Overseas Headlines- July 3, 2019

Date: July 3, 2019

United States:

 U.S. Trade Gap Widens by More Than Forecast to Highest in 2019

“The U.S. trade deficit widened by more than forecast to a five-month high as imports surged the most since 2015, illustrating how President Donald Trump’s trade policies are weighing on the economy. The gap increased 8.4% in May to $55.5 billion and April’s level was bigger than previously reported, Commerce Department data showed Wednesday. The median estimate of economists surveyed by Bloomberg called for a deficit of $54 billion. Imports jumped 3.3% and exports rose 2%, the most in a year, while the goods- trade gap with China widened to $30.1 billion. The report suggests net exports were on track to drag down the pace of expansion in the second quarter after giving a big boost in the prior period, though the monthly figures have been volatile thanks to tariffs. Chinese imports and exports both surged, potentially reflecting companies rushing shipments ahead of Trump’s latest increase in levies announced in May. The wider trade gap shows how policies including the tariff war between the U.S. and China continue to buffet U.S. business activity and growth, despite Trump’s intent to shrink the deficit. A strong dollar and weaker expansion abroad are also weighing on exports, which were down from a year earlier, while consumer demand and front-loading of orders to avoid tariff deadlines have boosted imports. Economists in a recent survey expected second-quarter growth to slow to a 1.8% annual pace from 3.1% in the first three months of the year, based on the median estimate. A separate government report on Wednesday showed filings for U.S. unemployment benefits fell for the second time in three weeks, a sigh the labor market is holding up before June jobs data are released later this week.”




 U.K. on Path for Second-Quarter Contraction After Dismal June

“The U.K. economy probably shrank for the first time since 2012 in the second quarter as Brexit uncertainty and fears for the global outlook took their toll on output in June, according to IHS Markit. The report comes a day after Bank of England Governor Mark Carney warned of damage to the global economy from rising protectionism, adding that the U.K. faces the additional threat of a no-deal Brexit on business investment. Concerns over a chaotic departure from the European Union, along with bets that central banks around the world will need to ramp up stimulus, have left investors fully pricing in a BOE interest-rate cut by August 2020. The Purchasing Managers Index on Wednesday showed U.K.’s dominant services sector all but stagnated last month, following surveys earlier this week showing outright contraction in the manufacturing and construction industries. That left a composite gauge covering the three sectors below 50 for the first time since the aftermath of the Brexit referendum in 2016, with the evidence suggesting the economy shrank 0.1% in the second quarter, Markit said. “The worsening picture will put further pressure on the Bank of England to add stimulus,” said Chris Williamson, chief business economist at IHS Markit. “For policy makers not loosen policy with the all-sector PMI at its current level would be unprecedented in the survey’s two-decade history.” Markit’s index for the services industry fell to 50.2 in June, down from 51 the previous month and defying economist expectations for no change. The pound fell for a third day after the report, and was 0.1% lower at $1.2576 as of 9:47 a.m. London time.”




 U.S. Slaps Import Duties of More Than 400% on Vietnam Steel

 “The U.S. Commerce Department imposed duties of more than 400% on steel imports from Vietnam, accusing some businesses of shipping products from the Southeast Asian nation to evade the levies in a further escalation of tension between the two trading partners. In three preliminary circumvention rulings on Vietnamese steel, the Commerce Department said certain products produced in South Korea and Taiwan were shipped to Vietnam for minor processing before being exported to U.S. as corrosion-resistant steel products and cold-rolled steel. Customs officials have been ordered to collect cash deposits at rates as high as 456.23% on imports of the steel products produced in Vietnam using material from South Korea and Taiwan. The U.S. is hardening its rhetoric against Vietnam, one of its major trading partners and an economy that’s benefiting from President Donald Trump’s trade war with China. Trump described Vietnam last week as “almost the single-worst abuser of everybody” when asked if he wanted to impose tariffs on the nation. Vietnam’s Ministry of Foreign Affairs didn’t immediately respond to a request for comment. It’s not surprising companies will try to route products through countries such as Vietnam to dodge higher duties, said Rob Carnell, Asia Pacific chief economist at ING Bank. “It’s a no-brainer,” he said. “You increase the cost and people are going to try and find a way to avoid it. It’s human nature.” In another case, U.S. Customs and Border Protection is investigating six American companies for allegedly evading anti-dumping duties while importing and misclassifying Chinese-made carbon steel pipe fittings through Cambodia, according to the U.S. Embassy in Phnom Penh.”


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