Trump brags about his China trade war ‘success’ as stock ticker shows market tanking

President Donald Trump on Monday boasted about how successful his trade war with China has been — even though stock markets took an absolute beating on the news that China was about to slap tariffs on $60 billion of American goods.

While giving remarks to White House reporters on Monday, Trump bragged that his tariffs were making the United States richer, while a stock-market ticker showed that the Dow Jones Industrial Average was falling by more than 600 points.

“We’re taking in right now hundreds of billions of dollars,” Trump said of his tariffs on Chinese goods. “We’re taking in billions of dollars of tariffs, and those tariffs are going to be tremendously, if you look at what we’ve done thus far with China, we’ve never taken in ten cents until I got elected, now we’re taking in billions of billions.”

Trump also falsely credited the tariffs for economic growth in the first quarter of 2019, even though the majority of economists say the tariffs had nothing to do with strong GDP growth.

“This is a very positive step,” Trump said as the stock ticker continued showing a bloodbath in the markets. “I love the position we’re in.”

[Raw Story]

Stock Market Falls as Trump threatens tariffs on $11 billion of EU goods

U.S. stocks closed lower Tuesday, with the S&P 500 snapping its eight-day winning streak, on fears over escalation of trade tensions with the European Union and a weaker global outlook from the International Monetary Fund.

How did the benchmarks fare?

The Dow Jones Industrial Average DJIA, -0.72%  dropped 190.44 points, or 0.7%, to close at 26,150.58, while the S&P 500 index SPX, -0.61% fell 17.57 points. or 0.6%, to 2,878.20. The Nasdaq Composite Index COMP, -0.56% declined 44.61 points, or 0.6%, to 7,909.28.

What drove the market?

The office of the U.S. Trade Representative threatened to levy tariffs on many European goods late Monday. The threat is a retaliation against European companies’ subsidies for aircraft manufacturer Airbus SE EADSY, -1.82% If the U.S. follows through, the proposed tariffs would affect about $11 billion in imports to the U.S., including helicopters, bicycles, cheese and wine.

Lighthizer said the Trump administration would wait for World Trade Organization clearance to implement the duties. President Donald Trump Tuesday morning tweeted that the EU has taken advantage of the U.S., adding that it would “soon stop!”:

The U.S.-EU tensions comes with the administration reportedly close to resolving a yearlong spat with China, which has roiled markets amid fears the clash between the world’s largest economies could disrupt global economic growth.

The IMF lowered the outlook for global economic growth in 2019 to 3.3% from 3.5% projected in January, marking its third reduction of growth expectations in six months. The decline has been broadly felt, with all advanced economies, including the U.S., and most major emerging-market economies seeing deterioration in their outlook.

Meanwhile, data pointed to a tightening of the U.S. labor market. The number of job openings in the U.S. fell by 538,000 to 7.1 million on the last business day of February, marking the smallest number of job openings since March of 2018.

The National Federation of Independent Business’s small-business optimism index edged up 0.1 point to a seasonally adjusted 101.8, marking the third month in a row in a narrow range.

What were strategists saying?

“The tariff threat is probably what’s moving markets negatively,” Karen Cavanaugh, senior market strategist with Voya Investment Management, told MarketWatch, though she noted that tariffs being discussed are relatively small. “We’re in an information vacuum before earnings season, and right now any little thing could move markets until we get something substantial to sink our teeth into.”

“Sentiment in continental Europe is holding up well, considering the heightened tensions between Washington, D.C., and Brussels in relation to the threat of $11 billion worth of tariffs being imposed on European imports,” wrote David Madden, market analyst at CMC Markets, in a research note.

Which stocks were in focus?

Apple Inc. AAPL, -0.30%  surrendered early gains to fall 0.3%, bringing its nine-day win streak to a close as its effort to reclaim $1 trillion in market cap took a pause.

Shares of Wynn Resorts LtdWYNN, -3.86% dropped 3.9% after the company terminated talks to purchase Australia’s Crown Resorts.

Shares of Paris-listed Airbus SE AIR, -1.86%  were off 1.9% amid the U.S. tariff threat. U.S. listed shares EADSY, -1.82% also fell 1.8%.

Avaya Holdings CorpAVYA, +4.17% shares gained 4.2% after Bloomberg reported that the communications software company is organizing a sales process for the company, following the receipt of unsolicited bids.

General Electric CoGE, -2.85% shares slid 2.9% a day after J.P. Morgan analyst Stephen Tusa downgraded the stock.

Shares of American Airlines Group IncAAL, -1.68% fell 1.7% after the company cut its first quarter guidance.

How were other markets trading?

Markets in Asia closed on a mixed note, with Japan’s Nikkei 225 NIK, -0.61%adding 0.2%, Hong Kong’s Hang Seng Index HSI, -0.35% rising 0.3%, while the Shanghai Composite Index SHCOMP, -0.39% lost 0.2%. European stocks were lower, with the Stoxx Europe 600 SXXP, -0.47% down 0.5%.

In commodities markets, the price of oil CLK9, +0.19% retreated from five-month highs, while gold futures GCM9, -0.13% settled higher. The U.S. dollarDXY, +0.02% was mostly unchanged.

[MarketWatch]

Trump Makes All-Caps New Year’s Decree: ‘MEXICO IS PAYING FOR THE WALL’

With the Federal government in its 10th day of a shutdown as President Donald Trump tries to secure funds in the budget for a Southern border wall, the commander-in-chief is reverting back to his original campaign promise about where the money is coming from.

In a Monday night tweet fired off just a few hours before the ball drop in Times Square, the president claimed that Mexico will be financing the wall by way of the trade pact they signed earlier in 2018.

“MEXICO IS PAYING FOR THE WALL through the many billions of dollars a year that the U.S.A. is saving through the new Trade Deal, the USMCA, that will replace the horrendous NAFTA Trade Deal, which has so badly hurt our Country,” Trump wrote. “Mexico & Canada will also thrive – good for all!”

Earlier, Trump also taped a brief New Year’s message for his followers:

“While I’m at the White House working, you’re out there partying tonight. But I don’t blame you. Enjoy yourselves. We’re gonna have a great year. Have a really, really Happy New Year.”

[Mediaite]

Trump announces second round of farm aid to offset trade damage

President Trump on Monday announced his administration was planning to disburse a second tranche of aid as part of a $12 billion package meant to assist American farmers stung by retaliatory trade measures enacted by China and other foreign governments.

“Today I am making good on my promise to defend our Farmers & Ranchers from unjustified trade retaliation by foreign nations,” Trump tweeted. “I have authorized Secretary Perdue to implement the 2nd round of Market Facilitation Payments. Our economy is stronger than ever–we stand with our Farmers!”

After this latest round of payments, farmers will have received about $9.6 billion in aid, according to Department of Agriculture figures. The largest payments will be for soybeans.

Agriculture Secretary Sonny Perdue said in a statement Monday that farmers “are continuing to experience losses due to unjustified trade retaliation.”

“This assistance will help with short-term cash flow issues as we move into the new year,” he added.

The Trump administration announced in July it was dispersing $12 billion in aid to farmers amid escalating trade disputes with China, Mexico, Canada and the European Union. The administration said it would dole out the first $6 billion in August.

Reuters reported earlier this month that the second portion of aid had been delayed by the administration.

The $6 billion that was dispersed in August included about $4.7 billion to producers of corn, cotton, dairy, pork, sorghum, soybeans, and wheat.

Perdue said in a statement at the time that “all of this could go away tomorrow, if China and the other nations simply correct their behavior.”

“But in the meantime, the programs we are announcing today buys time for the President to strike long-lasting trade deals to benefit our entire economy,” he said.

Trump has engaged in an escalating trade war with China that has hurt farmers in the U.S. who rely on China for exports.

The second portion of aid announced Monday was initially delayed because the Trump administration was worried about the cost of the program and was hopeful that China would resume buying soybeans from the U.S., according to Reuters.

[The Hill]

Stock markets plunge after Trump’s ‘Tariff Man’ tweet

Stocks took a nosedive on Wall Street as investors worried that a US-China trade truce reached over the weekend wasn’t all it was cracked up to be.

The Dow Jones Industrial Average sank almost 800 points Tuesday.

Boeing and Caterpillar, two major exporters which would have much to lose if trade tensions don’t ease, weighed the most on the Dow.

Bond prices soared sharply, sending yields lower, as traders shoved money into lower-risk investments.

The sharp drop in yields hurt banks because it makes it harder to earn money from lending. JPMorgan Chase sank 4.5 percent.

The S&P 500 lost 90 points, or 3.2 percent, to 2,700.

The Dow dropped 799 points, or 3.1 percent, to 25,027. The Nasdaq fell 283 points, or 3.8 percent, to 7,158.

The markets plunged after President Donald Trump unleashed a threatening tweet Tuesday morning.

“President Xi and I want this deal to happen, and it probably will. But if not remember, I am a Tariff Man,” Trump tweeted.

[New York Post]

Trump says he will withdraw from NAFTA, pressuring Congress to approve new trade deal

President Donald Trump said he intends to formally notify Canada and Mexico of his intention to withdraw from the nearly 25-year-old NAFTA agreement in six months. The move would put pressure on Congress to approve his new trade deal with the two U.S. neighbors.

“I’ll be terminating it within a relatively short period of time. We get rid of NAFTA. It’s been a disaster for the United States,” Trump said on board Air Force One after departing Buenos Aires, where he signed the U.S.-Mexico-Canada Agreement with the leaders of those two countries.

“And so Congress will have a choice of the USMCA or pre-NAFTA, which worked very well,” Trump added.

Trump’s comments confirmed what many have long suspected — that he would use the act of withdrawing from NAFTA as a cudgel to force Congress into passing the new deal.

But it also could be seen as an admission that the new agreement is not popular enough to be approved on its own merits, so Trump has to use the threat of disrupting the entire North American economy to round up the votes in Congress to get the deal past the finish line.

While a number of business groups do support the new deal because it contains new provisions on digital trade and strengthens intellectual property rights protections, others are simply relieved that it would keep much of the original agreement in place.

House Democrats, who are likely to hold the key to whether the new agreement is approved, have complained that labor and environmental provisions are not strong enough and have signaled they would like those concerns addressed as part of the implementing legislation.

Trump’s untested move would send the administration and Congress into a legal wilderness. The NAFTA deal includes a provision that allows a withdrawal after providing a six-month notice, but opinions differ on whether the president can act on his own.

Lawmakers passed legislation to implement the original deal in 1993. It’s uncertain whether a withdrawal initiated by the president would repeal the law that put the deal into force.

The president needs to take a look at the Constitution — it gives Congress authority over trade,” Sen. Ron Wyden (D-Ore.) said in September. “The president cannot pull America out of NAFTA without Congress’s permission.”

A 2016 report from the Congressional Research Service seems to be back up that position.

“It could be argued that because international trade is an area of shared constitutional authority, Congress must have a role in any decision by the United States to terminate or withdraw from an FTA,” CRS said.

Others argue Congress ceded authority to the executive branch decades ago that would allow Trump to terminate trade deals. They say Section 125 of the Trade Act of 1974 provides the underlying legal basis for a president to terminate or withdraw from an agreement and revoke any tariff reductions.

[Politico]

Trump tweets that tariffs are making the US “richer than ever before.” They’re not.

Either President Donald Trump isn’t sure how tariffs work or he’s being deliberately misleading about them.

The president fired off an early-morning tweet on Thursday declaring that billions of dollars are “pouring into the coffers of the United States” because of the tariffs his administration has put on some $250 billion in Chinese imports.

“If companies don’t want to pay Tariffs, build in the U.S.A.,” Trump wrote. “Otherwise, lets just make our Country richer than ever before!”

But that’s not really how tariffs work: The US may be generating some revenue from tariffs, but billions of dollars aren’t pouring in. Moreover, a lot of the money that is made off of tariffs comes from US consumers — not Chinese companies.

“If you think about who’s actually paying the tax, it’s like a sales tax. It’s like saying, ‘I put a sales tax on producers, isn’t this great we’re getting all this money?’ And then consumers say, ‘Wait, that’s from my wallet,’” said Michael Klein, a professor of international economic affairs at the Fletcher School at Tufts University and founder of the nonpartisan economics publication Econofact. “It’s just another example of taking where there’s a tiny germ of truth and blowing it up to the point where it’s absurd, for his own political purposes.”

On Thursday, Trump will travel to Buenos Aires for the G20 summit, where, among other agenda items, he’s expected to meet with Chinese President Xi Jinping for a working dinner to discuss the countries’ relations, including trade. The sit-down is seen as high-stakes, given that the US has placed nearly $250 billion in tariffs on Chinese goods and China has levied retaliatory tariffs of its own. The escalating trade war poses a threat to both nations’ economies.

Tariffs don’t really work this way

The Trump administration has shown itself to be pretty into the idea of tariffs. It’s put tariffs on steel and aluminum imports from multiple countries as well as on several billion dollars of Chinese goods. The way tariffs work is that the goods marked for tariffs face a border tax when they’re imported into the US.

As Vox’s Matt Yglesias recently explained, the US government with its initial rounds of China tariffs was careful to make sure the products it targeted had foreign-made alternatives:

When that happens, US purchasers switch to non-Chinese alternatives, and then consumers from outside the US tend to switch around and start buying the Chinese products. The overall impact is slightly less efficient global supply chains, some real pain to Chinese firms that need to find new customers, and a limited impact on American prices.

In other words, thus far, things have been relatively tame. A recent study from EconPol Europe found that Trump’s first round of tariffs have increased the prices US buyers pay for Chinese-made goods by 4.5 percent and decreased the prices received by Chinese sellers of US-bound goods by 20.5 percent.

That means that thus far, the tariffs have been mostly, but not entirely, paid for by China, but it’s not going great for anyone. And if Trump’s meeting with Xi doesn’t go well and the trade war escalates, the economic effects of tensions could worsen.

And it’s not going to be making the US significantly richer, because the more tariffs, the less incentive to import the goods affected, and therefore the less money being collected.

“If the point of tariffs is to reduce what you’re buying, that means you’re not going to make that much money,” Klein said.

And much of the money that does come in will be from Americans themselves. Tariffs are often passed on to consumers, therefore driving up prices and, ultimately, inflation.

Trump, who is personally very wealthy, has been rather cavalier about the potential for prices going up. In an interview with the Wall Street Journal this week in which he appeared to float the idea of putting tariffs on iPhones and laptops, he said, “I mean, I can make it 10 percent, and people could stand that very easily.”

“Made in the USA” isn’t as easy as Trump makes it out to be

President Trump often makes the case that many of the United States’ trade and economic problems could be solved if companies would just do all of their manufacturing here. He’s attacked General MotorsApple, and Harley-Davidson, among others, for having operations outside the US.

But “build in America” (which, by the way, many of Trump’s companies didn’t) isn’t as easy as it sounds. Supply chains are global, so even when Trump thinks he’s hitting back at China over, say, the iPhone, he’s missing the fact that the product is sourced from a lot of places, and its supply chain spans many countries.

In an Econofact analysis last year, Klein and Harvard political economist Marc Melitz estimated that each iPhone 7 imported to the US was recorded as a $225 import from China, but of that amount, only $5 represents work performed in China, largely assembly. The remaining $220 corresponds to other parts of Asia, Europe, and the Americas.

“It always sounds good when a president sounds tough on trade and issues protectionist policies,” Wayne Lam, a principal analyst at the information and analytics firm IHS Markit, told me when discussing the iPhone earlier this year. “We just don’t have the sheer workforce size nor skill set to be good at consumer electronics manufacturing.”

[Vox]

Trump floats new auto tariffs in response to GM layoffs

President Trump on Wednesday hinted he may support new tariffs on auto imports as his latest response to General Motors’ decision to shutter U.S. factories and lay off workers.

In a series of tweets, Trump argued that a longstanding 25 percent tariff on light trucks has boosted U.S. auto manufacturers and that the same approach could work for cars.

”If we did that with cars coming in, many more cars would be built here and G.M. would not be closing their plants in Ohio, Michigan & Maryland. Get smart Congress,” Trump wrote.

The president said major auto exporting countries “have taken advantage of the U.S. for decades” and warned “that the president has great power on this issue.”

”Because of the G.M. event, it is being studied now!” he wrote.

The comments follow a report in the German media that Trump is considering slapping a 25 percent tariff on car imports from all countries aside from Mexico and Canada. Trump previously decided to put off auto tariffs on Europe in exchange for the European Union agreeing to purchase more American soybeans.

General Motors’ announcement this week angered Trump, who views the U.S. economy as a reflection of his presidency. The plant closures and layoffs, combined with a sputtering stock market and rising interests rates, appear to have sparked fears of an economic downturn and prompted Trump to lash out.

Trump blamed Federal Reserve Chairman Jerome Powell for the stock-market slide and the GM layoffs, citing his decision to raise interest rates. The president said he also spoke to GM CEO Mary Barra to relay his unhappiness with the decision and threatened to end GM’s federal tax credit for electric vehicles.

GM has said slow demand for cars in the U.S. market, combined with tariffs on Chinese steel and aluminum, have hurt sales and forced the company to shutter plants in Lordstown, Ohio; Detroit-Hamtramck, Mich.; and White Marsh, Md.

The U.S. imposed a 25 percent tariff on imported light trucks in 1964 after France and West Germany imposed tariffs on U.S. chicken, hence the name ”chicken tax.”

[The Hill]

Trump says May’s Brexit plan could hurt UK-US trade deal

Donald Trump has suggested Theresa May’s Brexit agreement could threaten a US-UK trade deal.

The US president did not specify which aspect of the deal concerned him but told reporters the withdrawal agreement “sounds like a great deal for the EU”.

No 10 insisted the deal is “very clear” the UK would have an independent trade policy so that it can sign trade deals with countries around the world”.

Mrs May fought off heavy criticism of her Brexit deal from MPs on Monday.

Insisting the agreement “delivered for the British people” by regaining control of laws, money and borders, she said it would be put to an MPs vote on 11 December.

Hours later, Mr Trump told reporters outside the White House: “We have to take a look seriously whether or not the UK is allowed to trade.

“Because right now if you look at the deal, they may not be able to trade with us. And that wouldn’t be a good thing. I don’t think they meant that.”

It would appear Mr Trump was suggesting the agreement could leave Britain unable to negotiate a free-trade agreement with the United States.

However, responding to Mr Trump’s comments, a Downing Street spokesman said the Brexit withdrawal agreement struck on Sunday would allow the UK to sign bilateral deals with countries including the US.

“We have already been laying the groundwork for an ambitious agreement with the US through our joint working groups, which have met five times so far,” the spokesman added.

The BBC’s North America Editor Jon Sopel said Mr Trump’s comments were provocative, given trade would “carry on in much the same way as before” for the time being.

“Donald Trump knew exactly what he was doing with these remarks,” he said.

“There is a very open line of communication between senior members of his administration and prominent Eurosceptics.”

During Mr Trump’s UK visit in July – days after the British prime minister unveiled the proposals that formed the basis of the Brexit agreement – the US president had suggested an “ambitious” US-UK trade deal would “absolutely be possible”.

Billions of pounds in trade already flows between the UK and US – Britain’s largest single export market.

EU trade rules currently prevent the UK forging what some might view as a more advantageous bilateral trade deal with Washington.

Under the deal agreed in Brussels, the UK would continue to trade with the US under EU rules until at least the end of the “transition period” in December 2020.

During this transition – designed to allow businesses and others to prepare for the moment new post-Brexit rules kick in – the UK will be able to negotiate and strike deals with the US.

However, they will be unable to come into force until 1 January 2021 and could be delayed further if the backstop is triggered.

Tory Brexiteers fear the “backstop” written into the withdrawal agreement – which aims to prevent the return of customs posts on the Irish border in the event no UK-EU post-Brexit trade deal being agreed – could result in Britain being tied to EU rules for the long term.

In the Commons on Monday, Mrs May acknowledged the backstop was an “insurance policy no-one wants to use” but insisted the UK would have the right to determine whether it came into force.

She faced sustained criticism of the deal from MPs on all sides of the Commons.

Labour leader Jeremy Corbyn said Mrs May had brought home a “botched deal” that would “leave the UK worse off”.

The SNP’s Iain Blackford said the agreement was “full of ifs and buts” which would result in Scottish fishermen being “sold out” while the Lib Dem leader Sir Vince Cable and Green Party MP Caroline Lucas both called for another referendum.

And the DUP’s Nigel Dodds said the backstop “was bad for the United Kingdom and bad for the economy” and absolute certainty was needed over its legal application.

Tory backbencher Mark Francois was among a host of MPs to urge PM to think again, claiming the agreement was “as dead as a dodo” and “would not get through” Parliament.

Trump On Trade Wars With China, U.S. Allies: ‘We’ve Been the Stupid Country for So Many Years’

During his broad-ranging interview with 60 Minutes, President Trump said America has been a “stupid country” in the past, while also defending his approach to international economics and foreign policy.

Lesley Stahl pressed Trump on his escalating trade wars with China and their retaliation across multiple markets. Trump disputed her “trade war” characterization and that eventually led to a chat on the Trump Administration’s tariffs against American allies.

“I mean, what’s an ally?” Trump said. “We have wonderful relationships with a lot of people. But nobody treats us much worse than the European Union.”

Stahl continued to ask about this “hostile” approach, and whether Trump would consider dissolving the western alliance under NATO.

“We’ve been the stupid country for so many years,” Trump said. “We shouldn’t be paying almost the entire cost of NATO to protect Europe, and then on top of that, they take advantage of us on trade.”

[Mediaite]

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