Archives of “International relations” tag

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Pres. Trump has not yet decided to rollback tariffs with China

  
  Analysis
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Says China would like to have them rollback

  • Has not yet decided on rollback of tariffs with China
  • Says he isn’t concerned about anything on impeachment
  • Says he won’t fully rollback China tariffs
  • Says he could sign it trade deal with Xi in Iowa
  • Says he plans to sign any China trade deal in the US
  • Says China wants make a deal
  • I am very happy with taking in billions of dollars from China in tariffs.
The comment that he won’t FULLY rollback China tariffs is open to interpretation.
  • Does it mean that he won’t initially fully rollback the tariffs?
  • Does it mean he will be reluctant to rollback all the tariffs over time?  The President does have a tendency to like to get back what was taken.  He also thinks the tariffs are paid by China directly.
  • Does it mean, there will be some rollback initially. Peter Navarro said earlier that the December 15 tariffs would be postponed on a Phase I  deal, but the existing tariffs would remain to encourage Phase II and Phase III talks to proceed

India makes historic blunder in abandoning RCEP trade deal

  
  Analysis
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It is hard to view India’s decision to abandon the Regional Comprehensive Economic Partnership trade deal, or RCEP, as anything other than a historic blunder.

At Monday’s ASEAN Summit in Bangkok, Prime Minister Narendra Modi was expected, after years of grinding negotiation, to sign up to the 16-nation agreement. Instead, he told fellow Asian leaders that India was out.

The result will frustrate RCEP’s remaining members — the ten nations of ASEAN, alongside Australia, Japan, New Zealand and, most significantly, China — all of whom hoped India would join.

But the real loser will be India itself. Modi’s government now sits outside both of the trading blocs that will define Asia’s future: RCEP and the 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

Modi’s decision makes China the overwhelmingly dominant voice in a new deal, which, with India included, covered around a third of global gross domestic product. More to the point, it sends alarming signals about India’s commitment to both trade and domestic economic reform more broadly.

In private, Indian officials say RCEP’s terms remained unfavorable. Joining risked a flood of cheap Chinese imports in sectors like electronics. India had tried and failed to win substantial concessions in areas like work visas for its software outsourcing sector.

To be fair, signing up did come with risks. India ran a $58 billion trade deficit with China in 2018. That could well have increased if India jumped into RCEP but failed to introduce complementary reforms to boost domestic competitiveness. There were legitimate worries about import surges from China’s state-dominated economy too.

Having negotiated hard for years, however, India had already won concessions, including implementation delays stretching into decades and safeguards to protect sensitive sectors like agriculture. Over recent months it appeared as if Modi’s officials were trying to join, deciding that RCEP was in India’s economic and geopolitical interest. (more…)

‘Phase 1’ of US-China deal was easy, now comes the hard part

  
Analysis, Economy
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 Even as the “phase one” trade deal between the U.S. and China averted an escalation of the trade war, the agreement is widely seen as a small-bore pact that focused on relatively easy issues, such as agricultural and currency.

The deal was a product of compromise by two countries eager for a respite amid growing concerns about economic slowdowns. The two nations must tackle structural issues, such as China’s government subsidies, in the next phase of talks, and a real end to the trade war that would eliminate punitive tariffs imposed on each other still remains elusive. 

U.S. President Donald Trump was exuberant in announcing the agreement that would ease the pain of the Midwestern farmers that make up the core of his support base.

“The deal I just made with China is, by far, the greatest and biggest ever made for our Great Patriot Farmers in the history of our Country,” Trump tweeted Saturday morning. “In fact, there is a question as to whether or not this much product can be produced? Our farmers will figure it out. Thank you China!” 

In contrast, the Chinese side remained subdued. Beijing issued a statement reporting progress in agriculture but did not mention an “agreement.” State television reported the deal, although it downplayed the story. Trump’s about-face in May last year after an agreement to avoid tariffs was not lost on top Chinese officials.  (more…)

A look at the US-China trade war and its impact on markets

  
  Analysis
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The impact escalation will have

The impact escalation will haveThe focus of the market on the China-US trade war is acute due to China’s and the United States economic weight. In 2018 the US’s GDP was above $20 trillion and China’s GDP over $14 trillion, which makes them the world’s two largest economies by nominal GDP.

Furthermore, consider that when you add these two countries GDP together, they account for more than 40% of the world’s entire GDP. So, the first point to grasp is that the significance of a US-China trade war is really a global growth problem.

When you factor in the alliances and trade partners of both countries, the legitimate concern is that a China-US trade war spills over across the entire globe and slows down the entire world economy.

Trade between the US and China

(more…)

Iran envoys says won’t rule out war

  
Analysis, Politics
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Iranian Foreign Minister Mohammad Javad Zarif refused to rule out military conflict in the Middle East after the US sent more troops and weapons to Saudi Arabia in response to an attack on oil fields the US has blamed on the Islamic Republic.

“I’m not confident that we can avoid a war,” Zarif said in an interview with CBS to be broadcast Sunday on its “Face the Nation” program.

“I’m confident that we will not start one, but I’m confident that whoever starts one will not be the one who finishes it.”

When asked to elaborate, Zarif said: “That means that there won’t be a limited war.”

Zarif was interviewed in New York, where he will attend the United Nations General Assembly session.

The US said Friday it will send a “moderate” number of troops to the Middle East and missile defence capabilities to the Saudis in response to last weekend’s attack on oil facilities.

The foreign minister criticised the move. “I think it’s posturing,” Zarif said, according to a transcript provided by CBS. “I think it’s all going the wrong direction in addressing this issue.”

US and Saudi analyses of the attack have described the strike as complex, involving a mix of low-flying drones and cruise missiles coming from the north.

The attack exposed vulnerabilities in Saudi Arabia’s defence capabilities, despite the Kingdom having spent hundreds of billions of dollars on weaponry in recent years.

American officials blame Iran for the attack that knocked out half the production of oil from a key Saudi field.

Houthi rebels fighting a Saudi-led coalition in Yemen took credit for the attack.

“I’m confident that Iran did not play a role,” Zarif said. Anybody who “conducts an impartial investigation will reach that conclusion,” he said.

Fitch reports on Chinese tariffs impacting US agriculture

  
  Analysis
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Chinese tariffs stinging farmers

Chinese tariffs stinging farmers
  • Chinese tariffs on US agricultural imports escalate trade related risks to US farm sector , which is experiencing falling sales and land values
  • Ongoing trade wars impact equipment loan and lease ABS collateral performance
  • Ongoing trade wars have placed greater pressure on already stressed US agricultural sector
Biting tariffs will get Trump to the dealing table quicker than anything else, I would say. He won’t want to see tariffs stinging the US.

Global trade uncertainties 10 times higher than previous peak levels: IMF

  
  Analysis
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Concerns about global trade have reached nearly 10 times the peaks seen in the previous two decades, the International Monetary Fund (IMF) has said.

“Globally, the trade policy uncertainty index is rising sharply, having been stable at low levels for about 20 years,” it said in a blogpost.

“The World Trade Uncertainty index jumped in the past year 10-fold from previously recorded highs as the US-China trade war escalated,” said the blogpost written by Hites Ahir, Nicholas Bloom and Davide Furceri.

The Americas and the Asia Pacific are most affected by concerns about the US-China trade war while Africa is least affected, the IMF said in a new index aimed at quantifying trade uncertainty.

The index is based on reports from the Economist Intelligence Unit (EIU) dating back to 1996 and borrows from the methodology used in the IMF’s own World Uncertainty Index.

To calculate the new gauge, IMF researchers counted how often the word ‘uncertainty’ appears in the EIU reports near terms such as ‘tariffs,’ ‘protectionism’ or ‘trade.’ (more…)

US imposes new China tariffs, raising levies to pre-WWII level

  
  Analysis
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The U.S. slapped fresh tariffs on Chinese goods on Sunday to bring the average to more than 20%, comparable with levels seen during the protectionist era preceding World War II.

At 12:01 a.m. EDT, the U.S. imposed additional tariffs of 15% on about $110 billion in imports from China, covering 3,243 items. Consumer goods account for about half — far more than the 20%-plus of the previous round last September, which included such products as furniture. China’s corresponding tariffs against U.S. products took effect at the same time.

U.S. President Donald Trump postponed tariffs on 555 items on the original list — including smartphones — until Dec. 15 to soften the impact on the year-end shopping season. More than 80% of American imports of these goods come from China, and finding alternative sources is difficult. Higher tariffs are likely to lead to price increases, which risk weighing on consumer spending and thus the broader economy.

Digital consumer devices such as smartwatches are among the largest import categories by value affected by Sunday’s tariffs. More than half of all apparel is taxed as well.

China is retaliating with additional duties of 5% to 10% on $75 billion in imports from the U.S. The first tranche covers 1,717 goods including soybeans and crude oil, while the second set being implemented Dec. 15 will cover 3,361 items including autos.

But all told, fewer than 1,800 of these items — only about 35%, including crude oil — are new additions. Most have already been hit by previous rounds of tit-for-tat tariffs.

Beijing has already imposed tariffs on about 70% of its imports from the U.S. by value, and after these rounds, the only items left untouched will be those that it would be disadvantageous to domestic industry to tax, such as large aircraft. Previous tariff rounds have already led to sharp declines in imports of affected goods, and further hikes are unlikely to have much of an effect.

With the September duties, the average American tariff on Chinese goods rises to slightly above 21%, up from about 3% before the trade war, according to Chad Bown of the Peterson Institute for International Economics. China’s average tariff on imports from the U.S. climbs to nearly 22%. (more…)

IMF says monetary easing unlikely to make a lasting improvement in trade balance

  
Analysis, Economy
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Exchange rates can’t do it all

The IMF is out with a blog post about the effectiveness of using monetary policy to weaken a currency and boost exports.
“One should not put too much stock in the view that easing monetary policy can weaken a country’s currency enough to bring a lasting improvement in its trade balance,” the authors write.
They estimate that a 10% decline in a country’s currency improves the trade balance by about 0.3% of GDP in the near-term, largely via a contraction in imports. Over three years the effect is larger and hits an average of 1.2% of GDP.
One thing they highlight is that much international trade is done in US dollars. This slows and limits the effects of weakening the currency.

IMF lowers global growth forecast to 3.2% from 3.3%

  
Analysis, Economy
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The latest forecasts from the IMF

The latest forecasts from the IMF
The previous round of forecasts were in April:
  • 2020 global growth to 3.5% from 3.6%
  • US to 2.6% vs 2.3% prior
  • 2020 US growth 1.9% vs 1.9% prior
  • Eurozone 1.3% vs 1.3% prior
  • 2020 Eurozone raised to 1.6%
  • China 6.2% vs 6.3% prior
  • 2020 China 6.0% vs 6.1% prior
  • Canada 1.5% vs 1.5% prior
  • Germany 0.7% vs 0.8% prior
  • 2020 Germany to 1.7% vs 1.4% prior
  • Italy +0.8% vs +0.1% prior
  • Advanced economies 1.7% vs 1.8% prior
  • Emerging markets 4.7% vs 4.4% prior
  • 2020 emerging markets 4.7% vs 5.0% prior
  • World trade volume lowered to 2.5% vs 3.4% prior
  • Full report
In April, the IMF lowered its forecasts. Since October, this is the fourth downgrade in global growth and the statement said downside risks have intensified going forward, noting trade.
“The projected growth pickup in 2020 is precarious, presuming stabilization in currently stressed emerging market and developing economies and progress toward resolving trade policy differences,” the report says.
They noted that fixed investment is particularly soft, even in places where growth has surprised to the upside. They note high inventories in the UK and US.
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