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Tweet is another sign trade tensions with Beijing are cooling
U.S. delegation prepares to head for China in the new year
President Donald Trump said on Saturday he’d spoken at length with Chinese President Xi Jinping and that “big progress” is being made toward a deal between the world’s largest economies.
The agreement will be “very comprehensive” and will cover “all subjects, areas and points of dispute,” the president, who’s spending the weekend in Washington, said in a tweet.
Trump’s comment comes as a U.S. trade delegation prepares to travel to Beijing in early January for talks with Chinese officials. It’s another sign that tensions may be cooling after months of brinkmanship, and that the leaders are following through on commitments made at their dinner meeting in Buenos Aires on Dec. 1.
Xi said both he and Trump hope to push for “stable progress” in U.S.-China relations, and that bilateral ties are now at a vital stage, according to a Xinhua News Agency report on the leaders’ phone call.
Xi added that he and Trump discussed various international and regional issues, that China supports further talks between the U.S. and North Korea, and hopes for positive results, Xinhua reported.
It was unclear who initiated Saturday’s call. The White House, which typically doesn’t release details of Trump’s calls with foreign leaders beyond what the president reveals himself, didn’t immediately respond to a request for comment.
Bloomberg News reported on Thursday that a U.S. government delegation will travel to Beijing in the week of Jan. 7 for talks, according to two people familiar with the plans.
Read more: China Heads Into Trade Talks Bracing for More U.S. Demands
Deputy U.S. Trade Representative Jeffrey Gerrish will lead the team, which also will include Treasury Under Secretary for International Affairs David Malpass, according to the people, who spoke on the condition of anonymity. U.S. Trade Representative Robert Lighthizer, whom Trump named to be in charge of the China talks, isn’t scheduled to join the delegation.
U.S. stocks, beaten down recently by concerns about an escalating tariff war, got a boost from news of the upcoming talks.
The gathering will be the first face-to-face discussion between the two sides since Trump and Xi agreed to a 90-day truce during the Buenos Aires dinner. Treasury Secretary Steven Mnuchin said Dec. 18 that the U.S. and China have held discussions over the phone since then.
QuickTake: How ‘Made in China 2025’ Frames Trump’s Trade Gripes
Xi said Saturday that officials from both countries have been working actively and hopes the teams can meet each other halfway, Xinhua reported.
Negotiators on both sides have begun fleshing out a possible deal that includes ensuring greater access for foreign firms to China’s financial sector, but Trump may be overstating how close the countries are to agreement, the Wall Street Journal reported late Saturday, citing people familiar with “the state of negotiations.”
Beijing this week announced a third round of tariff cuts, saying it would lower import taxes on more than 700 goods from Jan. 1 as part of its efforts to open up the economy and lower costs for domestic consumers.
Trump, meanwhile, has agreed to put on hold a scheduled increase in tariffs on some $200 billion in annual imports from China while the negotiations take place. He’s pushing the Asian nation to reduce trade barriers and stop the alleged theft of intellectual property. Beijing so far has pledged to resume buying U.S. soybeans and to at least temporarily lower retaliatory tariffs on U.S. autos.
2. Pacific trade pact takes off with tariffs cut in six nations, Reuters
December 30, 2018 / 9:36 AM / Updated 4 hours ago
3 Min Read
SYDNEY (Reuters) - A landmark 11-country trade deal, a revamped version of the Trans-Pacific Partnership (TPP), came into force on Sunday with New Zealand’s trade minister hailing the opportunities it presented for exporters
The deal, which will slash tariffs across much of the Asia-Pacific region, does not include the United States after Washington pulled out of the TPP negotiations in 2017.
“The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) provides New Zealand with trade agreements for the first time with three significant economies: Japan, Canada and Mexico,” Trade Minister David Parker said in a statement.
“The CPTPP has the potential to deliver an estimated NZ$222 million ($149.01 million) of tariff savings to New Zealand exporters annually once it is fully in force.”
The pact came into effect on Sunday for Australia, New Zealand, Canada, Japan, Mexico and Singapore, with Vietnam to follow on 14 January, Australia’s Department of Foreign Affairs and Trade said on its website.
Brunei, Chile, Malaysia and Peru will begin 60 days after they complete their ratification process.
Investment bank HSBC said in a press release that 90 percent of tariffs on goods in the first six countries were removed on Sunday in the first round of cuts.
Australia is looking forward to favorable conditions for its agricultural exports including wheat, prompting U.S. competitors to warn they will need help to compete.
“Japan is generally a market where we seek to maintain our strong 53 percent market share, but today we face an imminent collapse,” U.S. Wheat Associates President Vince Peterson told a public hearing in Washington on Dec. 10.
“In very real terms, as of April 1, 2019, U.S. wheat will face a 40 cent per bushel, or $14 per metric ton, resale price disadvantage to Australia and Canada,” Peterson said, according to a transcript on the U.S. Wheat Associates website.
The deal will reduce tariffs in economies that together amount to more than 13 percent of global gross domestic product (GDP) - a total of $10 trillion. If the United States were included, it would have represented 40 percent.
U.S. President Donald Trump said in April that he would consider rejoining the trade agreement if the terms were more favorable to the United States.
3-1.. Trump's misplaced economic policies could sink the US economy next year, CNNMoney
By Mark Zandi for CNN Business Perspectives
Updated 1758 GMT (0158 HKT) December 27, 2018
<Mark Zandi is chief economist of Moody's Analytics. The opinions expressed in this commentary are his own>
By all rights, the coming year should be another good one for the economy. We are in the virtuous part of the business cycle. Unemployment is at a 50-year low, which is fueling stronger wage growth. Record open job positions combined with bigger paychecks are lifting consumers' spirits and their spending. The robust sales are prompting businesses to expand, pushing unemployment even lower.
Supercharging this virtuous cycle is a massive jolt of fiscal stimulus. Deficit-financed tax cuts juiced up the economy this past year, and while the benefits of the tax cuts are fading, big deficit-financed increases in government spending are now in full swing. The economic boost from this stimulus is temporary, but it will add to growth for much of the coming year.
If the economy continues to grow through June 2019, the current economic expansion will turn 10 years old, marking the longest economic expansion in the nation's history. It is hard to envisage what could stop us from celebrating this happy birthday.
Ah yes, there is President Trump. Given his wrong-headed economic policies and the political chaos swirling around him, the possibility of a recession can't be dismissed. If not by this summer, odds are uncomfortably high that one will hit by the next presidential inaugural.
The president's trade war is the most immediate economic hurdle. Trump appears to be searching for a face-saving way out of the conflict with China as the damage to the stock market and economy mounts. The arrangement he struck with Europe last summer and the recent new NAFTA agreement with Canada and Mexico are likely prototypes. That is, the deal will be much ado about nothing, since it will have no meaningful economic consequence
The US relationship with China is fraught, because the Chinese steal our intellectual property and inappropriately limit our access to their markets. But President Trump's sturm and drang won't meaningfully change any of that. Indeed, the more he and his trade advisors rage against China, the more it will unsettle investors, stall business investment decisions, and undermine the global economy
Then there are the president's virulent anti-immigration views. This is very bad for business, as most companies say their number one problem is holding onto existing workers and finding new ones. Workers are quitting their jobs at a record pace, which is astounding when considering that the large baby boom generation is in its 50s and 60s, when people are reluctant to switch jobs. Labor shortages are acute across all skills and educational attainment, industries and parts of the country.
For the foreseeable future, the only solution to this problem is to allow more immigrants into the country, not fewer. Of course, that's not happening under the Trump administration. The president has been unable to change the immigration laws, and the courts are working hard to ensure the laws on the books are followed, but Trump's disdain toward immigrants couldn't be clearer.
Also disconcerting is that according to the Congressional Budget Office, the nonpartisan government agency that does the budget bean counting for the federal government, the fiscal stimulus is wrecking the nation's fiscal situation. Unless we take a quick U-turn on current tax and government spending policies, the deficit will never again fall below $1 trillion, and even this forecast unrealistically assumes there won't be another recession.
All the fiscal red ink is a corrosive. It won't tank the economy next year or even a decade from now, but it will steadily weaken it. Because a big deficit means the government must borrow heavily to pay its bill, all borrowers must pay a higher interest rate than they would otherwise. Businesses find it is more expensive to finance their operations, which weighs on their hiring and investment.
President Trump's misplaced economic policies will significantly diminish the economy's prospects in the coming year, but it is the political chaos he is creating that could do it in. In just the past few days he has attacked the Federal Reserve's independence, cavalierly shut down parts of the federal government, and ushered out of his administration a string of senior officials and aides. Then there are the looming investigations, which appear to be coming to a head, into a long list of the president's potential misdeeds.
It is no wonder that the longest bull stock market in the nation's history is now at risk of dying off. To be sure, the stock market is not a fool-proof leading indicator of recession. Economics Nobel Laureate Paul Samuelson once quipped that the stock market has predicted nine of the last five recessions. This is probably one of those times when the market signal is a misfire. However, given the poor economic policies in place and the political drama in Washington that is sure to turn much darker in coming months, the next recession is coming into view.
<Mark Zandi is chief economist of Moody's Analytics. The opinions expressed in this commentary are his own>
3-2 Opinion: Roubini: President Trump is flirting with mutually assured economic destruction, MarketWatch
By Nouriel Roubini
Published: Dec 28, 2018 2:52 p.m. ET
Now that financial markets see the danger of the Trump presidency, the risk of a financial crisis and global recession has grown
NEW YORK (Project Syndicate) — Financial markets have finally awoken to the fact that Donald Trump is U.S. president. Given that the world has endured two years of reckless tweets and public statements by the world’s most powerful man, the obvious question is: what took so long?
For one thing, until now, investors had bought into the argument that Trump is all bark and no bite. They were willing to give him the benefit of the doubt as long as he pursued tax cuts, deregulation, and other policies beneficial to the corporate sector and shareholders. And many trusted that at the end of the day, the “adults in the room” would restrain Trump and ensure that the administration’s policies didn’t jump the guardrails of orthodoxy.
These assumptions were more or less vindicated during Trump’s first year in office, when economic growth and an expected increase in corporate profits — owing to forthcoming tax cuts and deregulation — resulted in strong stock-market performance. In 2017, U.S. stock indexes rose more than 20%.
But things changed radically in 2018, and especially in the last few months. Despite corporate earnings growing by over 20% (thanks to the tax cuts), U.S. equity markets moved sideways for most of the year, and have now taken a sharp turn south. At this point, broad indexes are in correction territory (meaning a 10% drop from the recent peak), and indexes of tech stocks, such as the Nasdaq, are in bear-market territory (a drop of 20% or more).
Though financial markets’ higher volatility reflects concerns about China, Italy and other eurozone economies, and key emerging economies, most of the recent turmoil is due to Trump. The year started with the enactment of a reckless tax cut that pushed up long-term interest rates and created a sugar high in an economy already close to full employment. As early as February, growing concerns about inflation rising above the Federal Reserve’s 2% target led to the year’s first risk-off.
Then came Trump’s trade wars with China and other key U.S. trade partners. Market worries about the administration’s protectionist policies have waxed and waned throughout the year, but they are now reaching a new peak. The latest U.S. actions against China seem to auger a broader trade, economic and geopolitical cold war.
An additional worry is that Trump’s other policies will have stagflationary effects (reduced growth alongside higher inflation). After all, Trump is planning to limit inward foreign direct investment, and has already implemented broad restrictions on immigration, which will reduce labor-supply growth at a time when workforce aging and skills mismatches are already a growing problem.
Moreover, the administration has yet to propose an infrastructure plan to spur private-sector productivity or hasten the transition to a green economy. And on Twitter and elsewhere, Trump has continued to bash corporations for their hiring, production, investment and pricing practices, singling out tech firms just when they are already facing a wider backlash and increased competition from their Chinese counterparts.
Emerging markets have also been shaken by U.S. policies. Fiscal stimulus and monetary-policy tightening have pushed up short- and long-term interest rates and strengthened the U.S. dollar. As a result, emerging economies have experienced capital flight and rising dollar-denominated debt. Those that rely heavily on exports have suffered the effects of lower commodity prices, and all that trade even indirectly with China have felt the effects of the trade war.
Even Trump’s oil policies have created volatility. After the resumption of U.S. sanctions against Iran pushed up oil prices CLG9, +1.14% the administration’s efforts to carve out exemptions and bully Saudi Arabia into increasing its own production led to a sharp price drop. Though U.S. consumers benefit from lower oil prices, U.S. energy firms’ stock prices do not. Besides, excessive oil-price volatility is bad for producers and consumers alike, because it hinders sensible investment and consumption decisions.
Making matters worse, it is now clear that the benefits of last year’s tax cuts have accrued almost entirely to the corporate sector, rather than to households in the form of higher real (inflation-adjusted) wages. That means household consumption could soon slow down, further undercutting the economy.
More than anything else, though, the sharp fall in U.S. and global equities during the last quarter is a response to Trump’s own utterances and actions. Even worse than the heightened risk of a full-scale trade war with China (despite the recent “truce” agreed with Chinese President Xi Jinping) are Trump’s public attacks on the Fed, which began as early as the spring of 2018, when the U.S. economy was growing at more than 4%.
Read: China is counting on its trade surplus in its battle for supremacy
Given these earlier attacks, markets were spooked this month when the Fed correctly decided to hike interest rates while also signaling a more gradual pace of rate increases in 2019. Most likely, the Fed’s relative hawkishness is a reaction to Trump’s threats against it. In the face of hostile presidential tweets, Fed Chair Jerome Powell needed to signal that the central bank remains politically independent.
But then came Trump’s decision to shut down large segments of the federal government over Congress’s refusal to fund his useless Mexican border wall. That sent markets into a near-panic, and the government shutdown was soon followed by reports that Trump wants to fire Powell — a move that could turn a correction into a crash. Just before the Christmas holiday, Treasury Secretary Steven Mnuchin was forced to issue a public statement to placate the markets. He announced that Trump wasn’t planning to fire Powell after all, and that U.S. banks’ finances are sound, effectively highlighting the question of whether they really are.
Read: Trump started a fight with the Fed he had zero chance of winning — now he’s backing down
Recent changes within the administration that do not necessarily affect economic policy-making are also rattling the markets. The impending departure of White House Chief of Staff John Kelly and Secretary of Defense Jim Mattis will leave the room devoid of adults. The coterie of economic nationalists and foreign-policy hawks who remain will cater to Trump’s every whim.
As matters stand, the risk of a full-scale geopolitical conflagration with China cannot be ruled out. A new cold war would effectively lead to de-globalization, disrupting supply chains everywhere, but particularly in the tech sector, as the recent ZTE and Huawei cases signal. At the same time, Trump seems to be hell-bent on undermining the cohesion of the European Union and NATO at a time when Europe is economically and politically fragile. And Special Counsel Robert Mueller’s investigation into Trump’s 2016 election campaign’s ties to Russia hangs like a Sword of Damocles over his presidency.
Trump is now the Dr. Strangelove of financial markets. Like the paranoid madman in Stanley Kubrick’s classic film, he is flirting with mutually assured economic destruction. Now that markets see the danger, the risk of a financial crisis and global recession has grown.
Nouriel Roubini is a professor of economics at the Stern School of Business, New York University, and CEO of Roubini Macro Associates. This was first published on Project Syndicate — “Trump vs. the Economy”.