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A transatlantic trade war is brewing. Can it be stopped?

How to negotiate a trade deal Europe is hoping crunch talks with the United States next week will head off the threat of car tariffs and a transatlantic trade war. But expectations for the meeting between President Donald Trump and European Commission President Jean-Claude Juncker could hardly be lower. “Anything short of an outright disaster would be considered a success,” Judith Lee, an international trade lawyer at Gibson Dunn, said of the talks scheduled for Wednesday in Washington. The United States has put tariffs on aluminum and steel imports from the European Union, and the bloc has retaliated with new taxes on American products. Trump is now threatening to hike tariffs on cars and auto parts from the European Union to 20%. EU trade commissioner Cecilia Malmström, who is also making the trip to the United States, said the purpose of the trip was to lower the temperature. “The aim ... Read More »

North Korea's economy just had its worst year in two decades

Trump touts trust with Kim in TV interview North Korea’s economy has shifted into reverse following the introduction of crippling international sanctions targeting its nuclear weapons program. Estimates released by South Korea’s central bank show that North Korea’s economy shrank by 3.5% in 2017. This year is likely to be even more dire. The isolated state does not publish its own growth figures. But South Korea has been compiling annual GDP estimates about its neighbor since 1991. The contraction is a sharp turnaround from 2016, when North Korea’s economy expanded by an estimated 3.9%. It’s also the worst performance since 1997, when Seoul estimated that North Korea’s economy shrank 6.5% amid widespread famine. The data for 2017 show that North Korean exports — of products such as coal, iron ore and textiles — plunged almost 40% to just $1.8 billion. The average annual income of North Koreans was just 5% ... Read More »

Trump rips Fed for raising interest rates

Trump ‘not happy’ with Fed for raising interest rates President Donald Trump said on Thursday that he’s “not thrilled” with the Federal Reserve for raising interest rates. Breaking with tradition to avoid criticizing the Fed, Trump told CNBC he’s worried that the central bank’s policies will cancel out his efforts to speed up the economy. “I don’t really — I am not happy about it,” Trump said in excerpts released by the network. He also said that higher interest rates will strengthen the US dollar too much, putting the United States at a “disadvantage” while central banks in Europe and Japan keep rates low. Trump complained that China’s currency is “dropping like a rock.” “I don’t like all of this work that we’re putting into the economy and then I see rates going up,” Trump said. The US dollar lost ground against rival currencies following the comments. Even though he’s ... Read More »

China's yuan plunges again. Is a currency war coming?

Can the US win a trade war with China? China’s currency is plunging again. But how low will it go? The yuan weakened almost 1% against the US dollar on Thursday to hit its lowest level in a year. It has now fallen by nearly 8% over the past three months amid a global trade spat and concerns over an economic slowdown in China. Analysts said the yuan’s latest dip came after China’s central bank indicated that it was willing to accept a weaker currency. A sliding currency could help China’s huge export industry cope with new US tariffs, as it makes Chinese products cheaper for buyers who pay in dollars. That could in turn boost an economy that posted its slowest growth rate in nearly two years — 6.7% — in the second quarter. Unlike the dollar or euro, the yuan does not float freely against other currencies. Instead, ... Read More »

Larry Kudlow: No recession in sight, maybe not until 2024

Another strong jobs report. Here’s why unemployment went up Some economists warn that President Donald Trump’s trade war with China and deficit-financed tax cuts will speed the arrival of a recession. But don’t tell that to Larry Kudlow, who is positively euphoric on the economy. Trump’s top economic adviser thinks the recovery from the Great Recession, already the second-longest in history, could keep going until 2024. “It’s possible that a real growth cycle is in front of us for the next four, five or six years,” Kudlow said Wednesday at the CNBC Institutional Investor Delivering Alpha Conference. “This (recovery) may not be so long in the tooth,” he said. Not only does Kudlow’s prediction defy the consensus thinking of economists, it stands in stark contrast to his own caution on the trade war with China. “At the moment, the trade negotiations are kind of stalled,” he said. Kudlow added that ... Read More »

Texas to pass Iraq and Iran as world's No. 3 oil powerhouse

Shale exec: US will surpass Russia in oil production Don’t mess with Texas. It’s a global oil superpower. The shale oil boom has brought a gold rush mentality to the Lone Star State, which is home to not one but two massive oilfields. Plunging drilling costs have sparked an explosion of production out of the Permian Basin of West Texas. In fact, Texas is pumping so much oil that it will surpass OPEC members Iran and Iraq next year, HSBC predicted in a recent report. If it were a country, Texas would be the world’s No. 3 oil producer, behind only Russia and Saudi Arabia, the investment bank said. “It’s remarkable. The Permian is nothing less than a blessing for the global economy,” said Bob McNally, president of Rapidan Energy Group, a consulting firm. The hyper growth out of Texas is needed because oil prices have risen sharply and major ... Read More »

CEOs are dumping stock in their companies. Here's what that means

Why stock buybacks may deepen income inequality The captains of Corporate America are steering a record amount of cash into stock buybacks. Companies have announced them this year at a rate of more than $5 billion a day. The buyback boom has been viewed by investors as a sign of confidence among CEOs. Yet with their own money, executives are quietly taking a much different approach: They’re cashing out. Insiders dumped $8.4 billion of their shares in May and $9.2 billion in June, according to an analysis of regulatory filings by TrimTabs Investment Research. That’s the biggest two-month period of insider selling in a year. “They’re buying back from the front door, and shoveling shares out the back door,” said John Mousseau, president of CEO of Cumberland Advisors, an investment firm that manages more than $3 billion. “It would be like going on TV to tell everyone what stocks we ... Read More »

EU and Japan sign trade deal covering a third of the world's economy

How to negotiate a trade deal The European Union and Japan signed a huge free trade deal on Tuesday that cuts or eliminates tariffs on nearly all goods. The agreement covers 600 million people and almost a third of the global economy. It’s also a major endorsement of a global trading system that is under increasing threat from protectionism. It will remove tariffs on European exports such as cheese and wine. Japanese automakers and electronics firms will face fewer barriers in the European Union. The dismantling of trade barriers stands in stark contrast to the approach taken by President Donald Trump, who has imposed tariffs on a range of foreign goods and is threatening more action. Donald Tusk, president of the European Council, hailed the agreement as the “largest bilateral trade deal ever.” “Relations between the European Union and Japan have never been stronger,” he said in a written statement. ... Read More »

China's economy slows just as the trade fight begins

Can the US win a trade war with China? China’s huge economy is cooling just as trade tensions with the United States are heating up. The world’s second-biggest economy grew by 6.7% in the second quarter of the year. That was slightly lower than the previous quarter and is China’s slowest rate of quarterly growth in almost two years. The official figures released Monday suggest China is still on track to meet the government’s 2018 target of about 6.5%, although the intensifying trade clash with the United States means the rate of growth is likely to continue to slow this year. Analysts have previously forecast that trade tensions could shave up to 0.5 percentage points off Chinese growth this year, depending on the intensity of tariffs. Earlier this month, the Trump administration and China imposed tariffs of 25% on $34 billion of each other’s exports. US tariffs on an additional ... Read More »

Fed is ready to keep raising rates, but faces a list of uncertainties

El-Erian on trade war: US will be less damaged than others A rising dollar. Escalating trade tensions. And way too low unemployment. These are just a handful of factors in the Federal Reserve’s semi-annual report to Congress on the US economy that could reshape the central bank’s calculus in the coming years. Any surprising twist could snag the Fed’s plans to continue to gradually raise rates this year and next, as it moves toward a more normal policy a decade after the financial crisis. The Fed has raised its key interest rate twice this year, most recently in June. It penciled in two more rate hikes this year and three more in 2019. And for now central bankers believe the American economy is robust enough to stay on course. Related: The Fed is worried about a trade war But policymakers under Federal Reserve Chairman Jerome Powell’s leadership also made clear ... Read More »

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