Date: August 8, 2019
U.S. Rushes to Ready New China Tariffs as Companies Fear Damage
“The Trump administration is rushing to finalize a list of $300 billion in Chinese imports it plans to hit with tariffs in a few weeks’ time, as U.S. companies make a last-ditch appeal to be spared from the latest round of duties. President Donald Trump’s announcement last week on adding a 10% tariff as of Sept. 1 to virtually every Chinese import that’s not yet subject to punitive duties took U.S. Trade Representative Robert Lighthizer by surprise, people familiar with the discussions said. Lighthizer and his staff are now under pressure to revise an initial list targeting more than 3,800 Chinese product lines based on issues raised during a public comment period and hearings. The USTR is planning to publish the final list this week or early next, the people said. In that meantime, companies are making a last-ditch attempt at convincing the Trump administration not to impose duties or to drop items they import from the tariff list. In a meeting shortly before the president announced the new duties, Lighthizer argued against the new tariffs. He instead urged patience to allow more time for a tariff increase in June to 25% from 10% on an earlier batch of $200 billion worth of Chinese imports to inflict pain on the Chinese economy, the people said. A USTR spokesman disputed that account, and said the agency was following the same legal process as it had in previous tariff rounds. Trump decides when the tariffs will go into effect and USTR will publish the final list before the effective date, the spokesman said. Still, companies are complaining about the lack of certainty for their business decisions and say a couple weeks’ notice isn’t enough time. “Companies don’t plan by tweet,” Jon Gold, of the National Retail Federation, said. “These are all contracts that are already executed and cargo is on the water.” ”
European Banks Staring Down Barrel of ECB Rate Cut Seek Relief
“After five years of negative interest rates, Europe’s lenders are grasping for straws. Top bankers used the release of dire earnings in recent weeks to lobby the European Central Bank to soften the blow of another potential interest rate cut. From Deutsche Bank AG to UniCredit SpA, executives say expectations for even lower rates have already made it harder to meet their goals, at a time when international trade disputes have clients sitting on the sidelines. “It’s a cry for help because rates are really hurting banks, hitting their share prices and even undermining whole business models,” said Michael Huenseler, who helps manage about 24 billion euros ($27 billion) including European bank bonds at Assenagon Asset Management in Munich. “European bankers never dreamed they’d be living with low rates for so long.” High on the wish-list for lenders is an exemption from at least some of the charges for holding deposits at the central bank, known as tiering. The ECB, which introduced negative rates in 2014, charges banks more than 7 billion euros a year to deposit cash. That’s hitting lenders from Germany, France and the Netherlands in particular, because they account for the biggest share of excess liquidity held at the region’s central banks. Germany’s Commerzbank AG alone would face a 50 million-euro hit to lending income if the ECB cut its deposit rate to minus 0.5% from minus 0.4%, as many economists predict. So far this year, the bank has compensated for the cost of negative rates by lending more, charging corporate clients for deposits and thanks to lower funding costs, according to finance chief Stephan Engels. His counterpart at Deutsche Bank, James von Moltke, says tiering could “be better than neutral to us in terms of the revenue impact.” Both Deutsche Bank and Commerzbank have struggled with low profitability for years and have been unable to stage successful turnarounds.”
China Goes Big on Commodities Purchase Amid Shifting Trade War
“Commodity purchases by China rebounded strongly in July. Imports of soy to coal and crude oil gained, signaling demand in the world’s biggest buyer remains solid even as a trade spat with the U.S. escalates. The increase comes as the nation’s overall imports shrank less than forecast while export growth rebounded, signaling some recovery in trade before new tariffs threatened by the U.S. The nation’s total imports “look surprising,” with the strong commodity component driven by both rising prices and volumes, said Betty Wang, senior China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong. “Coal and crude oil volumes also held up, which could be seen as signs of rising energy demand,” she said, adding that higher iron ore prices year-on-year also boosted the value of imports. Soybean shipments jumped in July to the highest level in almost a year as Chinese crushers boosted volumes from South America, and before halting U.S. purchases. Imports rose to 8.64 million tons last month, from 6.51 million tons in June and 8 million a year ago. The strength may persist through August and September, which could raise inventories and slow future purchases. Coal imports surged to the highest in six months as companies brace for tougher import controls in the second half. Shipments jumped 13% in July from a year ago to 32.89 million tons, handing authorities further impetus to clamp down as they aim to keep annual volumes at levels similar to last year’s. The end of a peak maintenance period saw China’s crude oil imports recover in July as state refiners rebuild stockpiles. Purchases climbed 14% on-year to 41.04 million tons. Additional crude oil quota to private refiners should keep imports upbeat in the second half, according to a note from ANZ. Iron ore sees yet more evidence of rebounding supply. Chinese imports soared to 91 million tons in July from 75 million a month earlier as output disruptions in Australia and Brazil ease. Purchases were also up slightly from a year ago. Chinese buying of overseas copper concentrates rose to a record amid an ongoing push to boost domestic refining capacity. And while inbound cargoes of unwrought copper and products fell from a year earlier, they were up from the prior month as import premiums rose.”
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