have clearly had a significant impact on imports from China,” said Brad Setser, a senior fellow at the Council on Foreign Relations. “They equally clearly have not led to a stronger U.S. manufacturing sector.”

Rather than bringing manufacturing back to the United States, the clash with China has caused American companies and consumers to shift purchases to other countries, like Mexico, Vietnam and South Korea, said Mary E. Lovely, a senior fellow at the Peterson Institute for International Economics.

Data released Wednesday morning showed the trade deficit in goods with Mexico increased $21.1 billion last year to a record $101.8 billion, as the United States brought in more goods from its southern neighbor. The trade deficit in goods with Canada grew by $8 billion, while the gap with Taiwan increased by $7.8 billion.

“You’re going to see this rearrangement of the deck chairs,” Ms. Lovely said.

The trade deficit in goods with the European Union also expanded to a record $177.9 billion in 2019, presaging Mr. Trump’s next conflict. In recent weeks, Mr. Trump has said that his attention was shifting to Europe now that he has signed trade deals with China, Japan, Canada and Mexico.

Mr. Trump has criticized Europe for selling more to the United States than it buys and has accused its central bank of pushing down the value of the euro to make it easier for European companies to compete against American rivals. His administration is already imposing tariffs on Europe over airplane subsidies, and is threatening further levies in response to its digital taxes and on its cars.

Many economists have predicted that Mr. Trump’s trade deal with China would give businesses more certainty about trading conditions and cause imports from China to rebound, at least in part, in the coming months.

Article source: https://www.nytimes.com/2020/02/05/business/economy/trump-trade.html?emc=rss&partner=rss

Trump Promotes Low Unemployment and Rising Wages in State of the Union

Job growth has slowed sharply — from 2.6 percent at the start of 2019 to 1.3 percent at the end of the year — in so-called middle-wage sectors that include mining, construction and transportation, according to calculations by Nick Bunker, an economist at the Indeed Hiring Lab. That blue-collar slowdown is driving the deceleration of job growth across the United States economy.

Mr. Trump’s policies have also not revived employment in coal mining, as he promised; the sector lost 1,000 jobs nationwide in 2019, according to the Labor Department. Primary metals manufacturing, which includes the steel and aluminum industries that Mr. Trump claimed to have restored with tariffs, shed about 12,000 jobs in 2019.

Employment growth in manufacturing, which Mr. Trump promoted in his speech last year, slowed to fewer than 50,000 jobs in 2019 — the worst rate of his presidency and the second worst of the long recovery from recession.

Mr. Trump nodded implicitly to that slowdown in his speech on Tuesday night. Last year, he claimed, incorrectly, that the United States had created 600,000 factory jobs during his tenure. On Tuesday, he revised that number down to “half a million,” which is the correct figure.

Many economists blame the economy’s deceleration on the trade wars Mr. Trump has waged with China and other countries that send steel, aluminum, washing machines and solar panels to the United States.

Economic growth slowed to 2.3 percent last year, according to data released last month by the Commerce Department. That is a percentage point less than what Mr. Trump’s advisers predicted for the year. Across Mr. Trump’s three years in office, growth has never reached the 3 percent rate that administration forecasters have projected. It has fallen well short of Mr. Trump’s campaign promises of 4, 5 or even 6 percent annual rates.

Independent economists expect only modest growth this year from the initial trade deal that Mr. Trump reached with China and the revamped North American trade pact that he signed last week.

Article source: https://www.nytimes.com/2020/02/04/business/economy/trump-economy-state-of-the-union.html?emc=rss&partner=rss

Coronavirus May Delay Hard-Fought U.S. Trade Wins in China

One of the final sentences of the Phase 1 trade deal may prove to be key. The provision calls for consultations between the parties if “a natural disaster or other unforeseeable event outside the control of the Parties delays a Party from timely complying with its obligations under this Agreement.”

But even with a deadly disaster looming, China’s failure to meet its commitments may create some opposition in the United States, potentially returning the countries to their rockier relations before the signing of the trade deal.

Economists have predicted a drag on global growth from the virus, at least in the short term. In the United States, Goldman Sachs analysts estimate a 0.4 percentage-point reduction in first-quarter economic growth, though that effect is likely to fade.

Those costs could quickly outweigh the economic benefits of the trade agreement. While the Trump administration has touted big economic gains from the pact, economists’ forecasts have been modest, since the deal leaves tariffs in place on more than $360 billion of Chinese goods.

Privately, some Trump administration officials say that China may use the virus as an excuse to delay meeting its commitments, in hopes that Mr. Trump will ultimately be voted out of office this year.

Some in China have reacted negatively to the Trump administration’s decision to restrict travel between the countries, including barring entry to all foreign nationals who recently traveled in China.

In a note to clients, Ian Bremmer, the president of Eurasia Group, said that the Chinese government had found the American move to shut its borders “unnecessarily provocative, and it adds a sour tone on the back of the recently agreed Phase 1 trade deal,” he said.

Article source: https://www.nytimes.com/2020/02/03/business/economy/coronavirus-china-trade-economy.html?emc=rss&partner=rss

Coronavirus May Delay Hard-Won U.S. Trade Wins in China

One of the final sentences of the Phase 1 trade deal may prove to be key. The provision calls for consultations between the parties if “a natural disaster or other unforeseeable event outside the control of the Parties delays a Party from timely complying with its obligations under this Agreement.”

But even with a deadly disaster looming, China’s failure to meet its commitments may create some opposition in the United States, potentially returning the countries to their rockier relations before the signing of the trade deal.

Economists have predicted a drag on global growth from the virus, at least in the short term. In the United States, Goldman Sachs analysts estimate a 0.4 percentage-point reduction in first-quarter economic growth, though that effect is likely to fade.

Those costs could quickly outweigh the economic benefits of the trade agreement. While the Trump administration has touted big economic gains from the pact, economists’ forecasts have been modest, since the deal leaves tariffs in place on more than $360 billion of Chinese goods.

Privately, some Trump administration officials say that China may use the virus as an excuse to delay meeting its commitments, in hopes that Mr. Trump will ultimately be voted out of office this year.

Some in China have reacted negatively to the Trump administration’s decision to restrict travel between the countries, including barring entry to all foreign nationals who recently traveled in China.

In a note to clients, Ian Bremmer, the president of Eurasia Group, said that the Chinese government had found the American move to shut its borders “unnecessarily provocative, and it adds a sour tone on the back of the recently agreed Phase 1 trade deal,” he said.

Article source: https://www.nytimes.com/2020/02/03/business/economy/coronavirus-china-trade-economy.html?emc=rss&partner=rss

Coronavirus Thwarts Business Travelers Who ‘Need to Be in the Room’

For the last couple of days, Mr. Bernard has been debating whether to go. On one hand, he does not want to be the person responsible for introducing a deadly virus in Nigeria. On the other, he needs to make business contacts in China, where fabric is “cheaper and cheaper and cheaper and cheaper,” he said.

For now, he’s planning to go.

“I don’t want to be contaminated,” Mr. Bernard said. But “with the face masks and the nose masks and a lot of warnings, I’m going to be protected.”

In the United States, several major companies, including Goldman Sachs, General Motors and Wells Fargo, have imposed travel limitations on employees. And analysts are projecting that the disruption could have a sizable impact on China’s economy, at least in the short term.

The obvious point of comparison is the SARS outbreak in 2002 and 2003, which coincided with a relatively brief slowdown of global growth, then a sharp acceleration. Two decades later, however, China is an economic powerhouse, a vital manufacturing hub and a center of global trade with deep ties to practically every major industry.

“The much larger role of China in the global economy versus 2003 implies much greater global spillover risks,” economists at JPMorgan wrote in a research note on Friday.

It has also meant that many more people visit the country for work. Andy Payne, the founder of AppyNation, a video game company in England, said he had scrapped two visits to China scheduled for February.

He was planning to meet with representatives of a Chinese media company to discuss a partnership. But on Wednesday, British Airways canceled all flights to mainland China. Now those gaming negotiations will take place in a video chat.

Article source: https://www.nytimes.com/2020/02/01/business/coronavirus-business-travel.html?emc=rss&partner=rss

Independent Voters See Economy Improving, a Potential Boon to Trump

But Ms. Mazur-Hofmann, 61, doubts the good times will last. She worries about the national debt and fears Mr. Trump will cut Social Security. And even if the economy remains strong, Ms. Mazur-Hofmann said, she will not vote for Mr. Trump in November because of how he treats people.

“I’ll never vote for Trump — never, never, never in a million years,” she said.

Democrats on the campaign trail have not shied away from talking about the economy, although they describe it in very different terms than Mr. Trump does. Senators Bernie Sanders of Vermont and Elizabeth Warren of Massachusetts, in particular, have run on policies that they say would reduce inequality and make the economy fairer. Former Vice President Joseph R. Biden Jr. has pledged to rebuild the middle class.

Liberal groups are urging Democratic candidates to frame economic issues this year in a matter that could counter Mr. Trump’s appeals.

A national poll released this week by Navigator Research, which is overseen by leaders of several progressive organizations, tested voter agreement with various descriptions of the economy. It found that progressive messages scored best when they were phrased around disparities in how the economy was performing for the very rich compared with everyone else. For example: “The gap between the wealthiest Americans and everyone else has never been bigger — we need big, bold changes in Washington to unrig the economic system so working people can get ahead.”

Democratic arguments are resonating with some voters. Rafael Corrales, 24, recently moved back home to Omaha, in part because rents in Seattle, where he had been living, climbed too high. An independent voter and the first member of his family to graduate from college, Mr. Corrales is now looking for work.

His parents, a construction worker and a teacher’s aide, have not seen a raise in years. Health insurance premiums keep going up. His friends are drowning in student debt.

“Many of my friends have thousands of dollars in loans, and they still don’t have a job in their field and they’re working in a grocery store,” he said. “Maybe for people who do have money in the stock market or have higher earnings, it has improved. But for the average American, I don’t think it has improved at all.”

About the survey: The data in this article came from an online survey of 2,969 adults conducted by the polling firm SurveyMonkey from Jan. 6 to 12. The company selected respondents at random from the nearly three million people who take surveys on its platform each day. Responses were weighted to match the demographic profile of the population of the United States. The survey has a modeled error estimate (similar to a margin of error in a standard telephone poll) of plus or minus 2.5 percentage points, so differences of less than that amount are statistically insignificant.

Article source: https://www.nytimes.com/2020/02/01/business/economy/independent-voters-economy.html?emc=rss&partner=rss

European Economic Growth Slows Almost to Zero

The coronavirus is another big unknown. China is a major customer for German cars and other European products. A slowdown in China would spill over to the eurozone. Europeans are also nervous that President Trump could follow through on threats to put punitive tariffs on cars manufactured there.

Output in Italy, Europe’s most troubled big economy, unexpectedly shrank 0.3 percent in the fourth quarter compared to the third. For the full year, Italian growth was zero, signaling more of the stagnation that has plagued the country for more than a decade.

Brexit has already hurt trade between Britain and Europe. Germany missed out on about 16.2 billion euros, or $18 billion, in exports to Britain because of Brexit, according to the Ifo Institute for Economic Research in Munich, which measured how much more Germany would have sold to Britain if trade had remained as high as it was in 2015, before the Brexit referendum.

Some economists expressed optimism that the fourth quarter of 2019 was a low point and European growth will begin to recover. Only a few months ago it looked like Britain was headed for a disorderly exit from the European Union. That danger, at least, seems to be past.

France, where the economy unexpectedly shrank 0.1 percent in the fourth quarter, could bounce back now that the strikes that paralyzed transportation have largely ended.

Unemployment in the eurozone, at 7.4 percent in December, is at its lowest since before the financial crisis began in 2008, according to figures released Thursday. When people have jobs, they spend more money and contribute to growth.

“Our hope is that the fourth quarter marks the bottom,” Ms. Colthorpe of Oxford Economics said. “We are little bit positive about 2020. But with uncertainties about Brexit and so forth it’s not going to be a massive rebound.”

Article source: https://www.nytimes.com/2020/01/31/business/economy/european-union-eurozone-economy.html?emc=rss&partner=rss

Trump Called Powell an ‘Enemy.’ ‘Ugh’ Was a Response Inside the Fed.

“Ugh ugh,” Mr. Clarida replied.

An hour later, Ms. Smith sent Mr. Powell and Mr. Clarida an email containing positive comments about the Fed chair from Senator Kevin Cramer, Republican of North Dakota. The email quoted a talk radio interview in which Mr. Cramer criticized Mr. Trump’s attacks on Mr. Powell.

“This is an area where I frankly disagree with the president. He’s forever attacking the Federal Reserve and particularly Jay Powell,” Mr. Cramer said in the interview. “They are independent of politics, and they ought to remain independent of politics.”

That message met with a positive reaction from Mr. Powell, who replied with one word: “Terrific.”

Mr. Powell has not responded to Mr. Trump’s attacks, even when they are personal. He has repeatedly said that the Fed, which is independent of the White House, does not take politics into consideration.

But Mr. Powell has spent much of his tenure shoring up support on Capitol Hill, meeting with lawmakers from both parties, who routinely give the chair high marks. Their view of the chair matters, because while the president nominates members to the Fed’s Board of Governors, the White House has no other significant power over the central bank. Monetary policymakers answer to Congress.

That reality has not stopped Mr. Trump’s steady drumbeat of criticism. While the Fed cut rates two times after the August tweet, Mr. Trump has continued to blast the central bank. He said this week that “the Fed should get smart” and lower interest rates, and has tweeted about Mr. Powell personally 13 more times.

Article source: https://www.nytimes.com/2020/01/30/business/economy/fed-trump-powell-ugh.html?emc=rss&partner=rss

U.S. Growth at Slowest Since 2016, Complicating Trump’s Pitch

Businesses are hesitant to invest when they are unsure of what’s ahead.

According to Ben Herzon, executive director of United States economics at Macroeconomic Advisers, a forecasting firm, research shows that the “level of investment spending recently has been about $100 billion lower than it would have had there been no uncertainty about trade policy.”

That suggests there is room for more investment if trade policy settles.

This week, Mr. Trump signed the new North American trade agreement with Canada and Mexico into law. But tariffs remain on two-thirds of Chinese imports. At the same time, trade frictions with Europe over tariffs, airplane subsidies, digital taxes and the World Trade Organization have ratcheted up.

Also unsettling is the outbreak and spread in China of a mysterious and deadly virus that has the potential to rattle investors, and slow growth in Asia.

On the domestic front, Mr. Trump’s impeachment trial in the Senate and the coming presidential election add another large dose of political volatility.

No matter who becomes the Democrats’ nominee, “we’re likely to have two candidates with very different views on tax, regulatory and trade policy,” said Mr. Luzzetti of Deutsche Bank. “Businesses don’t know which direction that’s going to go in, so they may hold back on spending projects.”

Ana Swanson contributed reporting.

Article source: https://www.nytimes.com/2020/01/30/business/economy/gdp-numbers.html?emc=rss&partner=rss