Wednesday, 12 Dec 2018

Finance 202: Trump wants to reduce the trade deficit. He has just reached a peak in ten years.

The ticket

President Trump's preferred gauge for US trade health is heading in the wrong direction.

The country's trade deficit reached its highest level in 10 years in October, the Commerce Department reported on Thursday. The US bilateral trade deficit with China also hit a monthly record, rising 7.1% to $ 43.1 billion.

Since the election campaign, Trump reports that this gap shows that China benefits from the United States. It does not matter that the trade deficit does not mean, as Trump argues, that the United States is losing money to China, but simply that Americans are buying more from China than Chinese people do. buy from Americans.

But the trade war that Trump is pushing in part to reduce the difference makes the situation worse, at least for now. Key exports such as soybeans continued to fall as a result of China's retaliatory tariffs on the crop. At the same time, imports have increased, which is at least partly explained by US companies that store Chinese products before the holidays. and a dramatic increase in the duty rate that was to bite on January 1st. (Americans are also willing to buy, as a result of Trump's tax cuts.)

"Increasing domestic demand through tax easing and struggles with trading partners is what happens," said Pantheon Macroeconomics chief executive Ian Shepherdson in a note to his clients on Thursday. . The broad trade deficit rose 1.7% to $ 55.5 billion, its highest level since October 2008, and widened for five consecutive months. It has increased by 11.4% since October 2017.

Top Trump's commercial advisor, Peter Navarro, said in an interview with CNN on Thursday that "Erin Burnett OutFront" said Beijing was deliberately increasing the deficit – "It's precisely why it will be difficult to trust them when signing any type of agreement." He added that the Chinese had artificially deflated the value of their currency and pushed their exports to counterbalance the tariffs of the administration. And although it will take time, he said, "we will see the deficit begin to decline structurally".

In the meantime, people with low incomes bear a disproportionate burden ofaccording to a study conducted this week by the Tax Foundation.

He found that Trump's fees were $ 42 billion in new taxes. In the long run, they would reduce 0.33% of the after-tax income of the lowest quintile, compared to a 0.23% reduction for the 1% of the highest paid.

About half of the goods from China are now subject to import duties. And while the Trump administration was initially trying to minimize the direct impact on consumers, US buyers now face higher prices on everything from fruit juice to luggage to furniture.

"With respect to how goods from China arrive in other markets, including the United States, this creates uncertainty with respect to prices. This leads us to start thinking about where we want to source, "Walmart CEO Doug McMillon told CNBC in an interview on Thursday..

"We buy far more goods manufactured in the United States than anywhere else. But China is second on this list. We are therefore concerned about next spring, next summer, next fall, what customers will have to pay if fares soar … so far we've managed to manage it. We try to get as little as possible and as late as possible for the customers, but there are certain categories where, over time, it will manifest itself. "

Prices continue to drive up prices in the economy, according to the latest beige book from the Fed, released Wednesday. "Most districts reported that businesses remained positive. however, some optimism has faded, with contacts pointing to heightened uncertainty resulting from the effects of tariffs, rising interest rates and labor market constraints. said the Fed. "Rumors of tariff-driven cost increases have spread more widely from manufacturers and subcontractors to retailers and restaurants."

– Highly anticipated work report. Danielle Paquette, postal: "Even in the face of the economic crisis – trade tensions, unstable markets, hurricanes – hiring remained strong in 2018: US employers have created more than 200,000 jobs in four of the last six months. Analysts predict that payroll growth in 2018 is likely to exceed the average monthly gains of 182,000 jobs in the previous year and could exceed the particularly strong levels of 2016 (195,000). "Most indicators of the US economy have held up well," said Mark Hamrick, Senior Economic Analyst at Bankrate, a personal finance website. "The question is: how much slowing is there on the horizon?"


Powell wants a wait-and-see approach to hiking. Nick Timiraos, WSJ: "Federal Reserve officials are considering whether to signal a new wait-and-see approach after a likely rise in interest rates at their December meeting, which could slow the pace of rate increases next year The general direction of short-term interest rates will be higher in 2019, according to recent interviews and public statements.

"But as they move in the middle, they are less and less sure of how quickly they will have to act or when they will have to go, and they want to assess how far they are going to go. The economy is holding up against the measures they have already taken The management of this new, less predictable approach will depend largely on the performance of the economy and markets in the coming weeks. "

The report helped stem losses in a day of wild trading. Shares fell sharply, in part because of investor concern over the prospects of US-China trade negotiations after Huawei's financial chief's arrest, "coupled with the omens of a recession on the bond market and a steep fall in oil prices. At 11:30, 500 shares had hit their lowest level in 52 weeks, "writes Taylor Telford of the Washington Post.

At its lowest level, the Dow Jones Industrial Average dropped by 784 points, or 3.1%, and by the last trading hour it had found its way back and closed the day down 79 points, or 0 At the end of the day, the Nasdaq composite index, which is very technology-oriented, moved into positive territory, registering an increase of 0.4%. Index of the 500 Standard & Poor's shares came back down with a drop of 0.2%. "

Bostic: Interest rates are "away from neutral". Jeff Cox, of CNBC: "Atlanta Fed President Raphael Bostic said the central bank may not need to go further with the rates of interest. interest in striking the right balance between slowdown and overheating. Acting on the key concept of a "neutral" rate for the economy, Mr Bostic said that the exact rate is difficult to determine, but that signs indicate that he is close . "

– OPEP postpones decision on oil production pending Russian negotiations Kiyoko Metzler and Carlo Piovano of AP: "The OPEC countries hoping to support the oil price on Thursday postponed their decision as to the reduction in oil production until it reached the end of the year. they negotiate with Russian ally Friday on its contribution to the reduction. Some saw this as a sign that the group of oil-producing countries might not have the political unity to control supply and was suffering from political pressures exerted by [Trump] do not push prices again. Others have interpreted this as a tactic to bring Russia to accept also significant cuts.

"The price of oil has dropped about 25% because the major producers – including the United States – are pumping a lot of oil, and it fell again on Thursday after the lack of action. OPEC and the broader concerns about global economic growth. "

The United States is a net exporter of oil for the first time in 75 years. Javier Blas of Bloomberg: "America became a net exporter of oil last week, breaking with 75 years of continued dependence on foreign oil and marking a turning point – though it is likely to be brief, [Trump] called "energy independence". The shift to net exports is the dramatic result of an unprecedented boom in US oil production: Thousands of wells were pumped from the Permian region in Texas and New Mexico to the Bakken in North Dakota and the Marcellus in Pennsylvania … Given the volatility in the weekly data, the United States will likely remain a small net importer most of the time. "



– China promises swift action on the US trade pact. Joe McDonald of AP: "The Chinese government announced on Thursday that it would proceed quickly to a ceasefire with Washington.It is confident that it can reach a trade agreement, suggesting that Beijing wishes to avoid disruption due to the arrest of a technical officer Discussions during the 90-day period during which [Trump] agreed to suspend US tariff increases starting with agricultural products, energy and automobiles. . .

"He was asked to confirm whether Beijing had promised to buy American products immediately." Gao said China "would immediately implement the consensus reached by both sides on agricultural products, cars and cars. The optimistic tone contrasted with China's criticism of Canada's arrest of a leader of tech giant Huawei who, according to a Toronto newspaper, is accused by the United States of attempting to violate trade restrictions imposed on Iran According to the government of President Xi Jinping, trade negotiations are too important to be disrupted.

Beijing reflects on Huawei's arrest. Beijing analysts agree that the government will try to contain the fallout of the arrest to prevent it from derailing trade negotiations, reported Anna Fifield of The Post newspaper. But Bloomberg reports that Chinese national security officials want a more energetic response.

What was behind the arrest? Mark Landler, Edward Wong and Katie Benner of the New York Times: "The timing of the arrest, according to some experts, could feed the suspicions of Chinese officials that nationalist factions of the Trump administration were trying to sabotage the trade agreement.Their mood has already deteriorated since Saturday., when the White House announced that the two sides had agreed to 90 days of talks, in a climate of confusion as to timing and doubts about the fact that the Chinese would accept the trade concessions described by Mr. Trump …

"For US officials and the White House, the fact that Mr. Trump entered the meeting without being aware of the arrest raised the question of whether the President had been properly informed before a sensitive meeting with a foreign leader. "

According to CNN, some administration officials believe that Meng could be used as leverage in trade negotiations.

American execs in China, beware. In his Sinocism newsletter, China expert Bill Bishop writes that US companies operating in China should in any case prepare for major disruptions. "Any foreign technological enterprise, especially American, which relies on China for its supply chains, must make a serious effort to reduce this dependence, as difficult, painful and costly as it may be. Frankly, the boards of directors of these companies are negligent if they do not push the company to do this planning …

"I've seen speculation that China could retaliate by arresting a US technology official, which would certainly be explosive, but I'm not sure that Beijing would do it without a clear legal case, because would undermine the broad propaganda campaign the Party has undertaken to portray as a company open to foreign companies and the defender of the global trading system. if i was an american technical manager, i would delay a little my trip to china or go on vacation if he was based there. "

The Brexit storage frenzy leaves businesses with few warehouses

With so many global companies accumulating stocks in front of the Brexit to protect themselves from disruptions at the border, some of them are facing a shortage of storage facilities in parts of the UK. Perishable food manufacturers and pharmaceutical companies are particularly vulnerable to the problem.




– The appeal of the Department of Justice regarding the AT & T-Time Warner merger is not very attractive. Hamza Shaban of the newspaper: "The Justice Ministry on Thursday asked the Federal Court of Appeal to reconsider AT & T's acquisition of Time Warner, priced at $ 85 billion, claiming that the judge who had approved the deal in June misinterpreted the fundamentals by threatening to obscure the popular TV channels.

"The Department of Justice has made oral arguments in its appeal of a lower court decision that had inflicted the agency a major defeat in one of the most antitrust lawsuits." followed by all the time for decades. The case of the blockbuster – the first time since the Nixon era that the government is resorting to the courts to challenge this type of agreement – was considered a landmark litigation because it indicated how the authorities of regulation and the courts could deal with mergers between non-competing companies. One and the other. "

– Trump's million dollar tax promise in the United States? Not so far. Bloomberg's Laura Davison: "The amount of offshore liquidity from US companies has returned home so far this year is only a fraction of what [Trump] had promised. A report by Morgan Stanley released on Thursday estimates that companies have reported $ 50 billion to $ 100 billion in the third quarter – which would bring total returnees to the United States to only $ 514 billion, according to figures released previously for first two quarters the department of commerce. Trump's tax redesign last December prompted companies to bring money back to the United States by offering a single, low tax on repatriated profits. Although companies have less difficulty transferring their profits abroad as part of the US tax reform, companies generally choose to keep their profits in their foreign subsidiaries. "

– Walmart and Target push the Fed to make them pay faster. AnnaMaria Andriotis of the WSJ: "Walmart Inc. and Target Corp. want the Federal Reserve to help them pay in real time. The retail giants are among the companies urging the Fed to develop a service to settle interbank transfers in real time, 24 hours a day, seven days a week. Such a service could ultimately eliminate the gap between the moment where consumers use debit cards to pay for items and the stores that receive the funds.

"In October, the Federal Reserve announced potential actions to help develop a faster payment system in the United States, including the creation of a real-time settlement service." Walmart, Target and Trade Groups including the National Retail Federation have discussed with the Fed about faster payments For years, the measures taken by the Fed could allow merchants and other players to develop faster payment services allowing consumers to pay the bills. account options without using the existing debit card rails Potential options include payment services built into the merchant's mobile wallets and smartphone – apps with in-store rewards encouraging shoppers to use them. "

Money on the hill

Little hope for a wall agreement. David Nakamura of The Post: "Despite [Trump’s] Threats to close the government this month to win financing at the border, there seems to be little appetite in Washington for a compromise agreement that has been perceived as a potential victory for both political parties. Trump and Democrat leaders reject any discussion of a big deal on immigration that would provide $ 25 billion to the wall on the US-Mexico border in exchange for a permanent legal status and eventual citizenship for 1.7 million young undocumented immigrants, called "dreamers". . & # 39; "

"This plan would have been presented in January before the White House distorted the talks by insisting on additional concessions, including reducing legal immigration and speeding deportations." The journalists asked on Thursday whether the Democrats of the House would be interested in the initial contract? Nancy Pelosi (California) responded roughly: "No" Wall money and dreamers "are two different subjects," she said.

A Democratic freshman in the House did not appreciate Gary Cohn's speech during the orientation of the members.. Rashida Tlaib, a newly elected lawmaker from Detroit, dismissed an apparent warning from former Trump's economic adviser and chairman of Goldman Sachs (who she had mistakenly identified as the former CEO of the company). bank):



Kraninger confirmed at CFPB. "The Senate confirmed Thursday President Trump's bid to head the Office of Consumer Financial Protection, paving the way for business-friendly leadership for a polarizing watch agency long hated by Republicans and the US. The banking sector voted 50 to 49. party lines in favor of Kathy Kraninger's appointment.

"Kraninger will replace the acting director of the office, Mick Mulvaney, who is also the head of the White House budget and the current boss of Kraninger.His appointment took a large part of Washington by surprise." Kraninger, deputy director from the Government to the Office of Management and Budget, has no experience in consumer credit but will become one of the most powerful banking regulators in the country. "

Senator Elizabeth Warren (D-Mass.), Who came up with the idea of ​​the office before running for office?

From Richard Cordray, whom President Obama has appointed the first director of the CFPB:

SEC will control the voting advisors. Gabriel Rubin, WSJ, said: "The securities regulators will consider a series of changes to limit the impact of consultants advising shareholders in public company votes," said Thursday's chairman of the board. the Securities and Exchange Commission, Jay Clayton, in response to corporate groups claiming to have a disproportionate influence The SEC will look into the possibility of imposing new disclosure requirements on so-called voting advisors, who make recommendations to institutional investors on issues such as executive compensation and environmental initiatives … Proxy voting has been a priority for groups like the US Chamber of Commerce, which has published ads earlier this year in leading newspapers urging the SEC to limit its influence. "

Graphic topper

Compare the Trump stock market. A sign that the stock market has not performed well in recent weeks: Trump has not tweeted about it since November 12th. During his presidency, the market's rise is somewhere in the middle of the pack compared to its predecessors, as shown in this Yahoo Finance chart.


Be there soon:


– Liana Finck from New Yorker:


– "I'm not that the guy in the video": how a life is changed after a viral police clash:

– Who is William Barr, Trump's new AG choice ?:

– After the train trip, Bush's coffin arrives at College Station, Texas, to be buried there:


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