December 2, 2019
Trump Revives Brazil, Argentina Steel Tariffs, Swipes at Fed
“President Donald Trump is reinstating tariffs on steel and aluminum from Argentina and Brazil, nations he criticized for cheapening their currencies to the detriment of U.S. farmers, and again called on the Federal Reserve to loosen monetary policy. Linking his trade agenda with his Fed criticism in an early morning tweet, he said the two South American countries “have been presiding over a massive devaluation of their currencies. which is not good for our farmers.” The president’s action amount to retaliation against two nations that have become alternative suppliers of soybeans and other agricultural products to China, grabbing market share away from the U.S. Argentina’s peso plunged earlier this year on election results putting a left-wing candidate in the presidency. Brazil has intervened multiple times in the past month to support its devaluing real. Brazil’s President Jair Bolsonaro said he would talk to his economy minister before reacting to Trump’s comments on the Brazilian real and the imposition of steel tariffs. “If needed, I can also talk to Trump, I have an open channel with him,” he added as he left the presidential palace. In a second Twitter post, Trump signaled that he wants the U.S. central bank to do something about suppressed currencies. Trump has long grumbled about the dollar’s strength and urged the Fed to abandon decades of precedent and act to weaken the greenback. The U.S. government’s dollar policy has traditionally been directed by the Treasury Department. That has prompted fears that the U.S. could lead the world into an era of weaponized monetary policy. While such a currency war hasn’t happened yet, Monday’s move marks the first time Trump has linked the imposition of tariffs explicitly to currency movements. As such, it signifies a potential new phase in his trade wars in which foreign-exchange markets are the battleground.”
Brexit Deal Could Help Unlock U.K. Investment, CBI Says
“Leaving the European Union with an “ambitious deal” on trade will help unlock U.K. investment and lead to a gradual improvement in growth, the Confederation of British Industry said Monday. The CBI’s view, accompanying their latest economic forecasts, could boost Prime Minister Boris Johnson’s election campaign, which has focused on the need to “get Brexit done.” That’s despite the next stage of Britain’s departure from the EU set to be even more torturous than the current one, according to trade experts. The prime minister is campaigning on a pledge to leave the EU early next year and sign a trade agreement before a transition period expires at the end of 2020 — a timetable that may be overly-ambitious. It will be crucial that the next government is clear it will take the time necessary to get a deal done, the CBI’s chief economist Rain Newton-Smith said in an interview. “This is going to be a process. It isn’t like you’re going to have this wall of investment that is suddenly unleashed,” Newton-Smith said. Nevertheless, “if firms can see a close deal with the EU on the horizon, with no further Brexit cliff-edges to worry about, investment will be unlocked,” she said. In its latest outlook, the business group forecast a “modest” growth rate of 1.3% this year and 1.2% in 2020, before a pickup to 1.8% in 2021 as global headwinds and Brexit uncertainty wane. The forecasts are based on leaving the EU with a transition agreement on Jan. 31, with a “clear line of sight to an ambitious deal for all sectors that delivers tariff-free trade and close alignment on rules.” The CBI said momentum in the economy is currently subdued, and noted its forecast is subject to a high degree of uncertainty. Under a scenario of further Brexit turmoil, the group sees growth of 1% and 1.6% in 2020 and 2021 respectively.”
Hong Kong Retail Sales Slump Again as Chaos Cripples Economy
“Hong Kong’s retail sales suffered a record contraction in October, as the city counts the cost of almost six months of political unrest. Retail sales by value contracted by 24.3% in the month from a year earlier, the fourth month of double-digit declines. By volume, sales contracted by 26.2%, also a record, according to a government release. Earlier Monday, Financial Secretary Paul Chan told lawmakers he expected the first budget deficit since the early 2000s for the fiscal year, and said that the ongoing turmoil has hurt economic growth by some 2 percentage points this year. The retail data indicate that the annual “Golden Week” holiday in mainland China failed to translate into a tourist bump that could have alleviated the domestic economic pain. Overall, visitors to Hong Kong fell almost 44% in the month. For retail businesses, that raises the stakes for coming months. Many proprietors will have to make hard choices: whether to continue the fight into next year or give up as leases come up for renewal and employee bonuses must be paid. Iris Pang, an economist with ING Bank NV in Hong Kong, sees a 70% chance of a wave of store closures among retailers if spending continues to be weak. The situation is especially dire for catering companies, who typically enjoy brisk business at the holidays though face the prospect of cancellations during periods of unrest. “Make or break is the correct description for most catering businesses in Hong Kong as some of them have continued in the business just because their rental agreement has yet to be due,” Pang said. “It is very likely that many catering businesses will close their business if their revenue doesn’t make a comeback during this holiday.” ”
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