United States:
U.S. and Japan Starting Next Round of Accelerated Trade Talks
U.S. and Japanese negotiators will begin a second round of trade talks in Washington on Thursday as they aim to secure a speedy deal focused on agriculture and vehicles. Japanese Economy Minister Toshimitsu Motegi will hold talks with U.S. Trade Representative Robert Lighthizer, while Finance Minister Taro Aso will meet separately with Treasury Secretary Steven Mnuchin for discussions expected to touch on currencies. On Friday, Japan’s Prime Minister Shinzo Abe plans to meet President Donald Trump in Washington. The U.S. is pushing to reduce its deficit with Japan and gain better access to the Asian nation’s agriculture market. For its part, Japan is looking for a concrete promise that it won’t be hit by possible U.S. tariffs on autos imports, similar to duties imposed by the Trump administration last year on steel and aluminum on national security grounds. “From the next session onwards we will speed up discussions toward an early agreement, and will discuss digital trade at an appropriate time,” Motegi said last week during the first round of negotiations. U.S. farmers are also agitating for a quick resolution. Almost 90 agricultural organizations said in a letter to Lighthizer this week that U.S. agricultural products are losing ground after Japan cut tariffs for a second time on products from the European Union and some Asia-Pacific nations. After Trump pulled the U.S. out of the Trans-Pacific Partnership soon after his inauguration, the 11 other members including Japan went ahead without the U.S. to forge a successor deal called the CPTPP. U.S. farmers say they’ve been left at a disadvantage by that pact, and another that Abe struck in 2018 with the European Union.
Europe:
U.K.’s Brexit Woe Is an Extreme Microcosm of Global Trade War
Brexit is an early experiment of how well the world can cope with new trade barriers and increased uncertainty. Leaving the European Union will clearly make commerce with the bloc that accounts for half of U.K. trade more difficult. But it also may give an extreme example of what’s to come elsewhere as President Donald Trump threatens to disrupt arrangements with China and Europe. Bank of England Governor Mark Carney calls it an “acid test” for how consumers and companies respond to the new environment. “We’ve had 30 years of globalization, and the U.K. is probably the best example right now of actively trying to reverse that by disintegrating from by far its largest and closest trade partner,” said Daniel Vernazza, chief U.K. and senior global economist at UniCredit in London. “Brexit is probably as close as you can get to an exogenous trade shock, and therefore you can more cleanly see the effects of it. We’ll see in the U.K. what disintegrating trade linkages does.” The similarities give economists and investors, who may have grown weary of Brexit turmoil over the past three years, all the more reason to pay attention as U.K. politicians return to work this week. According to calculations by BOE policy maker Gertjan Vlieghe, the U.K.’s vote to leave the European Union has cost the U.K. about 800 million pounds ($1 billion) per week since June 2016. Speaking in Parliament on Wednesday, Chancellor of the Exchequer Philip Hammond cited BOE figures that suggest business investment is 20 percent lower than it expected before the vote. For Arend Kapteyn, global chief economist at UBS Group AG, the dynamics in play in Brexit and a trade war are very similar. “You model it exactly the same way,” he said. “The only difference with Brexit is three-quarters of the disruption is non-tariff barriers.” If the U.K. is to prove a guide for the global economy, then there could be trouble ahead.
Asia:
Indonesia Rate Cuts May Be in the Pipeline in Wake of Jokowi’s Victory
With Indonesian President Joko Widodo making a renewed effort to boost economic growth as he prepares for a second term in office, the central bank may soon be able to play its part with interest-rate cuts. Economists are bringing forward their calls for monetary policy easing after unofficial results from last week’s presidential election put Jokowi — as Widodo is known — comfortably in the lead. That allows for policy continuity and for Jokowi to push ahead with his ambitious infrastructure program. Bank Indonesia Governor Perry Warjiyo has been sounding a cautious tone on the possibility of rate cuts, and only one of the 30 economists surveyed by Bloomberg sees a change on Thursday. Still, with inflation subdued and the currency stabilizing after last year’s emerging-market rout, there is growing support for the view that policy makers now have ample room to consider easing later this year, and as early as this quarter. “A Jokowi victory could lead to a resumption of inflows, adding to favorable local and global factors,” said Euben Paracuelles, an economist at Nomura Holdings Inc. in Singapore. “We think the scope for rate cuts this year by Bank Indonesia has increased.” He predicts 50 basis points of easing in the fourth quarter after previously forecasting rate cuts to begin next year. The president is expected to be confirmed as having won a second five-year term when official results from the April 17 election are announced in the next few weeks. He is leading by about 10 percentage points over Prabowo Subianto in official counting, with about 30 percent of votes from more than 800,000 polling stations tallied, mirroring unofficial results by private pollsters last week.
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