Monday, January 20, 2020

BBC News - What has Donald Trump actually achieved on trade?

Donald TrumpImage copyrightGETTY IMAGES
Image captionWhat deals has Donald Trump managed to do?
Is Donald Trump anything more than, as he once put it, "Tariff Man"?
The US president uses the tool against trading partners to fight battles from "unfair" steel price practices to France's digital tax on tech giants.
Most prominent has been his trade war with China which has raised border taxes on almost $500bn of annual trade.
Mr Trump styles himself as a deal-maker who, as president of the world's largest economy, uses tariffs for leverage in negotiations.
So can the US president legitimately claim he has made any progress? The BBC takes a look around the world.

China

When Mr Trump first announced a trade deal with China, he hailed it as "very large and comprehensive".
It was, he tweeted, "by far, the greatest and biggest deal ever made for our Great Patriot Farmers in the history of our Country".
This week, the two sides finally got around to a signing a deal but some were far from convinced that the substance merited Mr Trump's descriptions.
Chinese vice premier Liu He (L) and US president Donald J. Trump (R) sign a partial trade dealImage copyrightEPA
Image captionChinese vice premier Liu He (L) and US president Donald J. Trump (R) sign a partial trade deal
Most of the tariffs remain in place. The US will maintain levies of up to 25% on an estimated $360bn worth of Chinese goods while China is expected to keep tariffs on more than $100bn of US imports.
Even the Trump administration conceded it fell short of original goals, describing it as a "phase one" agreement.

North America

In 2018, the US, Canada and Mexico agreed to a deal that will govern the more than $1.1 trillion in trade between the three countries.
The pact, which has been slowly making its way through the legislatures of the three countries, will replace the 1994 North American Free Trade Agreement (NAFTA) which Mr Trump has described as the "worst".
However, despite a name change, a lot of the terms remain the same.
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map of Trump trade wars
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There are some differences, including stronger labour provisions and tougher rules on the sourcing of auto parts.
But analysts say their significance remains to be seen. Many of the other updates were worked out in negotiations that pre-dated Mr Trump.

Japan and South Korea

One of Mr Trump's first moves as president was to withdraw the US from the Trans Pacific Partnership - a proposed 12-country deal that eventually went ahead without America, putting its exports at a disadvantage.
Mr Trump has since claimed two bilateral agreements in Asia, with Japan and South Korea, but the changes were so limited that Congressional researchers said they barely qualified as trade deals.
In the case of South Korea, the most notable provision actually preserved US tariffs on light duty trucks.
With Japan, the US won either levy cuts or complete elimination on $7bn worth of agricultural goods. But this was the same access America would have received under the Trans Pacific Partnership.

Europe

In the case of Europe, there is no trade deal in sight.
The two sides went through a round of tit-for-tat tariffs after the US announced the steel and aluminium tariffs - measures that affect more than $10bn worth of two-way trade.
Then, in October, the US imposed 25% tariffs on $7.5bn worth of European goods, including Scotch whisky, French wine and Italian cheese.
PecorinoImage copyrightGETTY IMAGES
Image captionPecorino, from Italy, is one of the cheeses affected
In that instance, Mr Trump's decision had the approval of the World Trade Organization, which had found that the European Union provided illegal subsidies to aircraft manufacturer Airbus.
The US president had made repeated threats to impose tariffs on European cars but that has never materialised.
However, the White House continues to dangle the prospect of steep levies on other EU goods such as French produce in retaliation for France's new digital services tax..

Brazil and Argentina

Heads spun last month when Mr Trump announced on Twitter he wanted tariffs on steel and aluminium from Brazil and Argentina.
Those countries had been exempted from higher duty on both metals but Mr Trump claimed the two nations had been devaluing their currencies "which is not good for our farmers".
So far, there has been no follow-up announcement from his administration and the threats have not materialised.
Following a phone call with Mr Trump, Brazilian President Jair Bolsonaro said he had been assured they would not happen.

Friday, January 17, 2020

BBC News - China's economic growth hits 30-year low

Workers load boxes onto a ship at Lianyungang Port.Image copyrightGETTY IMAGES
China's economy grew last year at the slowest pace in almost three decades.
Official figures show that the world's second largest economy expanded by 6.1% in 2019 from the year before - the worst figure in 29 years.
The country has faced weak domestic demand and the impact of the bitter trade war with the US.
The government has been rolling out measures over the past two years in an attempt to boost growth.
It comes after almost two years of trade tensions with the US - although hopes of a better relationship with America have seen improvements in manufacturing and business confidence data.
This week Washington and Beijing signed a "phase one" trade deal. However, analysts remain unsure whether those recent gains will continue.
In response to the lower growth rate, Beijing is now widely expected to roll out yet more stimulus measures.
The government has used a combination of measures aimed at easing the slowdown, including tax cuts and allowing local governments to sell large amounts of bonds to fund their infrastructure programmes.
The country's banks have also been encouraged to lend more, especially to small firms. New loans in the local currency hit a record high of $2.44 trillion (£1.86tn) last year.
So far the economy has been slow to pick up, with investment growth falling to record low levels.
Historically, China has seen much stronger economic expansion, with the first decade of the 21st Century seeing double-digit percentage growth.
But - although that 6.1% growth rate is China's weakest expansion in almost three decades - it is much higher than other leading economies.
The US central bank, for example, has forecast that the American economy will grow by around 2.2% this year.
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'The trade war may have actually helped the Chinese economy'

Analysis by Stephen McDonell, BBC China correspondent
For many countries, having the slowest GDP growth in three decades might cause panic - but not in China.
Softening domestic demand and US tariffs have eaten into growth - but some analysts argue that the trade war may have actually helped the Chinese economy.
This 6.1% GDP figure for 2019 is not only within the government's target range, but Chinese policy makers have for years been trying to gradually step down expectations.
They're trying to break away from the years of unsustainable breakneck growth which has trashed the natural environment and led to an explosion in unserviceable debt.
The government has instigated some stimulus measures to make sure the steam doesn't come out of the economy too quickly. But on bank loans, the crucial question will be - who gets access to the loans?
Will it be those building the "bridge to nowhere" vanity projects which have popped up in many regional cities?
Or will it be the promising new start-up enterprises which are seen as the future of modern Chinese development?
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As part of the phase one deal, China pledged to boost US imports by $200bn above 2017 levels and strengthen intellectual property rules.
In exchange, the US agreed to halve some of the new tariffs it has imposed on Chinese products.
Speaking in Washington, US President Donald Trump said the pact would be "transformative" for the American economy.

Thursday, January 16, 2020

Reuters News - Concerns linger after U.S. and China sign initial trade deal

BEIJING/WASHINGTON (Reuters) - China will boost purchases of U.S. goods and services by $200 billion over two years in exchange for the rolling back of some tariffs under an initial trade deal signed by the world’s two largest economies, defusing an 18-month row that has hit global growth.
Key world stock market indexes climbed to record highs on news of the deal, before stalling on concerns it may fail to ease tensions, with numerous thorny issues unresolved. Oil prices rose, helped by expectations of more Chinese purchases of U.S. oil and gas.
While acknowledging the need for further negotiations with China to solve a host of other problems, President Donald Trump hailed the agreement as a win for the U.S. economy and his administration’s trade policies.
“Together, we are righting the wrongs of the past and delivering a future of economic justice and security for American workers, farmers and families,” Trump said in rambling remarks at the White House alongside U.S. and Chinese officials on Wednesday.
Chinese Vice Premier Liu He read a letter from President Xi Jinping in which the Chinese leader praised the deal as a sign the two countries could resolve their differences with dialogue.
“While markets seemed to take this deal as a risk-on signal, we should all be aware that headlines about trade, particularly U.S. China trade, are going to be a constant feature of 2020,” said Hannah Anderson, Global Markets Strategist, J.P. Morgan Asset Management in Hong Kong.
The centerpiece of the deal is a pledge by China to purchase at least an additional $200 billion worth of U.S. farm products and other goods and services over two years, above a baseline of $186 billion in purchases in 2017, the White House said.
Commitments include $54 billion in additional energy purchases, $78 billion in additional manufacturing purchases, $32 billion more in farm products, and $38 billion in services, according to deal documents released by the White House and China’s Finance Ministry.
Liu said Chinese companies would buy $40 billion in U.S. agricultural products annually over the next two years “based on market conditions” which may dictate timing of purchases in any given year.
Beijing had balked at committing to buy set amounts of U.S. farm goods earlier, and has inked new soybean contracts with Brazil since the trade war started.
Although the deal could be a boost to U.S. farmers, automakers and heavy equipment manufacturers, some analysts question China’s ability to divert imports from other trading partners to the United States.
The deal does not end retaliatory tariffs on American farm exports, makes farmers “increasingly reliant” on Chinese state-controlled purchases, and does not address “big structural changes,” Michelle Erickson-Jones, a wheat farmer and spokeswoman for Farmers for Free Trade, said in a statement.
Trump, who has embraced an “America First” policy aimed at rebalancing global trade in favor of U.S. companies and workers, said China had pledged action to confront the problem of pirated or counterfeited goods and said the deal included strong protection of intellectual property rights.
Washington’s insistence on enforcement mechanisms “with real teeth” could tear the deal apart if any tariffs are re-imposed for non-complicance.
U.S. Speaker of the House of Representative Nancy Pelosi said Trump’s China strategy had “inflicted deep, long-term damage to American agriculture and rattled our economy in exchange for more of the promises that Beijing has been breaking for years,” in a statement.
Earlier, top White House economic adviser Larry Kudlow told Fox News the agreement would add 0.5 percentage point to U.S. gross domestic product growth in both 2020 and 2021.
Aviation industry sources said Boeing Co (BA.N) was expected to win a major order for wide-body jets from China, including its 787 or 777-9 models, or a mixture of both.
The deal touted new wins for U.S. companies looking to access China’s $40 trillion financial sector, but many of the changes were already in the works with Beijing stepping up the pace of opening up in the past year.
China’s central bank said Chinese financial institutions are completely capable of coping with foreign competition and it will strengthen financial supervisions as the sector is freed up.

TARIFFS TO STAY

The Phase 1 deal canceled planned U.S. tariffs on Chinese-made cellphones, toys and laptop computers and halved the tariff rate to 7.5% on about $120 billion worth of other Chinese goods, including flat-panel televisions, Bluetooth headphones and footwear.
But it will leave in place 25% tariffs on a $250-billion array of Chinese industrial goods and components used by U.S. manufacturers, and China’s retaliatory tariffs on over $100 billion in U.S. goods.
Market turmoil and reduced investment tied to the trade war cut global growth in 2019 to its lowest rate since the 2008-2009 financial crisis, the International Monetary Fund said in October.
Trump, who has been touting the Phase 1 deal as a pillar of his 2020 re-election campaign, said he would agree to remove the remaining tariffs once the two sides had negotiated a “Phase 2” agreement.
“We’ve already begun discussions on a Phase 2 deal,” Vice President Mike Pence said in a Fox Business Network interview.
Reporting by Ryan Woo, Jeff Mason, Andrea Shalal and Dave Lawder; Additional reporting by Echo Wang, Lisa Lambert, Susan Heavey Lisa Lambert and Doina Chiacu in Washington, Tim Aeppel in New York, Mark Weinraub in Chicago, Se Young Lee and Stella Qui in Beijing and Tim Hepher in Paris; Writing by Michael Perry; Editing by Lincoln Feast

Wednesday, January 15, 2020

BBC News - Fall in inflation raises prospects of interest rate cut

hotelImage copyrightGETTY IMAGES
Image captionCheaper hotel costs helped to push the inflation rate down
The UK's inflation rate fell to its lowest for more than three years in December, increasing speculation that interest rates could be cut.
The rate dropped to 1.3% last month, down from 1.5% in November, partly due to a fall in the price of women's clothes and hotel room costs.
December's inflation rate was the lowest since November 2016.
Analysts said it raised the chances of a rate cut, with inflation below the Bank of England's target of 2%.
"Very soft UK inflation data for December leaves the door wide open for a Bank of England rate cut on 30 January," said Melissa Davies, an economist at stock broker Redburn.
The Bank's main interest rate is used by banks and other lenders who set borrowing costs.
It affects everything from mortgages to business loans and has a big effect on the finances of individuals and companies.
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Analysis box by Andy Verity, economics correspondent
City traders who spend their working lives trying to anticipate moves in interest rates are convinced of it today: the Bank of England is likely to cut the official interest rate when it meets later this month. Market indicators suggest a 60% chance of it happening.
Here's the thinking: at 1.3%, the official measure of consumer price inflation in the year to December was lower than expected and well below the 2% target. With the economy barely growing (even shrinking if you are prepared to rely on the official November estimate of a 0.3% contraction) there's little sign of inflationary pressure in the near future.
Granted, there was a sharp rise in the price of crude oil - a barrel was up 4.9% in the month and 17.4% on the year. But in spite of that, producers were still paying slightly less for their raw materials and supplies than they were last year.
The assumption has been that the November contraction was a temporary period of weakness induced by pre-election political uncertainty - and that there will be a recovery as businesses and consumers regain a new-found confidence to spend and invest.
The risk the MPC will have to contend with is that that hoped-for post-election recovery does not materialise.
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Earlier on Wednesday, Michael Saunders, one of the rate setters on the Bank's Monetary Policy Committee (MPC), reiterated his view that borrowing costs should be lowered.
"It probably will be appropriate to maintain an expansionary monetary policy stance and possibly to cut rates further, in order to reduce risks of a sustained undershoot of the 2% inflation target," he said.
Last week, two other rate setters and Bank governor Mark Carney also suggested that rates could be cut, depending on how the economy performs.
On Sunday, MPC member Gertjan Vlieghe told the Financial Times he would consider voting for a rate cut depending on how the economy has performed since the December election.
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However, members of the MPC could take the latest inflation figure with a pinch of salt, said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
"Half of the decline in the headline rate was driven by a sharp fall in volatile airline fares inflation," he said.
He expects inflation to rise to 1.6% in the first three months of 2020, and this could mean enough MPC members will decide to wait rather than voting to cut rates.
Emma-Lou Montgomery, associate director for personal investing at money manager Fidelity International, said the inflation data painted a bleaker picture for the UK economy than before.
"Today's UK CPI figures simply add to the growing sense of unease many feel when considering the outlook for the UK economy, with the rate of inflation continuing to lag well below the Bank of England's target of 2%."
A cut would ease the finances of borrowers, but create a tougher environment for savers, she added