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Trump's UK Visit, China's Trade Surplus, and More

Image: Trump's UK Visit, China's Trade Surplus, and More

Prime Minister Theresa May holds bi-lateral talks with U.S. President Donald Trump at Chequers on July 13, 2018 in Aylesbury, England. (Jack Taylor - WPA Pool/Getty Images)

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Friday, 13 July 2018 08:19 AM Current | Bio | Archive

Fed Chair Powell on trade

Fed Chair Powell gave an upbeat assessment of the U.S. economy yesterday, but warned a sustained period of high tariffs on a wide variety of imports could be harmful to growth.

He said: “I sleep pretty well on the economy right now. It’s in a 'good place' with unemployment at its lowest level in years and inflation close to the central bank’s 2 percent target.”

Nevertheless, the Fed Chair cautioned that trade disputes could end up being a negative for the economy if they result in a protracted period of widespread higher tariffs.

China’s trade surplus with the U.S.

China released trade data overnight, which has become an unusually political sensitive subject. The data did show an increase in imports from the United States. That might be supposed to please President Trump who tends to think of trade in rather 19th-century terms. In fact, the rise in imports may very well be because the Chinese are exporting more to the United States.

China’s trade surplus with the United States, which is at the center of the tariff tussle, widened to a record monthly high of $28.97 billion, up from $24.58 billion in May, according to Reuters calculations based on official data going back to 2008.

President Trump, who has demanded Beijing cut the trade surplus, could use the latest result to further ratchet up pressure on China after both sides last week imposed tit-for-tat tariffs on $34 billion of each others' goods. Washington has warned it may ultimately impose tariffs on more than $500 billion worth of Chinese goods — nearly the total amount of U.S. imports from China last year.

A lot of what China exports are made of things that China has first imported, and China imports things from the United States for the purpose of exporting.

Some care is needed in interpreting both the import and the export data as there is a sense that companies may be rushing to stockpile goods as an insurance against the tariffs (taxes) that President Trump and the Chinese are seeking to impose.

Evidence that the consumer taxes (tariffs) are being passed through came in U.S. consumer price inflation yesterday. Washing machine prices, which were one of the first things President Trump increased U.S. consumer taxes on (tariffs), were falling by 7.6 percent year-on-year back in February when the tax was imposed. Last month they rose 13.1 percent.

President Trump on visit in the U.K.

While on a visit in the United Kingdom today, President Trump will have lunch with Prime Minister Theresa May at Chequers, which is the U.K.’s serving British Prime Minister country retreat, and he'll also have tea with the Queen.

President Trump gave an interview to the British newspaper The Sun. The interview suggests that Mr. Trump warned that a soft Brexit will probably kill any hope of a separate U.S.-U.K. trade deal, which was supposed to be a centerpiece of today’s talks at Chequers.

President Trump also said that Boris Johnson would be a "great prime minister" and he has "a lot of respect for Boris" and was "very saddened" that he stepped down from his post as foreign secretary.

Mr. Trump’s remarks have little immediate market relevance perhaps. The British pound was unmoved, although the direct intervention in U.K. politics is unlikely to improve the U.S. president’s approval rating in the United Kingdom. Currently, the favorability rating is minus 60 percent, and does not offer much hope with regard to general trade policy, including the possible addition of U.S. taxes (tariffs) on European Union (EU) products.

Bank of England

Besides all that, the Bank of England’s Deputy Governor Cunliffe is speaking today, which could be interesting. The Bank of England being one of the few major central banks with any potential to surprise on monetary policy at the moment as there is some uncertainty about the precise timing of the next U.K. rate increase.       

U.S. import and export prices

Cross-border price pressures have been very heated, rising 0.6 percent for both import prices and export prices the past two reports. Oil-related pressures have been apparent in both with import prices also reflecting higher tariffs for steel and aluminum. But the June consensus calls for cooling, at a 0.1-percent gain for import prices and a 0.3-percent gain for export prices.

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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While on a visit in the United Kingdom today, President Trump will have lunch with Prime Minister Theresa May at Chequers, which is the U.K.’s serving British Prime Minister country retreat, and he'll also have tea with the Queen.
trump, uk, visit, china, trade, surplus
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2018-19-13
Friday, 13 July 2018 08:19 AM
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