web analytics
a

Facebook

Twitter

Copyright 2015 Libero Themes.
All Rights Reserved.

8:30 - 6:00

Our Office Hours Mon. - Fri.

703-406-7616

Call For Free 15/M Consultation

Facebook

Twitter

Search
Menu
Westlake Legal Group > United States International Relations (Page 20)

Trump Can Battle China or Expand the Economy. He Can’t Do Both.

LONDON — As President Trump intermittently escalates and moderates his trade war with China, his conflicting signals reflect a reality that limits his actions: He can try to sever the deeply intertwined American commercial relationship with China, or he can prod economic growth to assuage the fears of investors around the planet.

But he cannot do both at the same time.

Mr. Trump need not rely on the testimonials of economists to deduce this. He can disregard the admonitions of news outlets he derides as fake news. He can simply consult the one source whose verdicts he tends to celebrate: the stock market.

Among those who control money, portents of further trade hostilities between the United States and China, the two largest economies on earth, have proved an impetus to sell with abandon while amplifying talk of recession. Intimations of a deal avoiding further animosity reverberate as a clarion call to buy, sending share prices higher while easing worries about a potential global economic downturn.

Mr. Trump often appears caught between competing impulses that pull markets — and his China policy — in opposite directions.

Talk of a trade deal with China makes for happy stock markets and retirement account statements that Americans open up to learn that they are, also happily, richer. For a president seeking re-election next year, this option holds appeal.

Thunderous threats of fresh tariffs on Chinese goods and the forging of a new order in which American industry forsakes China may damage share prices and shrink economic growth prospects. But it brings plaudits from Mr. Trump’s most ardent political base — nationalists who portray the trade war as a tough but necessary piece of business, the sort of action evaded by the cowards who resided at the White House before.

The latest evidence for this state of affairs came in recent days, as Mr. Trump angrily reacted to China’s announcement of retaliatory tariffs of 10 percent on some $75 billion worth of American exports.

On Friday, the president unleashed furious tweets threatening China with pain. He vowed to raise tariffs on $550 billion of Chinese goods. He declared that China’s president, Xi Jinping, whom he had previously called a “good man,” was an “enemy.” And he commanded American companies to abandon China and start making their products in the United States.

ImageWestlake Legal Group merlin_151214007_f44ac43b-806f-4f47-8485-fb3310adfbdd-articleLarge Trump Can Battle China or Expand the Economy. He Can’t Do Both. United States International Relations United States Economy Trump, Donald J Mnuchin, Steven T Lighthizer, Robert E International Trade and World Market China Bolton, John R

The end of a shift at a Ford factory in Chongqing, China. Last week, Mr. Trump ordered American companies to leave China.CreditGilles Sabrié for The New York Times

That last bit was especially striking given that successive American administrations have criticized Chinese counterparts for using state-owned companies as tools of policy in contravention of market forces. Now, here was the president of the United States, traditional champion of swashbuckling capitalism, ordering American companies to heed his dictates.

In markets around the globe, investors reacted to these developments as powerful signals to yank their money to safety. They sold stocks and bought bonds. They dumped a vast assortment of currencies and purchased the American dollar, the ultimate haven in moments of worry.

They reacted, in short, as if much of the globe suddenly appeared riskier.

Signs of trouble had already been mounting. For better or worse, the United States and China have been fused for two decades, with their fortunes influencing economic conditions everywhere.

China has invested aggressively in manufacturing plants, ports and power systems to become the factory to the world. American consumers are the most significant drivers of economic growth on earth. Together, the United States and China are responsible for about 40 percent of the world’s economic output.

Any sign of a breakdown in this arrangement — the threat that China will be impeded in selling its goods, or that the American appetite is waning — spreads worry far and wide.

The trade war that has escalated over the last year has already produced distress. Germany, the largest economy in Europe, is teetering toward recession in large part because of weakening exports. As China’s economy slows in the face of American tariffs, Chinese factories have less need for goods made in Germany, from machinery to petrochemicals.

German weakness has contributed to a general sense of malaise in Europe, just as the Continent grapples with the prospect that Britain — also contracting — might crash out of the European Union without a deal governing future commercial relations.

Across Asia, the drop in trade has sown trouble, with Singapore and Hong Kong now declining and South Korea slowing. Even Vietnam — a country that has received fresh investment as multinational companies seek alternatives to making their wares in China — looks vulnerable if global trade over all continues to diminish.

The uncertainty of the trade war has caused companies like Gradall Industries, which makes industrial equipment in Ohio, to postpone investments.CreditRoss Mantle for The New York Times

“For the rest of the world, there are many other countries that are innocent bystanders that will actually suffer even more than the United States and China,” said Louis Kuijs, the Hong Kong-based head of Asia economics at Oxford Economics. “There is not going to be any de-escalation any time soon.”

The United States is still growing, with the unemployment rate lower than it had been in half a century. But companies are deferring investments as they puzzle over the impact of trade hostilities. How can executives proceed with expanding operations in Ohio or Michigan when they have no certainty over the tariffs that will apply to parts and electronics brought in from China? A slowdown in investment could eventually prompt households to curb their spending, bringing a recession.

If a continued trade war footing tanks stock markets, share prices could themselves become an affliction. As millions of Americans absorb the reality that their investments are worth less, they may question whether to buy that new home, take that trip or open that new business.

Long before Mr. Trump took office, American governments complained about China and its failed promises to open its market. China has lavished subsidies on state-owned companies. It turned itself into an export juggernaut while ignoring labor and environmental standards.

Beijing and Washington have argued over this state of affairs for decades, while American labor interests and industry groups have demanded redress.

But Mr. Trump has gone much further than his predecessors in his diagnosis. In his telling — at least, in his combative moments — China is a rogue operator that fleeces Americans. The solution is not another slow-moving case at the World Trade Organization, but a fundamental redrawing of commercial geography. American companies must vacate China, walking away from customers and supply chains. In his view, the American economy is supposed to “decouple” from China, as the think tank vernacular has it.

Mr. Trump’s tweet storm on Friday morning appeared to underscore that he was serious, that he was truly willing to see Americans accept the costs — plunging stock markets, weakening investment — for a wholly new sort of relationship with China as adversary.

Stock markets suffered a sell-off because a dissolution of American and Chinese commercial arrangements was certain to be disruptive. Companies with global operations would have to scramble to figure out where they would buy parts and raw materials. The potential outcomes were many, but none of them involved the world’s getting richer.

Commerzbank headquarters in Frankfurt. With exports to China weakening, Germany is at risk of a recession.CreditFelix Schmitt for The New York Times

Yet by Sunday morning, at the Group of 7 summit in France, Mr. Trump was expressing “second thoughts” about the new tariffs on Chinese goods. By Monday morning, he was calling Mr. Xi a “great leader” and reporting that China was interested in resuming trade talks. Stock markets were buoyant. At least for a few hours, the bewildering notion that the United States and China were dissolving ties could be forgotten.

But for how long? And what is the end game?

For as long as Mr. Trump has occupied the Oval Office, trade experts have parsed his often contradictory words and actions for clues to his real policy aims and beliefs. They have labored to divine what he values, and somehow separate it from what he may say as a negotiating ploy or as a diversion from scandal.

Most have come to conclude that his policy is perpetually flexible, depending on which advisers have his ear and on the tenor of television conversations about American economic growth prospects and — especially — the stock market.

His hard-line advisers — like the United States trade representative, Robert Lighthizer, and Mr. Trump’s chief trade adviser, Peter Navarro, author of a book called “Death by China” — urge him to untether the American economy from China.

The president’s national security adviser, John R. Bolton, portrays trade as but one element in which China poses grave peril to American interests. In this calculus, economic damage is the unavoidable cost of reclaiming American status as a superpower that dictates the terms of world engagement.

But Larry Kudlow, the former television host who leads Mr. Trump’s National Economic Council, and Treasury Secretary Steven Mnuchin tend to focus on areas of interest to investors, not least share prices. Conventional wisdom has it that Mr. Trump is channeling their influence when he talks up possible deals with China.

Mr. Trump is famously adept at maintaining positions that seem mutually exclusive. In recent weeks, he has touted the awesome strength of the American economy while excoriating the Federal Reserve chair for imperiling the economy by not aggressively lowering interest rates. He has flirted with tax breaks to juice the economy further.

But the trade war threatens to force Mr. Trump to choose between it and economic growth.

In Beijing and Washington alike, hard-liners have dug in, shrinking room for a compromise. In both capitals, a sense of permanent alteration has transpired, a deepening assumption that — whatever comes next — China and the United States will proceed with profound wariness.

For the global economy, that could entail grave uncertainties and perils.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

As Trump Swerves on Trade War, It’s Whiplash for the Rest of the World

BIARRITZ, France — Remember when President Xi Jinping of China was the “enemy”? That was so Friday. As of Monday, according to President Trump, Mr. Xi was “a great leader” and a “brilliant man.”

What about that edict by Mr. Trump, who “hereby ordered” American companies to leave China? Three days later, he was positive he would get a trade deal and, if so, then firms should “stay there and do a great job.”

Mr. Trump spent the weekend in France insisting that he was not having a debate with his fellow world leaders, but at times it seemed like he was having a debate with himself. Day by day, even hour by hour, his approach to the trade war with China, the most consequential economic conflict on the planet, veered back and forth, leaving much of the world with geopolitical whiplash.

If he seemed all over the map, he made clear on Monday, as he wrapped up days of diplomacy, that the world would just have to get used to it. He likes leaving negotiating partners, adversaries, observers and even allies off balance.

“Sorry!” he told reporters, sounding anything but apologetic. “It’s the way I negotiate. It’s the way I negotiate. It’s done very well for me over the years, and it’s doing even better for the country.”

The way he negotiates at times involves facts that may not be facts, statements that may not have been said and episodes that may not have occurred. And at times, he denied saying what he had said.

On Sunday, he said he had “second thoughts” about escalating the trade war with China, only to have staff members later insist that his only regret was not escalating it more. By Monday morning, he was ratcheting back the rhetoric and predicting a deal with Mr. Xi, whom he pronounced a “great leader” four times.

To explain his renewed optimism, he cited two phone calls he said the Americans had received from the Chinese seeking to resume official negotiations. China, however, failed to confirm any phone calls, and Treasury Secretary Steven Mnuchin then said the administration had been communicating with Beijing’s top negotiator “through intermediaries.”

ImageWestlake Legal Group merlin_158742183_55c0011a-13be-4ef7-b77c-f972c54357b3-articleLarge As Trump Swerves on Trade War, It’s Whiplash for the Rest of the World Xi Jinping United States Politics and Government United States International Relations United States Trump, Donald J Macron, Emmanuel (1977- ) Iran International Trade and World Market Group of Seven France China

President Trump and President Xi Jinping of China at a bilateral meeting at the Group of 20 in Osaka, Japan, in June.CreditErin Schaff/The New York Times

But within a few hours, Mr. Trump, who when challenged prefers to double down rather than back down, was insisting that not only were there phone calls but “numerous calls.”

Investors placed bets collectively worth billions of dollars based in part on their analysis of his comments, which came shortly before world markets began reopening after the weekend. That may have been the point, to calm the waters.

And yet even some policy veterans who are generally supportive of the president find his scattershot approach off-putting and counterproductive.

“There can be virtue in playing your cards close to your chest and in keeping adversaries guessing, but the problem with the Trump model is that he takes those tactics to an extreme,” said Michael Doran, a senior fellow at the conservative Hudson Institute. “You never know when to believe him.”

Mr. Doran and others attribute that to Mr. Trump’s history in real estate, when negotiations could be full of bluff or intimidation without much consequence beyond the immediate players.

“When you are a solo operator negotiating real estate deals, all that matters in the end is the contract — the signature on the deal,” Mr. Doran said. “In politics and diplomacy, there is much that is important that is never in the formal deal.”

Credibility, among others. Mr. Trump, who in business sometimes impersonated a spokesman for himself, has a way of putting words in the mouths of other leaders in a way that serves his interests and that happen to sound more like him than them.

“The question I was asked most today by fellow World Leaders, who think the USA is doing so well and is stronger than ever before, happens to be, ‘Mr. President, why does the American media hate your Country so much? Why are they rooting for it to fail?’” he wrote on Twitter on Sunday.

No leader expressed anything like that in public, although it would be impossible to know for sure what was said in private. Mr. Trump likewise insisted that some of the leaders secretly agreed with him behind the scenes that Russia should be welcomed back into the Group of 7, despite their public comments saying the opposite.

A working session during the third and final day of the G7 summit in Biarritz.CreditPool photo by Carlos Barria

At one point on Monday, the president went so far as to mischaracterize his own wife’s involvement in his diplomacy. “The first lady has gotten to know Kim Jong-un and I think she’d agree with me, he is a man with a country that has tremendous potential,” he said, referring to North Korea’s leader.

But Melania Trump has never met Mr. Kim, much less gotten to know him. Within a few hours, the White House press secretary, Stephanie Grisham, was forced to release a “clarification” acknowledging that. “While the first lady hasn’t met him,” she said, “the president feels like she’s gotten to know him too.”

Never burdened with excess devotion to precision, Mr. Trump has a way of just saying whatever comes into his head. At one point on Monday, he said offhandedly that he might release his Middle East peace proposal before Israel’s election next month, completely contrary to the White House plan. That sparked immediate headlines in Israel, even though it seemed like more of a maybe-I-will, maybe-I-won’t throwaway line rather than a serious forecast.

Or maybe it wasn’t. He has in recent weeks reversed himself so many times that it can be hard to tell. He switched positions on new tax cuts and enhanced background checks for gun purchases. He denied that a planned trip to Denmark was to pursue his ambition of buying Greenland, then when the prime minister said it was not for sale, he canceled the trip, saying there was no point in going.

That can leave even his supporters unsure how to respond. When Mohammad Javad Zarif, Iran’s foreign minister, made a surprise visit to Biarritz on Sunday for discussions with the French on the sidelines of the Group of 7 meeting, American officials would not say whether they had advance notice. “No comment,” Mr. Trump said, uncharacteristically.

That led many to assume he had been ambushed and his allies lashed out on his behalf. Nikki Haley, Mr. Trump’s former ambassador to the United Nations, called it “completely disrespectful” and “manipulative of Macron,” referring to President Emmanuel Macron of France. Senator John Cornyn, Republican of Texas, added, “Why would Macron suck up to stone cold killers?”

But then a day later, Trump insisted that no, he had not been ambushed, he had known all along and given it his blessing. In fact, he went even further, declaring himself willing to meet with President Hassan Rouhani of Iran in the next few weeks if Mr. Macron could set up an encounter under the right circumstances.

In part, Mr. Trump’s various contradictions owe to the fact that he is far more open and far less guarded with the news media than any of his modern predecessors. For all of his antipathy toward “fake news,” he talks with reporters almost constantly, creating many opportunities for off-script remarks. On Monday alone, he took questions from reporters in free-flowing sessions four different times.

Journalists never complain but even Mr. Trump seemed to think maybe he had talked too much. “I don’t know why we need to have a press conference,” he was overheard griping to Mick Mulvaney, his acting chief of staff, before his last encounter with journalists.

“You wear them down after a while,” Mr. Mulvaney replied.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

As Trump Swerves on Trade War, It’s Whiplash for the Rest of the World

BIARRITZ, France — Remember when President Xi Jinping of China was the “enemy”? That was so Friday. As of Monday, according to President Trump, Mr. Xi was “a great leader” and a “brilliant man.”

What about that edict by Mr. Trump, who “hereby ordered” American companies to leave China? Three days later, he was positive he would get a trade deal and, if so, then firms should “stay there and do a great job.”

Mr. Trump spent the weekend in France insisting that he was not having a debate with his fellow world leaders, but at times it seemed like he was having a debate with himself. Day by day, even hour by hour, his approach to the trade war with China, the most consequential economic conflict on the planet, veered back and forth, leaving much of the world with geopolitical whiplash.

If he seemed all over the map, he made clear on Monday, as he wrapped up days of diplomacy, that the world would just have to get used to it. He likes leaving negotiating partners, adversaries, observers and even allies off balance.

“Sorry!” he told reporters, sounding anything but apologetic. “It’s the way I negotiate. It’s the way I negotiate. It’s done very well for me over the years, and it’s doing even better for the country.”

The way he negotiates at times involves facts that may not be facts, statements that may not have been said and episodes that may not have occurred. And at times, he denied saying what he had said.

On Sunday, he said he had “second thoughts” about escalating the trade war with China, only to have staff members later insist that his only regret was not escalating it more. By Monday morning, he was ratcheting back the rhetoric and predicting a deal with Mr. Xi, whom he pronounced a “great leader” four times.

To explain his renewed optimism, he cited two phone calls he said the Americans had received from the Chinese seeking to resume official negotiations. China, however, failed to confirm any phone calls, and Treasury Secretary Steven Mnuchin then said the administration had been communicating with Beijing’s top negotiator “through intermediaries.”

ImageWestlake Legal Group merlin_158742183_55c0011a-13be-4ef7-b77c-f972c54357b3-articleLarge As Trump Swerves on Trade War, It’s Whiplash for the Rest of the World Xi Jinping United States Politics and Government United States International Relations United States Trump, Donald J Macron, Emmanuel (1977- ) Iran International Trade and World Market Group of Seven France China

President Trump and President Xi Jinping of China at a bilateral meeting at the Group of 20 in Osaka, Japan, in June.CreditErin Schaff/The New York Times

But within a few hours, Mr. Trump, who when challenged prefers to double down rather than back down, was insisting that not only were there phone calls but “numerous calls.”

Investors placed bets collectively worth billions of dollars based in part on their analysis of his comments, which came shortly before world markets began reopening after the weekend. That may have been the point, to calm the waters.

And yet even some policy veterans who are generally supportive of the president find his scattershot approach off-putting and counterproductive.

“There can be virtue in playing your cards close to your chest and in keeping adversaries guessing, but the problem with the Trump model is that he takes those tactics to an extreme,” said Michael Doran, a senior fellow at the conservative Hudson Institute. “You never know when to believe him.”

Mr. Doran and others attribute that to Mr. Trump’s history in real estate, when negotiations could be full of bluff or intimidation without much consequence beyond the immediate players.

“When you are a solo operator negotiating real estate deals, all that matters in the end is the contract — the signature on the deal,” Mr. Doran said. “In politics and diplomacy, there is much that is important that is never in the formal deal.”

Credibility, among others. Mr. Trump, who in business sometimes impersonated a spokesman for himself, has a way of putting words in the mouths of other leaders in a way that serves his interests and that happen to sound more like him than them.

“The question I was asked most today by fellow World Leaders, who think the USA is doing so well and is stronger than ever before, happens to be, ‘Mr. President, why does the American media hate your Country so much? Why are they rooting for it to fail?’” he wrote on Twitter on Sunday.

No leader expressed anything like that in public, although it would be impossible to know for sure what was said in private. Mr. Trump likewise insisted that some of the leaders secretly agreed with him behind the scenes that Russia should be welcomed back into the Group of 7, despite their public comments saying the opposite.

A working session during the third and final day of the G7 summit in Biarritz.CreditPool photo by Carlos Barria

At one point on Monday, the president went so far as to mischaracterize his own wife’s involvement in his diplomacy. “The first lady has gotten to know Kim Jong-un and I think she’d agree with me, he is a man with a country that has tremendous potential,” he said, referring to North Korea’s leader.

But Melania Trump has never met Mr. Kim, much less gotten to know him. Within a few hours, the White House press secretary, Stephanie Grisham, was forced to release a “clarification” acknowledging that. “While the first lady hasn’t met him,” she said, “the president feels like she’s gotten to know him too.”

Never burdened with excess devotion to precision, Mr. Trump has a way of just saying whatever comes into his head. At one point on Monday, he said offhandedly that he might release his Middle East peace proposal before Israel’s election next month, completely contrary to the White House plan. That sparked immediate headlines in Israel, even though it seemed like more of a maybe-I-will, maybe-I-won’t throwaway line rather than a serious forecast.

Or maybe it wasn’t. He has in recent weeks reversed himself so many times that it can be hard to tell. He switched positions on new tax cuts and enhanced background checks for gun purchases. He denied that a planned trip to Denmark was to pursue his ambition of buying Greenland, then when the prime minister said it was not for sale, he canceled the trip, saying there was no point in going.

That can leave even his supporters unsure how to respond. When Mohammad Javad Zarif, Iran’s foreign minister, made a surprise visit to Biarritz on Sunday for discussions with the French on the sidelines of the Group of 7 meeting, American officials would not say whether they had advance notice. “No comment,” Mr. Trump said, uncharacteristically.

That led many to assume he had been ambushed and his allies lashed out on his behalf. Nikki Haley, Mr. Trump’s former ambassador to the United Nations, called it “completely disrespectful” and “manipulative of Macron,” referring to President Emmanuel Macron of France. Senator John Cornyn, Republican of Texas, added, “Why would Macron suck up to stone cold killers?”

But then a day later, Trump insisted that no, he had not been ambushed, he had known all along and given it his blessing. In fact, he went even further, declaring himself willing to meet with President Hassan Rouhani of Iran in the next few weeks if Mr. Macron could set up an encounter under the right circumstances.

In part, Mr. Trump’s various contradictions owe to the fact that he is far more open and far less guarded with the news media than any of his modern predecessors. For all of his antipathy toward “fake news,” he talks with reporters almost constantly, creating many opportunities for off-script remarks. On Monday alone, he took questions from reporters in free-flowing sessions four different times.

Journalists never complain but even Mr. Trump seemed to think maybe he had talked too much. “I don’t know why we need to have a press conference,” he was overheard griping to Mick Mulvaney, his acting chief of staff, before his last encounter with journalists.

“You wear them down after a while,” Mr. Mulvaney replied.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

China Vows Tariff Retaliation. Trump Fires Back. Stocks Tumble.

Westlake Legal Group 23markets1-facebookJumbo-v2 China Vows Tariff Retaliation. Trump Fires Back. Stocks Tumble. United States International Relations United States Trump, Donald J Stocks and Bonds Standard&Poor's 500-Stock Index Powell, Jerome H Politics and Government International Trade and World Market Federal Reserve System Dow Jones Stock Average Customs (Tariff) China Banking and Financial Institutions

Stocks fell on Friday, after a new round of tariff threats between Beijing and President Trump pushed the market toward another weekly loss.

Before the start of trading on Wall Street, China said it would answer the next round of American tariffs on Chinese goods by increasing tariffs on American imports. Around 11 a.m., Mr. Trump answered with a series of messages on Twitter.

“We don’t need China and, frankly, would be far better off without them,” he wrote, adding that he would respond to China’s tariff threat later in the day.

In another Twitter message, Mr. Trump said that American companies were “hereby ordered to immediately start looking for an alternative to China.”

Stocks, which had been climbing, promptly fell, as investors turned their attention away from a speech by Jerome H. Powell, the Federal Reserve chair, and back toward the continuing trade war between the world’s two largest economies.

On Friday, Mr. Powell noted that rising uncertainty surrounding the Trump administration’s trade policy was a challenge for the central bank. But he reiterated that the Fed would act as necessary to keep the more-than-decade-long expansion going. Financial market prices suggest investors are virtually certain the Fed will cut interest rates at its meeting next month.

Mr. Powell’s speech did little to change those expectations, giving the stock market a temporary respite, before the President’s statement on Twitter.

Energy stocks suffered some the steepest losses in the S & P 500, as crude oil prices dropped sharply. Tech stocks tumbled as did shares of semiconductor companies, which were down more than 3 percent. Both sectors have proven especially sensitive to indications that the trade battle between China and the United States was worsening.

China’s government announced that it would retaliate against the Trump administration’s plans for two batches of tariffs on $300 billion in Chinese imports, on Sept. 1 and Dec. 15, with levies on $75 billion of American imports on the same schedule.

It was the latest in the tit-for-tat trade battle that is shown growing signs of hurting the global economy. Evidence is growing that the global industrial sector is now in weakening. Germany, the trade sensitive economic engine of Europe, contracted in the second quarter. And growth in industrial production in China fell has fallen to its lowest level since 2002.

Concerns about economic growth have driven a flood of global money into the safety of bond markets. Pushing prices up, and yields sharply lower. Such drops suggest investors are lowering their expectations for economic growth and inflation.

On Friday, the trend continued with the yield on the 10-year Treasury note plunging to 1.54 percent shortly before noon.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Stocks Dip After China Announces Retaliatory Tariffs on U.S. Goods

Westlake Legal Group 23markets1-facebookJumbo-v2 Stocks Dip After China Announces Retaliatory Tariffs on U.S. Goods United States International Relations United States Trump, Donald J Stocks and Bonds Standard&Poor's 500-Stock Index Powell, Jerome H Politics and Government International Trade and World Market Federal Reserve System Dow Jones Stock Average Customs (Tariff) China Banking and Financial Institutions

Wall Street stocks dipped and major European indexes fell on Friday after Beijing said it would answer President Trump’s next round of tariffs on Chinese goods by increasing tariffs on American imports, the latest sign that the trade war between the two countries could drag on.

Dow Jones industrial average and S&P 500 futures had been up slightly as investors awaited a speech by Jerome H. Powell, the Federal Reserve chair, on Friday that they hoped would clarify whether the central bank would cut interest rates again next month as has been widely expected.

But both indexes slid into negative territory at the start of trading after China’s government announced that it would retaliate against the Trump administration’s plans for two batches of tariffs on $300 billion in Chinese imports, on Sept. 1 and Dec. 15, with levies on $75 billion of American imports on the same schedule.

European markets, which rose in early trading on Friday, also tumbled after the tariff announcement by the State Council Tariff Commission in Beijing. The Euro Stoxx 50, the CAC 40 in France and the Dax index in Frankfurt were all down about 0.4 percent. Bucking the trend, the FTSE 100 in London was up 0.1 percent.

Asian markets ended trading mostly higher.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Stocks Dip After China Announces Retaliatory Tariffs on U.S. Goods

Westlake Legal Group 23markets1-facebookJumbo-v2 Stocks Dip After China Announces Retaliatory Tariffs on U.S. Goods United States International Relations United States Trump, Donald J Stocks and Bonds Standard&Poor's 500-Stock Index Powell, Jerome H Politics and Government International Trade and World Market Federal Reserve System Dow Jones Stock Average Customs (Tariff) China Banking and Financial Institutions

Wall Street stocks dipped and major European indexes fell on Friday after Beijing said it would answer President Trump’s next round of tariffs on Chinese goods by increasing tariffs on American imports, the latest sign that the trade war between the two countries could drag on.

Dow Jones industrial average and S&P 500 futures had been up slightly as investors awaited a speech by Jerome H. Powell, the Federal Reserve chair, on Friday that they hoped would clarify whether the central bank would cut interest rates again next month as has been widely expected.

But both indexes slid into negative territory at the start of trading after China’s government announced that it would retaliate against the Trump administration’s plans for two batches of tariffs on $300 billion in Chinese imports, on Sept. 1 and Dec. 15, with levies on $75 billion of American imports on the same schedule.

European markets, which rose in early trading on Friday, also tumbled after the tariff announcement by the State Council Tariff Commission in Beijing. The Euro Stoxx 50, the CAC 40 in France and the Dax index in Frankfurt were all down about 0.4 percent. Bucking the trend, the FTSE 100 in London was up 0.1 percent.

Asian markets ended trading mostly higher.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

In Denmark, Bewilderment and Anger Over Trump’s Canceled Visit

ODENSE, Denmark — The astonishment in Denmark over President Trump’s apparent desire to buy Greenland turned to bewilderment and anger on Wednesday after the American leader abruptly scrapped a state visit because the Danes have no desire to sell.

The cancellation was a rare snub of Denmark’s head of state, Queen Margrethe II, who had extended the invitation to the president and would have hosted him and the first lady.

News that Mr. Trump is not coming “came as a surprise,” the Royal House’s communications director told the state broadcaster, adding, “That’s all we have to say about that.”

Others, however, had more to say. “Is this some sort of joke?” Helle Thorning-Schmidt, a former prime minister, wrote on Twitter. “Deeply insulting to the people of Greenland and Denmark.”

It was not a joke. A day earlier, Mr. Trump said on Twitter that Denmark was “a very special country with incredible people” but added that he was abandoning plans to visit because of the country’s refusal to sell Greenland, a semiautonomous part of the kingdom of Denmark.

The idea, which came to light last week, had been immediately and flatly rejected by leaders in Greenland and Denmark, who found themselves in the odd position at the time of having to publicly state that “Greenland is not for sale.”

ImageWestlake Legal Group merlin_159500397_9055a542-992d-4d5e-a22d-1bb68f6e2fd6-articleLarge In Denmark, Bewilderment and Anger Over Trump’s Canceled Visit United States International Relations United States Trump, Donald J Margrethe II, Queen of Denmark Jensen, Kristian (1971- ) Greenland Frederiksen, Mette Denmark

Greenland is a semiautonomous part of the kingdom of Denmark. Its government handles everything except foreign policy and defense.CreditLucas Jackson/Reuters

On Wednesday, disbelief and condemnation echoed through the political landscape, as it began to sink in that Mr. Trump wasn’t kidding.

“Please stop,” Martin Lidegaard, head of the foreign affairs committee in Parliament, wrote on Twitter, before citing several other areas of discussion that he said should be of interest to both countries: the Arctic, climate change and the Middle East.

“Total chaos,” the former finance minister Kristian Jensen wrote. “This has gone from a great opportunity for a strengthened dialogue between allies to a diplomatic crisis.”

Adding to the already considerable awkwardness, Mr. Trump’s announcement came not long after the American ambassador, Carla Sands, had written on Twitter that Denmark was excited about the president’s visit.

A headline in Berlingske, a conservative daily, read “The U.S. and Denmark’s relationship has never been this ice-cold. It will have wide-ranging consequences.” A headline on the website of the state broadcaster read, “Trump sends Denmark and the U.S.’s relationship to the freezing point.”

Prime Minister Mette Frederiksen has said she had no interest in discussing the sale of Greenland. “Greenland is not Danish. Greenland belongs to Greenland,” Ms. Frederiksen told a Danish newspaper this week. “I strongly hope that this is not meant seriously.”

Ole Spiermann, a former professor of international law and legal adviser to the government of Greenland, said that from the perspective of international law, “the Danish state has the sovereign right to sell or trade Greenland if it wishes.”

The cancellation was a rare snub for Denmark’s head of state, Queen Margrethe II, who extended an invitation to Mr. Trump.CreditJohn Randeris/EPA, via Shutterstock

But Greenland’s right to self-determination under international law and also the Danish Constitution demand that “Greenland’s status cannot be changed without acceptance from the Greenlandic people.”

Any offer from Mr. Trump should be addressed to both Denmark and Greenland, Mr. Spiermann said.

Should the people of Greenland want an association with the United States against the will of the Danish government, he added, they would first have to become independent from Denmark and then join the United States.

Greenland’s government is in charge of most aspects of its affairs except foreign policy and defense. Local governments have not managed to develop a sustainable economy and receive more than 50 percent of the island’s budget in direct subsidies topped with additional Danish spending on defense and enforcement of sovereignty. The total bill amounts to $740 million annually.

“For no reason Trump assumes that (an autonomous) part of our country is for sale,” Rasmus Jarlov, a former minister of business, wrote on Twitter. “Then insultingly cancels visit that everybody was preparing for. Are parts of the U.S. for sale? Alaska? Please show more respect.”

Many Danes had seen Mr. Trump’s visit as a recognition of a special relationship with the United States built on decades of friendly relations, mutual interests in the Arctic, and Danish responsiveness to American calls to action.

Danish troops took part in American-led missions in Iraq, Syria and Afghanistan, where 43 Danish troops were killed, a staggering number for a nation of 5.5 million not used to war.

Pernille Skipper, the speaker of Parliament’s leftist red-green alliance, said on Twitter that Mr. Trump “lives on another planet. Smug and disrespectful.”

Noting that the president’s tweet said the visit had been postponed, rather than abandoned, Soren Espersen, who speaks for the populist Danish People’s Party on foreign affairs, suggested there was little point in Mr. Trump coming. “Why not just cancel?” he said. “We are so busy here with other things.”

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Seized Iranian Tanker Leaves Gibraltar Despite U.S. Pressure

Westlake Legal Group merlin_159430113_b2fffdfd-c1b5-41c5-afb3-33c0a8284e22-facebookJumbo Seized Iranian Tanker Leaves Gibraltar Despite U.S. Pressure United States International Relations United States Ships and Shipping Iran Great Britain Gibraltar Embargoes and Sanctions

An Iranian oil tanker held for six weeks after being impounded left Gibraltar on Sunday, days after the authorities there rejected a request from American officials to turn the vessel over to them.

A marine traffic monitoring site showed the tanker, the Grace 1, leaving Gibraltar’s waters. Iranian and Gibraltar news organizations confirmed that it had departed.

The Grace 1 was seized on July 4 by British marines and Gibraltar port officials who asserted that the tanker was carrying oil to Syria in violation of a European Union embargo. Iran soon detained a British-flagged tanker, the Stena Impero, in the Strait of Hormuz, the narrow entryway to the Persian Gulf that is a conduit for about 20 percent of the world’s crude oil.

The decision to release the Iranian ship was seen as a sign of easing of tensions between Gibraltar, a semiautonomous British territory, London and Tehran. A confrontation between Iran and the West, particularly with the United States, has escalated in recent weeks.

The ship’s departure also raised expectations that Iran, in turn, would relinquish the Stena Impero.

Gibraltar ordered the release of the Grace 1 on Thursday despite a last-minute request from the United States that it be allowed to seize the ship. The following day, the Justice Department unsealed a warrant issued by a federal court in Washington to seize the tanker, the oil it contains and nearly $1 million based on statutory violations.

“A network of front companies allegedly laundered millions of dollars in support of such shipments,” Jessie Liu, the United States attorney for the District of Columbia, said in a news release.

The Justice Department said that multiple parties affiliated with the Islamic Revolutionary Guards Corps of Iran, which the United States has designated a foreign terrorist organization, were believed involved.

On Friday, Gibraltar’s chief minister, Fabian Picardo, said that because of the American intervention, the case would go back to court.

But on Sunday, the Gibraltar government rejected the American request. It said that the warrant had relied on broad United States sanctions against Iran that were not applicable in the European Union.

Iran’s naval commander said Sunday that his country was ready to dispatch its naval fleet to escort the oil tanker, renamed Adrian Darya-1.

“The era of hit and run is over,” Rear Adm. Hossein Khanzadi was quoted as saying by Iran’s Mehr news agency. “If top authorities ask the navy, we are ready to escort our tanker Adrian.”

In announcing the decision Thursday to release the vessel, the government of Gibraltar said that it had information that the Grace 1 was headed to Syria when it was initially detained, but that it now had assurances the tanker would not go there. Three crew members who had been detained were also released.

Some speculated that the release could be part of a ship swap, but none of the involved parties confirmed that. The Iranian authorities said on Friday that they had made no promises.

“Iran has made no commitment for the release of the Grace 1 tanker,” said Abbas Mousavi, a spokesman for the Iranian Foreign Ministry, according to a report from the semiofficial Tasnim news agency.

Mr. Mousavi also said, “We announced from the early hours of the oil tanker’s detention that Syria was not the oil tanker’s destination and remained so to the end.” Even if the oil had been headed to Syria, he said, “it would still have nothing to do with anyone.”

The Gibraltar government disputed Iran’s claims, saying Iran had indeed made commitments to not transport the oil to Syria.

“The evidence is clear, and the facts speak louder than the self-serving political statements we are hearing today,” the government said.

It was unclear whether the United States intended to seize the vessel now that it has left Gibraltar. But any attempt to intercept the tanker in international waters would most likely be considered illegal.

The United Nations Convention on the Law of the Sea, which provides a framework for engagement at sea, maintains that military ships do not have the authority to detain or board foreign-flagged vessels in international waters unless the ship is suspected of serious offenses like piracy or participating in the slave trade.

The United States has announced additional punitive measures for the crew members of any vessel that transports oil from Iran to Syria.

The State Department said Thursday it would revoke United States visas for the crew members operating Grace 1. The State Department said that it had found that the vessel was helping the Islamic Revolutionary Guards Corps by transporting Iranian oil.

“This could result in serious consequences for any individuals associated with the Grace I,” the State Department said.

Secretary of State Mike Pompeo posted the statement on Twitter with a warning: “A message to all mariners — if you crew an IRGC or other FTO-affiliated ship, you jeopardize future entry to the U.S.”

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Seized Iranian Tanker Leaves Gibraltar, Despite U.S. Demand

Westlake Legal Group 16iran-tanker-facebookJumbo Seized Iranian Tanker Leaves Gibraltar, Despite U.S. Demand United States International Relations United States Ships and Shipping Iran Great Britain Gibraltar Embargoes and Sanctions

An Iranian oil tanker held for six weeks after being impounded left Gibraltar on Sunday, days after the authorities there rejected a request from American officials that it turn the vessel over to them.

A marine traffic monitoring site showed the tanker, the Grace 1, leaving Gibraltar’s waters. Iranian and Gibraltar news organizations confirmed that it had set sail.

The ship’s departure raised hopes that Iran, in turn, would relinquish a British tanker it seized in what appeared to be retaliation.

On Thursday, Gibraltar ordered the release of the Grace 1 despite a last-minute request from the United States hours earlier that it be allowed to seize the ship.

The following day, the Justice Department unsealed a warrant issued by a federal court in Washington to seize the tanker, the oil it contains and nearly $1 million based on statutory violations.

“A network of front companies allegedly laundered millions of dollars in support of such shipments,” Jessie Liu, the United States attorney for the District of Columbia, said in a news release.

The Justice Department said that “multiple parties affiliated with” the Islamic Revolutionary Guard Corps of Iran, which the United States has designated a foreign terrorist organization, were thought to be involved.

On Friday, Gibraltar’s chief minister, Fabian Picardo, said that, because of the American intervention, the case “could go back to the court, absolutely.”

But on Sunday, the government of Gibraltar rejected the American request. It said in a statement that the warrant relied on broad United States sanctions against Iran that were not applicable in the European Union.

Iran’s naval commander said Sunday that his country was ready to dispatch its naval fleet to escort the oil tanker, renamed Adrian Darya-1.

“The era of hit and run is over,” Rear Adm. Hossein Khanzadi was quoted as saying by the Mehr news agency. “If top authorities ask the navy, we are ready to escort our tanker Adrian.”

The decision to release the ship was seen as a sign of easing of tensions between officials in Gibraltar, a semiautonomous British territory, Tehran and London. A confrontation between Iran and the West has escalated in recent weeks, particularly with the United States.

The Grace 1 was seized on July 4 by British marines and Gibraltar port officials, who asserted that the tanker was carrying oil to Syria in violation of a European Union embargo.

Iran soon detained a British-flagged tanker, the Stena Impero in the Strait of Hormuz, the narrow entryway to the Persian Gulf that is a conduit for around 20 percent of the world’s crude oil.

In announcing the decision Thursday to release the vessel, the government of Gibraltar said that it had information that the Grace 1 was headed to Syria when it was initially detained, but that it now had assurances the tanker would not go to there. Three crew members who had been detained were also released.

Some speculated that the release could be part of a ship swap, but none of the involved parties confirmed that information. But the Iranian authorities said on Friday that they had made no promises.

“Iran has made no commitment for the release of the Grace 1 tanker,” said Abbas Mousavi, a spokesman for the Iranian Foreign Ministry, according to a report from the semiofficial Tasnim news agency.

Mr. Mousavi also said, “We announced from the early hours of the oil tanker’s detention that Syria was not the oil tanker’s destination and remained so to the end.” Even if the oil had been headed to Syria, he said, “it would still have nothing to do with anyone.”

The Gibraltar government rejected the claims, saying Iran had indeed made commitments to not transport the oil to Syria. “The evidence is clear, and the facts speak louder than the self-serving political statements we are hearing today,” the government said in a statement.

It was unclear if the United States intended to seize the vessel if it left Gibraltar.

But any attempt to intercept the tanker in international waters would most likely be in violation of international rules.

The United Nations Convention on the Law of the Sea, which provides a framework for engagement at sea, maintains that military ships do not have the authority to detain or board foreign-flagged vessels in international waters unless the ship is suspected of serious offenses like piracy or participating in the slave trade.

The United States has announced additional punitive measures for the crew members of any vessel that transports oil from Iran to Syria.

In a statement released late Thursday, the State Department said it would revoke United States visas for the crew members operating Grace 1. The State Department said that it had found that the vessel was helping the Islamic Revolutionary Guards Corps by transporting Iranian oil.

“This could result in serious consequences for any individuals associated with the Grace I,” the statement said.

Secretary of State Mike Pompeo posted the statement on Twitter with a warning: “A message to all mariners — if you crew an IRGC or other FTO-affiliated ship, you jeopardize future entry to the U.S.”

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

How the Recession of 2020 Could Happen

These three things are all true: The United States almost certainly isn’t in a recession right now. It may well avoid one for the foreseeable future. But the chances that the nation will fall into recession have increased sharply in the last two weeks.

That is the unmistakable message that global investors in the bond market are sending. Longer-term interest rates have plunged since the end of July — a shift that historically tends to predict slower growth, interest rate cuts from the Federal Reserve, and a heightened risk that the economy slips into outright contraction.

This is happening in an economy that, by most indicators, is solid. The United States economy is growing at a roughly 2 percent rate and keeps adding jobs at a healthy clip. There is no sign of the kind of huge, obvious bubbles that triggered the last two recessions, the equivalent of dot-com stocks in 2000 or housing in 2007.

So if there’s going to be a recession in 2020 — if the pessimistic signals in the financial markets prove correct — how would it happen? There are plenty of clues, in the details of recent economic reports, in signals from the markets, and in the recent history of recessions and near recessions.

President Trump’s on-again-off-again execution of the trade war with China and other countries has fed uncertainty into businesses’ decision-making. Corporate investment spending is softening, despite the big tax cut that Mr. Trump said would boost it. And the combination of central banks that are at the outer limits of their ability to stimulate growth, and an inward turn by many countries, could make governments less effective at responding to a downturn.

“It is potentially a self-inflicted-wound type of recession,” said Tara Sinclair, an economist who studies business cycles at George Washington University. “But how deep that gash goes depends on many other characteristics of the economy and the policy response thereafter.”

There are parallels to the past. Often, a recession results when some widely held belief about the world turns out to be false. In 2001, it was that a technology boom would fuel the economy and the stock market indefinitely; in 2007, it was that the housing market would never melt down across all regions at once.

This time around, the belief in doubt is that the world will only become more stable and interconnected over time, and that trade, currency and diplomatic relationships can be counted upon.

Recessions result not just when something bad happens in the economy; bad things happen all the time. Recessions occur when those initial shocks are multiplied, in ways that reverberate worldwide. The dot-com crash was accentuated by the Sept. 11 terrorist attacks in 2001 and a rash of corporate scandals. The 2007 housing bust in the United States became a global financial crisis in 2008 only because banks worldwide took huge losses on mortgage debt.

The starting point for the international tensions that could lead to a recession in the United States is business investment spending, especially in the industrial sector. As corporate C.E.O.s look around the world and make their plans for investment and hiring in the year ahead, they aren’t liking what they see.

ImageWestlake Legal Group merlin_158963853_998277f0-085a-49c0-8aac-08d808f1d590-articleLarge How the Recession of 2020 Could Happen United States International Relations United States Economy Recession and Depression International Trade and World Market Economic Conditions and Trends China

A steel plant in Salzgitter, Germany.  Europe has faced slow growth for years but so far has avoided recession. CreditFabian Bimmer/Reuters

The economies in China and many of its Asian neighbors are getting weaker, partly as a result of the trade war with the United States. The European economy, which has muddled along for years with low growth, may be tumbling into a recession, and if Britain crashes out of the European Union with no exit deal on Oct. 31, Europe could face still deeper challenges.

Already, a key measure of business capital spending in the United States, “fixed nonresidential investment,” was in negative territory in the second quarter. And in the nation’s factories, the rate of growth has slowed for five consecutive months, according to the Institute for Supply Management’s index. Although this measure still showed growth, the July reading was the weakest since August 2016.

The trade war between China and the United States is a big part of the reason. The conflict has made it difficult for many global firms to plan their operations — and in some cases, it may lead them to sit on their hands rather than invest. The American strategy has been more successful at escalating trade tensions than in resolving them, so companies do not know whether tariffs will go away soon or will be a continuing cost of doing business.

“The president says we’re going to get a great deal and a great deal soon, but he’s been saying that for over a year,” said Phil Levy, a former trade official in the George W. Bush administration and a chief economist at Flexport, a freight forwarder that works with many companies involved in international trade. “You end up paralyzed. You have to make plans, but there is risk all over the place, so businesses get cautious and hold back on investment.”

It’s not just companies directly involved in trade with China that may see reason to hold back on investment. The turmoil in financial markets spurred by the trade war could make businesses of all sorts more cautious.

Still, if the downturn remains confined to business spending, it will be hard — just as a matter of arithmetic — for an overall contraction to result. Consumer spending accounts for more than two-thirds of the American economy, versus about 14 percent for business investment.

So far, American consumers are spending enthusiastically, driving overall growth. But there are a few ways the freeze-up in business confidence could change that.

Turbulence in global markets — and the news reports attached to that turbulence — could reduce consumer confidence, and lead Americans to pull back on their buying. The University of Michigan survey of consumer sentiment fell sharply in its August reading, announced Friday.

Or more directly, if businesses pull back on investment spending, they may also make moves that reduce consumers’ incomes, including layoffs, hiring freezes and cuts to overtime.

If that’s the worst of it — trade wars, slower business spending and weaker overseas economies — the United States could probably weather it without falling into contraction. But there are risks out there that could multiply those shocks.

One is the buildup of corporate debt. Businesses have taken on more debt in an era of low interest rates, which leaves them more vulnerable to failure if the economy were to soften or interest rates were to rise. A pullback because of trade wars could cause a wave of bankruptcies that turns a mild slowdown into something worse.

“A highly leveraged business sector could amplify any economic downturn as companies are forced to lay off workers and cut back on investments,” the Federal Reserve chair, Jerome Powell, said in a May speech.

But the biggest risk multiplier may come out of the policy world. In past recessions, the Fed had plenty of room to cut interest rates as a stimulus measure, and fiscal policymakers have been willing to pour money into weaker economies.

The Fed’s main target interest rate is just over 2 percent now, compared with 5.25 percent heading into the last recession in 2007. Other global central banks have even less wiggle room.

And a polarizing president and a divided Congress are unlikely to find much common ground in stimulating the economy. In early 2008, for example, as a recession took hold, the George W. Bush administration negotiated a $152 billion stimulus package with a Democratic Congress to try to lessen the damage.

It seems unlikely that President Trump, heading into a re-election battle, would find the same harmony with Democrats today.

“You could get a widespread fiscal response to a recession,” said Megan Greene, a senior fellow at Harvard’s Kennedy School. “That would be really nice, but I’d also like a unicorn for my birthday.”

International coordination would be even harder in the current geopolitical moment. In the fall of 2008, finance ministers and central bankers of the Group of 20 major economies released a joint statement pledging to work together to end the financial crisis. With many nations facing inward, it is hard to imagine that today.

How would a 2020 recession happen?

The trade wars and a breakdown in international economic diplomacy cause businesses around the world to pull back. This leads to further tumbles in markets and job losses, prompting American consumers to become more cautious. High corporate debt loads create a wave of bankruptcies. And central bank policy proves impotent, combined with fiscal policy that is nonexistent.

Chances of a near-term recession are only about one in three, in the view of most forecasters. But if it does develop, the big question will be whether the usual tools to fight it are up to the task.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com