Date: November 08, 2019
U.S. Says Phase-One China Deal Would Include Tariff Rollback
The U.S. and China have agreed to roll back tariffs on each other’s goods in stages as negotiations continue over resolving the more than yearlong trade war, officials on both sides said. “In the past two weeks, top negotiators had serious, constructive discussions and agreed to remove the additional tariffs in phases as progress is made on the agreement,” China’s Ministry of Commerce spokesman Gao Feng said Thursday. White House economic adviser Larry Kudlow confirmed the advance in negotiations. “If there’s a phase one trade deal, there are going to be tariff agreements and concessions,” he told Bloomberg. Despite the progress, markets were mixed with U.S. equity futures edging lower, as other officials to President Donald Trump tamped down expectations for an imminent breakthrough in discussions. Trade adviser Peter Navarro told Fox Business: “there is no agreement at this time to remove any of the existing tariffs as a condition of the phase one deal. The only person who can make that decision is President Donald J. Trump. It’s as simple as that.” An agreement to ratchet back tariffs would pave the way for a de-escalation in the trade war that’s cast a shadow over the world economy. China’s key demand since the start of negotiations has been the removal of punitive tariffs imposed by Trump, which by now apply to the majority of its exports to the U.S. “If China, U.S. reach a phase-one deal, both sides should roll back existing additional tariffs in the same proportion simultaneously based on the content of the agreement, which is an important condition for reaching the agreement,” Gao said Thursday. China’s exports and imports continued to contract in October, data released Friday showed, though slightly less than forecast by economists. The trade surplus with the U.S. widened in the month to $26.4 billion. The two sides continue to negotiate over where and when a “Phase One” deal would be signed. Gao said he had no further information on the location or timing.
Germany’s Not the Only Country Lagarde Could Target to Boost Spending
By Christine Lagarde’s own definition, the European Central Bank president’s desire for a government spending boost in the euro zone can now focus on a dozen countries. That selection ranges from the region’s biggest economy, Germany, to its smallest member, Malta. The European Commission’s latest forecasts, released on Thursday, show them all having next year what Lagarde described in her confirmation testimony as space for stimulus: a fiscal deficit within 0.5% of gross domestic product. The new ECB president has inherited an institution that under her predecessor, Mario Draghi, has been pressing for national budgets to complement its own monetary easing at a time of slowing economic growth. Countries in the euro region with surpluses already declining because of fiscal stimulus include Cyprus, the Netherlands, Luxembourg and “to a lesser extent” Germany, according to the Commission. Europe’s most populous country is the prime target for ECB officials seeking a fiscal boost. That’s because of Germany’s size and the room it built up from years of budget rectitude. It’s also because industry there faces a combination of headwinds, from global trade tensions to auto sector challenges, that makes it the epicenter of the region’s slowdown. While stimulus is forthcoming, including climate-change measures assessed by the Commission at 0.1% of GDP, it describes the overall expansion as “modest.” Unluckily for Lagarde, Germany is a country with emphatic opposition to looser purse strings. Voters there cherish balanced budgets and the country’s constitutional brake on debt.
Malaysia Unexpectedly Lowers Reserve Ratio While Resisting Rate Cut Calls
Bank Negara Malaysia unexpectedly cut its reserve ratio after keeping its main policy rate unchanged this week. The Statutory Reserve Requirement will be lowered to 3% from 3.5% effective Nov. 16, the central bank said in an emailed statement. The move is meant to ensure enough liquidity in the domestic financial system and isn’t a signal on the monetary policy stance, it said. Malaysia has held borrowing costs unchanged since kicking off Asia’s easing trend with a rate cut in May, with central banks from India to the Philippines taking more aggressive action to spur growth in their economies. Some analysts predict Bank Negara will ease monetary policy next year as the global downturn worsens, after the central bank maintained its overnight rate at 3% at its final meeting of the year this week.
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