Month: June 2018

Britain will not sign a trade agreement with the United States that is not in the country’s best interests, Trade Minister Liam Fox said Saturday after European Union officials filed a complaint with the World Trade Organization over stiff U.S. tariffs on steel and aluminum imports.

“If we can’t come to an agreement that we believe is in the interests of the United Kingdom, then we wouldn’t be signing any trade agreement,” Fox said Saturday in an interview with BBC radio.

Fox’s comments came one day after European Union officials submitted a formal complaint to the WTO, the first in a series of retaliatory actions, including possible tariffs, against the U.S. Fox said the tariffs are “illegal” and that British Prime Minister Theresa May would raise the issue at the Group of Seven meeting next week in Canada.

Trans-Atlantic and North American trade tensions escalated when the U.S. imposed on Friday a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports from the European Union, Canada and Mexico. The U.S. also negotiated quotas or volume limits on other countries, such as South Korea, Argentina, Australia and Brazil, instead of tariffs.

In a separate dispute, China is prepared to target billions of dollars in U.S. products, many of which come from America’s agricultural heartland, where Trump enjoys strong voter support.

Commerce Secretary Wilbur Ross arrived in Beijing Saturday in an attempt to avert an all-out trade war between the world’s two largest economies. On China’s target list are U.S. soybean farmers, who export about 60-percent of their soybeans to China.

A dairy farmer who also grows soybeans in the midwestern state of Nebraska, Ben Steffen, is angry about the U.S. tariffs “because it hits me in my pocketbook from multiple angles.”

California farmer Jeff Colombini, who grows walnuts, cherries and apples, is concerned about the financial damage a trade war could bring.

“With these tariffs, its going to make the product[s] too expensive for the consumers in Mexico and in Canada and in the EU,” he said. “I have 200 employees, and they depend on the success of this operation for their jobs and to feed and clothe their families.”

The imposition of the tariffs is also not popular with some members of Congress, including those from Trump’s own party, whose states are dependent on exports.

“Imposing steel and aluminum tariffs on our most important trading partners is the wrong approach and represents an abuse of authority intended only for national security purposes,” said Bob Corker of Tennessee, who is the chairman of the Senate Foreign Relations Committee.

“You don’t treat allies the same way you treat opponents,” Republican Senator Ben Sasse of Nebraska said on Twitter. “Blanket protectionism is a big part of why we had a Great Depression. ‘Make America Great Again’ shouldn’t mean ‘Make America 1929 Again.’”

Tennessee has three major auto assembly plants. Nebraska is a significant exporter of cattle, corn, soybeans and hogs.

Mexico said, in response, it will penalize U.S. imports, including pork bellies, apples, grapes, cheeses and flat steel.

“There’s a reason why” the countries are carefully selecting which American products to target in response, said William Reinsch, senior adviser at the Center for Strategic and International Studies.

“Most of bourbon is made in Kentucky, which is the state of the Senate majority leader. Harley Davidsons are made in Wisconsin, which is the state of the speaker of the House,” Reinsch told VOA News. “Usually when other countries retaliate, and the Chinese have done something similar, is they’re good at maximizing political pain by picking out products that are made in places where people are politically important.”

“Tariffs on steel and aluminum imports are a tax hike on Americans and will have damaging consequences for consumers, manufacturers and workers,” said Republican Orrin Hatch, who chairs the Senate’s finance committee and is a longtime advocate of breaking down trade barriers.

Expected higher prices for U.S. consumers on some products is only one side of the equation, said Ross, who noted that steel and aluminum makers in the U.S. are adding employment and opening facilities as a result of the U.S. government action.

“You can create a few jobs, however, you’re going to lose more in the process,” as consuming industries will be placed at a disadvantage of paying more for raw materials compared to their foreign competitors, Simon Lester, trade policy analyst at the libertarian Cato Institute, told VOA News.

 
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An anonymous bidder offered more than $3.3 million Friday for a private lunch with Warren Buffett, an amount just short of the record paid in 2016 and 2012 for the chance to pick the brain of the renowned investor and philanthropist.

An online auction that raises money for the Glide Foundation’s work to help the homeless in San Francisco ended Friday night on eBay with a winning bid of $3,300,100. The winner wished to remain anonymous.

Third highest price paid

The price was the third highest in the 18 years Buffett has offered the lunch. Winners paid $3,456,789 in 2012 and 2016, which remain the most expensive charity items ever sold on eBay.

Buffett has raised more than $26 million for the Glide Foundation through the annual auctions. Bidders continue to pay high prices for the chance to talk with Buffett, who leads Nebraska-based Berkshire Hathaway, and the event raises a significant part of Glide’s $20 million annual budget.

Buffett supports Glide because of the work the charity does to help people. His first wife, Susie, introduced him to Glide after she volunteered there.

“Glide really takes people who have hit rock bottom and helps bring them back. They’ve been doing it for decades,” Buffett said.

Glide provides meals, health care, job training, rehabilitation and housing support to the poor and homeless.

One topic off limits

Buffett has said he gets asked about a variety of topics during the lunch. The only subject that’s off limits is what Buffett might invest in next.

The winners of the lunch auction typically dine with Buffett at Smith and Wollensky steak house in New York City, which donates at least $10,000 to Glide each year to host the lunch.

Buffett’s company owns more than 90 companies including insurance, furniture, railroad, jewelry, utility and candy businesses. Berkshire Hathaway also has major investments in companies including Coca-Cola Co., Apple, American Express and Wells Fargo & Co.
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The U.S. economy added 223,000 jobs in May, sending the unemployment rate to an 18-year low of 3.8 percent. The Labor Department says hourly wages also grew, bumping average worker pay up 2.7 percent from this time last year. And yet, despite the improving job picture, economists say there may be dark clouds forming on the horizon. Mil Arcega reports.
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U.S. Commerce Secretary Wilbur Ross arrived in Beijing on Saturday for talks on China’s promise to buy more American goods after Washington revived tensions by renewing its threat of tariff hikes on Chinese high-tech exports.

The talks focus on adding details to China’s May 19 promise to narrow its politically volatile surplus in trade in goods with the United States, which reached a record $375.2 billion last year.

President Donald Trump threw the status of the talks into doubt this week by renewing a threat to hike tariffs on $50 billion of Chinese goods over complaints Beijing steals or pressures foreign companies to hand over technology.

Compromise on surplus

Private sector analysts say that while Beijing is willing to compromise on its trade surplus, it will resist changes that might threaten plans to transform China into a global technology competitor.

China has promised to “significantly increase” purchases of farm goods, energy and other products and services. Still, Beijing resisted pressure to commit to a specific target of narrowing its annual surplus with the United States by $200 billion.

Following Beijing’s announcement, U.S. Treasury Secretary Steven Mnuchin said the dispute was “on hold.” But the truce appeared to end with this week’s announcement that Washington was going ahead with tariff hikes on technology goods and also would impose curbs on Chinese investment and purchases of U.S. high-tech exports.

Technology competitor

The move reflects growing American concern about China’s status as a potential tech competitor and complaints Beijing improperly subsidizes its fledgling industries and shields them from competition.

Foreign governments and businesses cite strategic plans such as “Made in China 2025,” which calls for state-led efforts to create Chinese industry leaders in areas from robots to electric cars to computer chips.

“The U.S. focus on so-called industrially significant technologies heightens the risk of escalation between the two countries,” BMI Research said in a report. “Indeed, while China has shown itself willing to compromise in the area of trade deficit reduction, it will not take any actions which threaten its strategically important ‘Made in China 2025’ program.”

Trump also has threatened to raise tariffs on an additional $100 billion of Chinese goods, but gave no indication this week whether that would go ahead.

Earlier, China responded with a threat to retaliate with higher duties on a $50 billion list of American goods including soybeans, small aircraft, whiskey, electric vehicles and orange juice. It criticized Trump’s move this week and said it reserved the right to retaliate but avoided repeating its earlier threat.

Tariffs on Canada, Europe Mexico

Trade analysts warned Ross’s hand might be weakened by the Trump administration’s decision Thursday to go ahead with tariffs on steel and aluminum imports from Canada, Europe and Mexico.

That might alienate allies who share complaints about Chinese technology policy and a flood of low-priced steel, aluminum and other exports they say are the result of improper subsidies and hurt foreign competitors.
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Turkish Foreign Minister Mevlut Cavusoglu is scheduled to meet with U.S. Secretary of State Mike Pompeo in Washington on Monday amid souring relations between the NATO allies and trading partners over economic and other issues.

The talks come as Turkish sectors, such as the major steel industry, reel from the higher tariffs imposed by the U.S. administration on Turkey and other nations.

“Huge, huge effect, steel producers are desperate, the psychology is terrible among producers,” said Tayfun Senturk, a Turkey-based international steel trader. “For the last three months, there have been no new U.S. orders, and the U.S. is a major market for Turkish producers, especially in piping. If it continues for a few years, there will be closures.”

In March, President Donald Trump introduced 25 percent tariffs on steel from several primary producers. Turkey didn’t enjoy an exemption given to the European Union, Canada and Mexico that ended Friday.

“This is mainly a dispute with China and secondly the European Union. Why was Turkey targeted? I don’t understand,” Senturk said.

Turkey is the eighth-largest steel producer in the world and second only to Germany in Europe. Last year, Turkey was the sixth-largest exporter to the United States.

There are growing suspicions among Turkish steel producers that politics rather than economics is behind the steel tariffs.

“There have been steps by the steel industry to try to build an understanding with the USA. As far as I know, it is not progressing, because of political reasons,” steel trader Senturk said. “They [steel producers] are saying this would not have happened if the situation [between the U.S. and Turkey] was all right like it was 10 years ago.”

In addition to the manufacturing industry, Turkey’s financial sector could be next to feel the repercussions from strained U.S. relations. U.S. regulatory authorities are considering a significant fine against Turkish state-owned Halkbank after one of its senior officials was convicted in a New York court in January of violating U.S. sanctions against Iran.

“Everybody is expecting a huge fine against Halkbank, but this is a political decision,” political scientist Cengiz Aktar said. Analysts predict the fine could exceed the $9 billion imposed on France-based BNP Paribas bank for breaking U.S. sanctions on Iran.

The fallout of such a fine could be considerable given international investors’ concerns about the Turkish economy.

“If we see major sanctions on Turkey, politically driven ones, the pressure on the currency could be substantial,” said economist Inan Demir of Nomura International, a Japan-based financial holding company.

This year the Turkish lira has already fallen more than 20 percent.

Worse could still be in store for Turkey, analysts say. Washington’s withdrawal from the international-brokered nuclear deal with Tehran could put Ankara and Turkish business in a tight spot. Trump has announced the introduction of trade sanctions against Iran. The U.S. has also warned that companies in violation of the measures could become targets themselves.

Ankara appears unfazed by Washington’s warnings.

“It is an opportunity for Turkey,” said Turkish Economy Minister Nihat Zeybekci. “We will continue to have trade with Iran while complying with the U.N. resolutions on nuclear activities. We believe in this: The stronger Iran gets in this region, the stronger Turkey becomes as well.”

Analysts suggest Zeybekci’s combative stance could be just political rhetoric, given Turkey is in the midst of campaigning for general and presidential elections set for June 24. Taking a tough stand against Washington is seen to play well with the ruling AKP nationalist voting base.

Complying with U.S. sanctions on Iran, however, could come at a substantial cost for Ankara.

“Turkey is in a difficult position. We have to remember Iran is one of the main actors, along with Russia, providing oil and gas to Turkey,” said former senior Turkish diplomat Aydin Selcen, who served in Iraq and Washington.

“It will be difficult for Turkish banks and Turkish companies to do business in Iran, but it will be difficult to find an alternative for natural gas and oil from Iran. So Turkey will have to tread carefully,” he added.

The prosecution in Turkey of U.S. pastor Andrew Brunson on terrorism charges threatens further measures by Washington against Ankara.

“It’s a show trial taking place, and it has already hurt the bilateral relationship,” U.S. Ambassador-at-Large Sam Brownback said Wednesday in a press briefing. “I think there will be more items to follow … from the United States towards Turkey if they continue to hold him.”

Ankara says Brunson’s trial is a matter for the courts, but, analysts warn, as U.S.-Turkish relations continue souring, the economic price Ankara will pay is likely to rise.
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U.S. employers extended a streak of solid hiring in May, adding 223,000 jobs and helping lower the unemployment rate to an 18-year low of 3.8 percent.

The Labor Department says average hourly pay rose 2.7 percent from a year earlier, a slightly faster annual rate than in April. But pay growth remains below levels that are typical when the unemployment rate is this low.

Still, the report shows that the nearly 9-year old economic expansion – the second-longest on record – remains on track. Employers appear to be shrugging off recent concerns about global trade disputes.

The job market is also benefiting a wider range of Americans: The unemployment rate for high school graduates reached 3.9 percent, a 17-year low. For black Americans, it hit a record low of 5.9 percent.

The solid hiring data coincides with other evidence that the economy is on firm footing after a brief slowdown in the first three months of the year. The economy grew at a modest 2.2 percent annual rate in the January-March quarter, after three quarters that had averaged roughly 3 percent annually.

Some economists remain concerned that the Trump administration’s aggressive actions on trade could hamper growth. The administration on Thursday imposed tariffs on steel and aluminum imports from key allies in Europe, Canada and Mexico. Earlier in the week, it threatened to hit China with tariffs on $50 billion of its goods.

Still, while Trump has made such threats since March, most employers so far haven’t suspended hiring.

And consumers have started to spend more freely, after having pulled back in the January-March quarter. That gain could reflect in part the effect of the Trump administration’s tax cuts, which might be encouraging more Americans to step up spending. Consumer spending rose in April at its fastest pace in five months.

Some of the spending reflects more money needed to pay higher gas prices, a potential trouble spot for consumers in the coming months. The average price of a gallon of gas nationwide reached $2.96 on Thursday, up 15 cents from a month ago, according to AAA. Some economists calculate that higher gas costs could offset up to one-third of the benefit of the tax cuts.

Companies are spending more on industrial machinery, computers and software _ signs that they’re optimistic enough about future growth to expand their capacity. A measure of business investment rose in the first quarter by the most in 3{ years. That investment growth has been spurred partly by higher oil prices, which have encouraged the construction of more drilling rigs.

Manufacturers have benefited from the healthier business spending and have increased hiring. In April, factories expanded production of turbines and other heavy machinery by the most in seven months.

Macroeconomic Advisers, a forecasting firm, says it now foresees the economy expanding at a robust 4 percent annual pace in the April-June quarter, which would be the fastest in nearly four years. That is up from its forecast last week of less than a 3 percent rate for the current quarter.

Yet even with unemployment at an 18-year low, wage growth has been chronically sluggish in most industries, leaving many Americans still struggling to pay bills, particularly as inflation has ticked up. Still, companies are starting to pay more to lure workers from other companies, a trend that could lead to broader pay gains in coming months.

Mark Zandi, chief economist at Moody’s Analytics, said higher pay for job-switchers tends to augur more robust raises for everyone else.

At the same time, Martha Gimbel, head of economic research at the job listing site Indeed, notes that wages for people who remain in their jobs have actually declined in recent months. That suggests that many employers have yet to worry about their workers being lured away.

 
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