Overseas Headlines- July 2, 2019

United States:

U.S. Proposes More Tariffs on EU Goods in Airbus-Boeing Dispute

“The U.S. added more European Union products to a list of goods it could hit with retaliatory tariffs in a long-running trans-Atlantic subsidy dispute between Boeing Co. and Airbus SE. The Trade Representative’s office in Washington on Monday published a list of $4 billion worth of EU goods to target in retaliation for European aircraft subsides. The products range from cherries to meat, cheese, olives and pasta, along with some types of whiskey and cast-iron tubes and pipes. It adds to a list of EU products valued at $21 billion that the USTR published in April, according to the release. The EU has a similar case pending against Boeing and has readied retaliatory tariffs of its own. Though the dispute predates President Donald Trump’s efforts to overhaul America’s big trading relationships, the timing of the latest punitive measures will add to already strained ties between Washington and Brussels. The airplane subsidy spat and the tariffs both sides are threatening contrast with the Trump administration’s other high-profile trade moves because they’re playing out under WTO rules rather than by unilateral White House authority. Under Trump, the U.S. has called for sweeping changes at the Geneva-based WTO and is currently blocking nominees to its appeals panel — a move that may paralyze the institution’s dispute-settling capacity by year end.”




ECB Policy Makers See No Rush for July Interest-Rate Cut

“European Central Bank policy makers aren’t yet ready to rush into additional monetary stimulus at this month’s meeting, preferring instead to wait for more data on the economy, according to euro-area central-bank officials familiar with the matter. While Governing Council members agree that they could act on July 25 if the outlook deteriorates, they are currently leaning toward the following meeting in September when they’ll have updated economic forecasts to back up their decision, the people said. The council might tweak its policy language this month to signal more stimulus is imminent. The officials asked not to be identified as the discussions are informal. A spokesman for the ECB declined to comment.The euro jumped to the highest level of the day, climbing as much as 0.3% to $1.1321. Waiting until September largely meshes with expectations, with investors pricing a 10 basis-point rate cut by then, but some are looking for faster or bigger action. Commerzbank and Morgan Stanley expect 10 basis points as early as this month. HSBC forecasts 10 basis points in both September and December, and Goldman Sachs foresees 20 basis points in September. Morgan Stanley and Goldman Sachs also expect a resumption of quantitative easing. A delay also leaves the market more exposed to shocks over the summer months when liquidity is thinner. The prospect of escalating trade tensions was highlighted on Monday when the U.S. proposed adding more tariffs to European Union goods because of a dispute between Boeing Co. and Airbus SE.”




China Confident That Trade War Won’t Mean Massive Factory Moves

“China is still a competitive location for investment, according to Premier Li Keqiang, even as some companies look to move production out of the country to avoid tariffs and damage from the trade war with the U.S. “The relocation of the global industrial chain is a natural trend during globalization, and global industries will improve during the process,” Li told a group of foreign and domestic business leaders at the World Economic Forum’s summer meeting in Dalian. “You move some industries outside China, while leaving some others in China, or even increase the investment to China,” he said. “As long as we can build the industrial chain according to commercial and market principles, China, with its complete industrial clusters and huge market, will be competitive.” The rising tariffs and tensions between the U.S. and China over the past year have led companies to move some production out of China to Vietnam or other countries. Even with the truce agreed over the weekend, both China and the U.S. are still tariffing much of the items they buy from each other, and there is no certainty for business that this won’t increase if talks break down again. The government also indicated it was fine with some firms moving low-end manufacturing business overseas, with a commerce ministry official saying only a few companies are leaving due to the trade war. “China’s role in the global supply chain reflects its comparative advantage, as well as division and cooperation in the context of globalization. It is a natural choice of the market, and it is the effect of economic rules,” the official, Chu Shijia, said at a briefing in Beijing on Tuesday. Chinese companies are going global and moving part of their supply chains to cheaper places, but as China makes progress in its technology and opening up, there are also new domestic industry areas such 5G or integration in overseas supply chains such as Tesla Inc., he said. “China’s comprehensive advantage in the supply chain can’t be replaced by any other country currently,” he said.”


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