Overseas Headlines – March 22, 2018

March 22, 2018 

United States:

Trump Plans to Impose $50 Billion in China Tariffs, Source Says

President Donald Trump is set to announce about $50 billion of tariffs against China over intellectual-property violations on Thursday, according a person familiar with the matter. The president is considering targeting more than 100 different types of Chinese goods, according to the person, who spoke on the condition of anonymity. The value of the tariffs was based on U.S. estimates of economic damage caused by intellectual-property theft by China, the person said. “Tomorrow the president will announce the actions he has decided to take based on USTR’s 301 investigation into China’s state-led, market-distorting efforts to force, pressure, and steal U.S. technologies and intellectual property,” White House official Raj Shah said in an emailed statement on Wednesday. It will be Trump’s first trade action directly aimed at China, which he has blamed for the hollowing out of the American manufacturing sector and the loss of U.S. jobs. The decision comes as policy makers including IMF Managing Director Christine Lagarde warn of a global trade conflict that could undermine the broadest world recovery in years. On Thursday, China’s Ministry of Commerce cautioned against the U.S. taking measures “detrimental to both sides”. The nation strongly opposes such unilateral and protectionist action, and will take “all necessary measures” to firmly defend its interests, the ministry said in a statement on its website.



Euro-Area Growing Pains Drag Expansion to Slowest in 14 Months

The euro area’s private-sector economy grew at the slowest pace in 14 months in March, as service providers and factories struggled to keep up with demand. A composite purchasing managers’ index by IHS Markit slid to 55.3 from 57.1. That’s below the median estimate of 56.8 in a Bloomberg survey of economists, and marks a second successive decline from the 12-year high reached in January. “The loss of momentum since the buoyant start to the year has been quite dramatic,” said Chris Williamson, chief business economist at IHS Markit. “At least some of the slowing may be ascribed to bad weather in some northern regions and, perhaps more importantly, ‘growing pains’ resulting from the strength of the recent growth spurt.” IHS Markit said supply-chain bottlenecks and raw material shortages were reported to have stymied production in manufacturing, with delays in Germany the highest in the survey’s 22-year history. Companies also saw activity being curtailed by growing skill shortages. Such a trend could complicate the European Central Bank’s debate over when to end its extraordinary monetary stimulus. While officials including President Mario Draghi have called for caution, one of their key reasons is that the economy may have more slack than previously thought.



Japanese Snap Up German, French Bonds While Shunning U.S. Debt

Japanese investors snapped up the most German and French sovereign debt in six months in January, while extending their selling spree in U.S. bonds into a fourth month. Investors from the Asian nation bought a net 922.4 billion yen ($8.7 billion) of German notes in the first month of the year, the most since July, according to balance of payments data released by the Ministry of Finance Thursday. They purchased 1 trillion yen of French securities, while offloading 920.8 billion yen of American bonds. The data marks the continuation of a trend that has seen Japanese funds boosting holdings of European debt in recent months as expectations of faster tightening by the Federal Reserve, a rapid rise in yields on Treasuries and higher dollar-hedging costs dim the appeal of U.S. bonds. A booming European economy has also seen investors look past some of the political risks to invest in the region. “A mild rise in bond yields and brighter prospects for the euro may have attracted demand for European bonds,” said Tsuyoshi Ueno, a senior economist at NLI Research Institute in Tokyo. “Speculation that China may pare U.S. Treasury purchases could also have made Japanese investors nervous about taking positions there.”