Day: April 16, 2018

U.S. President Donald Trump said on Monday it is unacceptable that Russia and China are devaluating their currencies, days after the Treasury Department declined to label these countries as currency manipulators in its latest report.  

Amid a possible new round of sanctions against Russia and a simmering trade war with China, Trump tweeted Monday morning, “Russia and China are playing the Currency Devaluation game as the U.S. keeps raising interest rates. Not acceptable!

In general, when a country artificially devaluates its currency, its exports become cheaper and more competitive in the global marketplace. 

During his presidential campaign, Trump has repeatedly accused China of lowering the value of its currency and vowed to formally label China as a currency manipulator, but so far has failed to do so.

White House Press Secretary Sarah Sanders says the administration is closely watching China’s currency practices. “That’s something that the Treasury Department is watching very closely and we’re continuing to monitor it,” she said Monday.

In a semiannual report titled “Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States” released last Friday, the Treasury Department did not designate China as a currency manipulator, but put it as one of the six countries on a monitoring list. The other five countries on the list are Japan, Korea, India, Germany, and Switzerland. Russia is not on the monitoring list.  The Chinese currency, the renminbi, has appreciated over 3 percent against the dollar since the beginning of this year, after strengthening by over 6 percent in 2017.

Brad Setser,a senior fellow at the Council on Foreign Relations and a former Treasury Department official said in an interview with VOA he does not think it is an accurate complaint that  Russia and China are playing the currency game.  

“The Russian ruble was actually quite stable before the sanctions on Russia were intensified. It’s quite clear the volatility in the ruble is a function of the intensification of U.S. sanctions, a sign that the sanctions are biting,” he explained. 

Setser said over the past several months, the Chinese yuan has actually appreciated, and China has not been intervening heavily. 

“There are plenty of things to criticize China for on trade, but right now, there’s no real basis for criticizing China on currency,” he noted.

In the past three years, the Federal Reserve raised interest rate six times to a range between 1.5 percent and 1.75 percent, and said they expect to raise the rate two or three more times this year.

Usually, when a country raises its interest rates, the value of its currency rises, making its exports more expensive and less competitive.  However, higher U.S. interest rates have not raised the value of the dollar. 

“The interesting puzzle that the market has been pondering for the past several months is that the dollar has actually weakened even as the U.S. has raised rates, and even as U.S. passed legislation to expand the fiscal deficit,” Setser said.   

Former Deputy Assistant Secretary for International Economic Analysis at the Treasury Department Setser stressed the United States should not label China as a currency manipulator at this moment.

“It would undermine the United States’ credibility to name China at a point in time when there is no plausible case that China is managing its exchange rate in a way that is adverse to the U.S. interest,” he said. 
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South African President Cyril Ramaphosa appointed a team of business and finance experts on Monday to hunt the globe for 100 billion rand ($8 billion) in investment to boost the ailing economy.

The team of economic envoys includes two former finance ministers — Trevor Manuel and Pravin Gordhan, who now holds the state firms portfolio — as well as a former top banker.

Ramaphosa became president in February after winning the leadership of the ruling African National Congress last year on promises to revive the economy and crack down on corruption.

Monday’s appointments to the team also include economist Trudi Makhaya, who becomes special economic adviser to the president, former Treasury Director General Lungisa Fuzile, ex-Deputy Finance Minister Mcebisi Jonas and former Standard Bank chief executive Jacko Maree.

“These are people with valuable experience in the world of business, investment and finance and they have extensive networks across a number of major markets,” said Ramaphosa before leaving Johannesburg for a Commonwealth Heads of Government Meeting in London.

Ramaphosa said the envoys would travel to Europe, Asia and across Africa to build an “investment book” to help plug a substantial shortfall of foreign and local direct investment.

“We are modest because we want to overachieve,” Ramaphosa said, explaining why the government was targeting 100 billion rand rather than a much larger sum.

Political and policy uncertainty damaged investment and business confidence during nine-year presidency of Ramaphosa’s predecessor, Jacob Zuma, when South Africa’s credit rating was slashed to junk by two of the top three agencies and economic growth slowed to a crawl.

The tide has begun to turn under Ramaphosa, with Moody’s last month keeping the country at investment grade and changing the outlook to stable from negative.

The economic outlook has also improved, with the World Bank raising its 2018 growth forecast to 1.4 percent this month from 1.1 percent forecast in September, a touch below the Treasury’s projection of 1.5 percent.

Ramaphosa has sacked or demoted a number of ministers allied to his scandal-ridden predecessor, and reinstated Nhlanhla Nene as finance Minister after Zuma fired him in 2015.
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The European Union is seeking compensation from the United States for U.S. tariffs on steel and aluminum, despite Washington’s assertion that they are not subject to World Trade Organization rules, a WTO filing showed Monday.

In a step already taken by China, the EU said it did not accept the “national security” justification for the U.S. tariffs but said they had been imposed just to protect U.S. industry.

“Notwithstanding the United States’ characterization of these measures as security measures, they are in essence safeguard measures,” the EU statement said.

Safeguard tariffs can be imposed on imports of a particular product if a country’s own industry is at risk of serious damage from a sudden surge of imports. In the U.S. case, critics of Trump’s policy say there is no such threat.

The EU said it wanted to hold consultations with the United States as soon as possible.

U.S. President Donald Trump announced the tariffs last month, causing a global outcry because the penalties were seen as unjustified and populist.

Countries can claim exemption from many international trade rules if they can show they are imposing tariffs to protect their national security. But those exemptions do not apply for safeguard sanctions.

The EU and other U.S. allies are not only worried the tariffs will limit the amount of their goods getting into the United States. They also fear steel barred from the United States will flood back into their markets, causing a glut.

China had said it will retaliate by putting duties on up to $3 billion of U.S. imports including fruit, nuts and wine.

The EU is drawing up its own list of duties.
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Simmering U.S.-China trade frictions have stirred up a furious debate among American farmers who are already facing increased tariffs from Beijing on a wide range of products from pork to fruit and nuts.

In the Chinese capital, Beijing, however, discussion of the topic is muted by comparison. Chinese state media are publishing lengthy articles about how China will stand its ground, with some even arguing it’s time for Beijing to teach America a lesson.

Consumers are watching the dispute closely. Some are concerned about the impact the trade tensions could have, but most that VOA spoke with were convinced they could weather the storm by buying products from other countries and sources.

At an open-air market in downtown Beijing, U.S. imported fruits and nuts are now still competitively priced. But when tariffs start to hit, they are likely to cost even more. One vender VOA spoke with said he is already weighing his options.

“I can just stop buying U.S. goods and stop selling products from America,” he said. “I can just buy goods from China. Chinese should eat products made in China.”

Tit for tat tariffs

The United States has said it will place tariffs on more than 1,300 Chinese goods if Beijing does not take steps to further open its markets, address American concerns and do more to protect intellectual property rights.

Chinese authorities have repeatedly voiced confidence they are prepared to fight to the end if Washington goes ahead with its tariffs, but neither side knows for certain just how broad an impact either country’s tariffs could have.

Both Beijing and Washington are working to minimize the impact on their own economies while working to appear tough and resolved, but tough actions can produce unintended consequences.

The Trump administration has already been scrambling to assure U.S. farmers they will be taken care of in the event that trade actions impact their livelihoods.

Even though China has yet to follow through on its pledge to place a 25 percent tax on soybean imports, the threat has begun to hit the price of soybeans and animal feed for pigs and poultry. And because of that, there are concerns the measure aimed at punishing American farmers in areas where political support for Trump was strong could also impact farmers and consumers in China as well.

Chinese officials issued a statement last week arguing that would not happen.

Price movement

Xiao Guoying, a researcher with the Institute of Subtropical Agriculture under the Chinese Academy of Sciences said that a minor price hike would be unavoidable if a trade war is launched.

But he also believes that businessmen in China and the United States are smart and will find ways around the tariffs.

“Suppliers still have to find markets to sell their soybeans, even if it means a price cut,” Xiao said. “If global demand and supply [of soybean] remain stable, there won’t be a major price fluctuation.”

In Beijing, most residents that VOA spoke with said they hoped the two sides will find a way to work the dispute out. If not, some warned that it is consumers that will end up footing the bill.

Miss Wang Chongyun works in the financial sector. She likes to vacation in San Diego and is a fan of Michael Kors’ products. She hopes the two countries sit down and talk soon.

If not, the dispute “will have an impact on the Chinese economy and that has an impact on the public’s interests,” she said. “With higher tariffs and prices, we’ll have to spend more.”

Ways to cope

Others, however, argue that it is foreign countries that need China more. And hence, any tariffs doomed to fail.

“If they [other countries] want to make money here, they have to work together with China because there are a lot of Chinese,” said one young woman.

Few that VOA spoke with knew what Washington is demanding or even the huge gap in access that exists between Chinese companies operating in the United States and the gridlock American and other foreign firms face trying to compete in China.

One man surnamed Hou, who works in the service sector, sees the trade dispute as an opportunity for China to stand up. He said China still has many weaknesses, but it also needs to improve itself and can’t always be bossed around by the United States.

“China’s domestic industries no longer lag behind and it can make whatever its people need,” Hou said. “There’s no need to rely on the U.S., take sports apparel, for example, there are plenty of domestic brands to choose from.”

 
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Doug Fabbioli is concerned about the future of the rural economy, as urban sprawl expands from metropolitan areas into farm fields and pastureland. The Virginia winery owner decided to be part of the solution and founded The New AG School. As Faiza Elmasry tells us, the school’s mission is raising the next generation of farmers. Faith Lapidus narrates.
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