Assigned News Items
Note: I will list here, for most of the term, the major news items that have appeared that are relevant for the course. I will usually discuss these, if only briefly, on Tuesdays (or the following Thursdays when Tuesdays are not available). You should be sure to be familiar with them from whatever news sources you are using. Where possible, I will provide links to the items online. I will include questions about some of them on exams.
- US does not declare China a currency manipulator
-- WSJ: 4/15
| WP: 4/12
- The US Treasury Department, required to issue a report on countries that manipulate their currencies to the disadvantage of the US, included criticism of China in its report but declined to declare China a currency manipulator.
- During his campaign, President Trump had said he would declare China a currency manipulator as soon as he took office. More recently, and after his meeting with China's President Xi, Trump has said he would not do this. This continues a two-decade precedent, in that the US has never declared any country to be a currency manipulator.
- Whether that decision was motivated by the fact that China has not, in fact, intervened to reduce the value of its currency in recent months is not clear.
- Trump nominates members of the board of the Export-Import Bank
-- WSJ: 4/14
| NYT: 4/14
- Having hinted in his campaign that he would get rid of the United States Export-Import Bank, which makes loans to foreign buyers of US exports, Trump has now nominated two former Congressmen as members of its board, one to be its president.
- The nominee for president of the board, Scott Garrett, was a member of the Tea Party alligned Freedom Caucus and a fierce opponent of the Ex-Im Bank. Trump himself has now reversed his position, saying that "Actually, it’s a very good thing. And it actually makes money; it can make a lot of money."
- The Bank was shut down briefly in 2015 by Congress, then reopened. But since then it has lacked a quorum on its board and was therefore unable to approve large loans. These nominations, if approved, will change that.
- Trump tells China that it will get a better deal on trade if it helps restrain North Korea
-- WSJ: 4/13
| NYT: 4/12
- "I explained to the President of China that a trade deal with the U.S. will be far better for them if they solve the North Korean problem!" tweeted Trump.
- Trump had earlier threatened to disavow the "One China" policy if China did not restrain North Korea, but had to back off from that.
- Without such help from China, Trump has indicated that the US will act alone against North Korea. This is upsetting to South Korea, which would certainly bear the brunt of any response to that.
- China's reserves increase
-- WSJ: 4/8
| FT: 4/8
- After mostly declining since mid-2014, and falling every month for the last eight, China's reserves increased slightly for the second month in a row.
- After selling reserves in order to slow the decline in the dollar value of the Chinese yuan, the currency as stabilized and intervention has (slightly) reversed.
- The US dollar has been falling recently, lessening the need for China's currency to fall in dollar value.
- Xi and Trump meet in Summit, but make little progress on trade
-- WSJ: 4/8
| NYT: 4/8
- China's President Xi and US President Trump met in their first summit meeting, in Trump's Mar-a-Lago resort in Florida.
- In their 21 hours together, they discussed both North Korea and trade, but did not reach any agreement. Part way through the discussion, Trump informed Xi of the US missile strike on Syria.
- Commerce Secretary Ross said that "China expressed interest in reducing its trade surplus with the U.S. because of the impact it was having on money supply and inflation." Mr Xi proposed "a 100-day plan to overhaul the trade relationship between the world’s largest economies."
- Krugman says "Trump Is Wimping Out on Trade"
-- NYT: 4/3
- In his regular column in the New York Times, Paul Krugman said that President Trump has finally made his first specific moves on international trade policy, and Krugman described these as "nothingburgers."
- In the last week, the Trump administration has leaked its plans for renegotiating NAFTA, and these amount to much less than Trump had signaled during the campaign.
- On Friday, Trump signed two executive orders on trade, one to strengthen US enforcement of its anti-dumping and countervailing duty laws, and the second to produce a report on the sizes and causes of US bilateral trade deficits with other countries. Both are small initiatives, the former duplicating something that the Obama administration had already done.
Mar 20 - Apr 2
- UK's May initiates Brexit
-- WSJ: 30/30
| NYT: 3/30
- UK's Prime Minister Theresa May, as expected, began the two-year process of negotiating the UK's exit from the European Union by sending a letter notifying the EU that it is leaving. The letter was hand delivered to European Council President Donald Tusk.
- This is the first time any member state has left the EU, and the process is therefore uncertain. But it will surely be very complicated, given the many connections that exist between members of the EU, connections that will have to be undone and perhaps replaced.
- Mrs May seeks a broad trade deal with the EU as part of these negotiations, but the EU has said that trade negotiations will have to wait until Brexit is complete. Mrs May also included a veiled threat regarding security, if trade access is not achieved.
- The US dollar falls on exchange markets
-- WSJ: 3/28
- The value of the US dollar fell to its lowest level since November.
- The Wall Street Journal's index of the dollar against a basket 16 other currencies fell to its lowest level since November 11, 2016.
- The dollar had risen since the election of Donald Trump, probably because of expectations that he would expand spending and cut taxes, which would in turn lead the Fed to tighten monetary policy. The drop now follows Trump's failure to pass health care reform, causing doubts about his ability to accomplish these other objectives.
- China's tariff on imported cars
-- WSJ: 3/22
| NYT: 3/21
- China's high tariffs on imported cars -- 25% -- are a cause of growing friction with the Trump administration, and will likely come up in the meeting between Presidents Trump and Xi.
- Chinese purchase many cars from foreign companies, but most of these are built in China, where the foreign companies produce in joint ventures with local companies, as required by the Chinese government.
- China's tariff, which applies to cars imported from all countries, not just the US, has been in place since China joined the WTO and is therefore not a violation of WTO rules.
- G20 finance ministers drop pledge agianst protectionism at insistence of US
-- WSJ: 3/18
| NYT: 3/18
| FT: 3/18
| WP: 3/18
- At their meeting in Baden Baden, Germany, the G20 finance ministers and central bankers who have regularly endorsed free trade at their meetings for a decade, did not do so this time. They also dropped a pledge to finance the fight against climate change.
- The US disagreed with the other 19 countries on these issues, but the G20 works by consensus.
- Last year's communique vowed to "resist all forms of protectionism." This year's said "We are working to strengthen the contribution of trade to our economies. We will strive to reduce excessive global imbalances, promote greater inclusiveness and fairness and reduce inequality in our pursuit of economic growth."
- UK Parliament votes to move ahead with Brexit
-- WSJ: 3/14
| NYT: 3/14
- The British Parliament on Monday completed the process of approving Brexit.
- The unelected House of Lords on Monday first voted to amend the measure to require EU citizens now in the UK the right to remain, and also to require that Parliament have oversight on the final terms of any agreement. The elected House of Commons then overturned both amendments, and in response the House of Lords yielded.
- Prime Minister Theresa May had promised to initiate negotiations by the end of March. She can now send formal notification of withdrawal under Article 50 of the EU treaty.
- Iceland removes capital controls
-- NYT: 3/15
- Iceland, which was hard hit by the global financial crisis and responded by imposing controls on the movement of money in and out of the country, has now -- after nine years -- removed those controls.
- In 2008, Iceland's three main banks failed due to their investments in housing abroad, and its currency plummeted. "To prevent an outright collapse, the government imposed capital controls on businesses, pensioners and individuals." It had been easing those controls for more than a year, and has now removed them fully.
- Aided by the country's currency depreciation and protected by the capital controls, Iceland's economy was able to recover nicely from the crisis.
- Classification of the Snuggie
-- WP: 3/6
- The Snuggie is a blanket with sleeves. It is a popular item sold on TV, and it is made in China. Is it clothing, or is it a blanket?
- US government lawyers say it is clothing; the importers say it is a blanket. A US trade court just ruled that it is a blanket.
- As a blanket its tariff is 8.5%; as "pullover apparel" its tariff is 14.9%. The ruling will cost the US government money, and stimulate further imports of the Snuggie.
- Trade balances
-- FT: 3/7
| WSJ: 3/7
| WSJ: 3/8
- Germany's 2016 trade surplus, a record, is of concern not only to Donald Trump but also to international institutions, other EU countries, and even to some in Germany who argue for greater spending by the German government.
- The US trade deficit in January was highest highest since March 2012. Exports had fallen and imports risen in the final months of 2016. In January exports rose slightly, but less than imports. Reasons include the strengthening US dollar and rising US incomes.
- China's trade balance in February was a deficit for the first time in nearly three years, as exports fell and imports rose. This is not necessarily meaningful, however, as trade is very sensitive to the timing of the Lunar New Year holiday.
- Central banks seeking to increase international reserves
-- WSJ: 3/8
- Central banks around the world are increasing their international reserves, with several reaching record highs.
- Many are intervening to resist appreciation of their currencies. In addition, political uncertainty is prompting investors to seek the safety of currencies such as the Swiss franc, leading Switzerland to offset that by adding to reserves.
- In emerging markets, "External reserves are a form of insurance for sovereigns against crisis and defaults," said one commentator.
Feb 22 - Mar 5
- Trump wants to bypass the WTO
-- WSJ: 3/1
| WP: 3/1
| FT: 2/27
- Trump has instructed his staff to look for ways to circumvent the World Trade Organization, processing disputes with other countries bilaterally rather than through the WTO dispute settlement mechanism.
- They do not plan to leave the WTO, but they view the WTO as a slow-moving bureaucracy that is biased against US interests.
- Unlike his team on national security issues, which continue to value NATO, Trump's trade advisors share is protectionist orientation.
- Trade news
-- WSJ: 2/22
| NYT: 2/24
| WSJ: 2/25
- Organic food imports surge, depressing prices and upsetting US farmers who say they are less carefully regulated in other countries than in the US.
- Court blocks seizure of luxury autos bound for China. Seizures had been in response to car companies trying to block re-exports of cars by a small Tennessee company.
- China has become Germany's largest trading partner, as exports-plus-imports with China in 2016 surpassed both France and the US.
- Currency news
-- WSJ: 3/3
| NYT: 3/1
| FT: 2/27
- Israel's currency, the shekel, appreciated to a two-year high, in spite of continued intervention by the central bank, whose foreign exchange reserves have swelled from $41 billion in 2009 to $102 billion now.
- Nigeria struggles to maintain the official value of its currency, which is pegged at 199 naira to the dollar but has fallen to 520 per dollar on the black market. Traders on the black market are now being arrested, their dollars confiscated, and their licenses revoked.
- The fallling value of China's renminbi, which might have been expected to boost the profits of China's manufacturers, is instead prompting their US buyers to demand lower prices.
- Canada-EU FTA Approved
-- WSJ: 2/16
| NYT: 2/16
- The EU-Canada Comprehensive Economic and Trade Agreement (CETA), a Free Trade Agreement (FTA) between the EU and Canada, was approved by the European Parliament in a vote of 408 to 254. Many saw this vote as a rebuke to President Trump.
- Negotiations on CETA were begun almost 8 years ago, and the completed agreement ran into political opposition in parts of Europe. This is a rare move forward in globalization, which has seen setbacks with Brexit, the election os Donald Trump, and the rise of anti-globalist parties in many EU countries.
- CETA now goes into provisional effect, but full implementation still requires ratification by more than 30 national and regional parliaments, which could take years.
- Migration into Mexico
-- NYT: 2/12
- A growing number of migrants from Central and South America are migrating to Mexico, not the US. In 2016, 8100 applied for asylum in Mexico, 15 times as many as five years ago. The largest numbers come from El Salvador and Honduras.
- They move north because of dangers from gangs in their home countries. They stop in Mexico for several reasons, including the rising cost and difficulty of getting into the US and the perception that legal status might be easier to get in Mexico than in the US.
- Recently there is the additional factor of President Trump. “Why would you want to go to a country that doesn’t like you?”
- "Chicken Tax" will disrupt Mexico-US trade if Trump cancels NAFTA
-- WSJ: 2/15
- The US has a 25% tariff on imports of pickup trucks and some vans, but the tax does not apply to Canada or Mexico, because of NAFTA. If President Trump were simply to cancel NAFTA completely, that tax would apply to trucks from Mexico, including those produced there by GM, Toyota, and Fiat Chrysler. Ford would be hurt less, as it produces cars but not pickup trucks in Mexico.
- The tax is called the "chicken tax," because it was put in place in the 1960s by President Johnson in retaliation against taxes on US chicken exports in Europe, especially Germany. At that time, imported trucks came mostly from Germany. The tax was never removed.
- Last year, the US imported about $20 billion in pickup trucks from Mexico, trucks that would be subject to the chicken tax. This was about one quarter of the pickup trucks that Americans bought.
- US trade deficit 2016
-- WSJ: 2/8
- The US deficit in its balance of trade on goods and services for 2016 was $502.25 billion, the largest since 2012. This included a larger deficit on trade in goods, and a surplus in services. Though larger in dollar terms, it was down slightly as a percent of US GDP.
- The deficit is likely to increase due to "potential for a stronger dollar, larger federal budget deficits and low national saving rates compared with much of the rest of the world." However, President Trump intends to reduce the deficit in order to stimulate the US economy.
- "The gap fundamentally reflects the fact that Americans consume more than they produce relative to the rest of the world. To shrink the gap, they would either have to produce more or consume less."
- China's foreign exchange reserves fall to 5-year low
-- FT: 2/7
- China's foreign exchange reserves fell below $3 trillion, for the first time in five years. However the rate of decline has slowed recently.
- Reserves had reached almost $4 trillion in June 2014, but since then China's central bank has been selling dollars from its reserves in order to slow the decline in the dollar value of it own currency, the renminbi. The renminbi fell 6.5% against the dollar in 2016, the largest annual decline ever.
- The central bank has tried to stem the flows by raising interest rates and restricting capital outflows.
- Price of gold rises
-- WSJ: 2/7
- The price of gold rose to its highest level in nearly 3 months, to $1,230 per troy ounce on the US gold futures market.
- The rise was unusual, in that gold usually rises when the world's economies are weak, but US and global economic data have been improving recently. The rise probably reflects political uncertainty more than economic weakness, as President Trump has clashed with allies and insurgent politicians in several European countries such as France have moved up in the polls.
- Gold last reached its all-time high of $1,900 per troy ounce in 2011 with the Greek debt crisis and concerns about the future of the Eurozone.
Jan 30 - Feb 5
- US to seek FTA with Japan
-- FT: 2/2
- Having pulled out of the Trans-Pacific Partnership, which included Japan, the Trump administration will now seek a bilateral Free Trade Agreement with Japan.
- President Trump will meet with Japanese Prime Minister Shinzo Abe on February 10, and this will be high on Trump's agenda.
- Mr Abe, who expended much political capital in Japan getting the TPP, will still be pushing the US to rejoin that, but, failing that, he may also be receptive to a bilateral FTA with the same provisions. Mr Trump, on the other hand, may push for additional and more restrictive provisions, such as on currencies and auto parts, that Mr Abe will find it hard to accept.
- Trump's trade adivisor accuses Germany of using undervalued currency
-- FT: Jan 31
- Peter Navarro, head of the Trump administration's newly created National Trade Council, said that the euro is "grossly undervalued" and that Germany is using it to "exploit" its US and EU trading partners.
- This is likely an indication that the Trump administration will be using exchange rates more broadly as subjects of criticism and negotiation. In another meeting, Trumap said of Japan and China, "They play the money market, they play the devaluation market, while we sit here like a bunch of dummies."
- The euro is controlled not by Germany but by the independent European Central Bank. The value of the euro has fallen recently relative to the dollar, as the ECB has used expansionary monetary policy while the US Fed has become more restrictive. The German government has opposed the easy money policies of the ECB.
- Mexico benefits from increased remittances from the US
-- WSJ: 1/30
- Remittances from Mexican immigrants in the US to their families in Mexico have increased since Trump's election, due to concern about effects on Mexico and due to the falling value of the Mexican peso.
- About $25 billion flowed from the US to Mexico in 2015, the largest remittance flow between any two countries in the world. The flow in November was 25% larger than a year earlier.
- President Trump, as a candidate, had suggested blocking remittances to Mexico as a way of pressuring Mexico to pay for his wall.
- Donald Trump limits immigration
-- NYT: 1/28
- Donald Trump issued an executive order immediately limiting immigration. Immigration of any sort from Syria is stopped indefinitely, and immigration from another six countries is stopped for 90 days: Iran, Iraq, Libya, Somalia, Sudan, and Yemen. In addition, admission of refugees from any country is suspended for 120 days.
- During these periods of suspension, the intent is to improve the process for vetting immigrants.
- The action prompted protests at airports where immigrants were being detained or turned back. It also prompted a federal court judge to block implementation of a part of the order.
- Trump formally withdraws from the TPP
-- NYT: 1/24
- The Trans-Pacific Partnership, a free trade agreement among 12 countries including the US but not China, had been a signature achievement of the Obama administration, though it had not been approved by Congress.
- On Monday, Trump signed the order formally ending US participation in the agreement. This was not a surprise, as the TPP had been presumed dead ever since his election, and was very uncertain of being approved by Congress even if Clinton, who said she opposed it, had been elected.
- Nonetheless, this was a strong signal that the Trump administration plans to pursue a different path on trade than all prior administrations of the last half century, both Democratic and Republican.
- UK Supreme Court rules that Brexit must be voted on by Parliament
-- WSJ: 1/25
| NYT: 1/25
- After UK voters in the referendum in June 2016 chose to exit from the European Union, the new Prime Minister Teresa May announced her intention to invoke the EU's Article 50 by the end of March 2017, starting the two-year process of negotiating the terms of exit. A lawsuit was then filed saying that membership in the EU could only be ended with the consent of Parliament, and that lawsuit was finally decided on Tuesday by the UK Supreme Court, confirming that.
- PM May will now hurry to submit legislation to Parliament, asking it to approve the Brexit action. The Parliament is expected to approve it, even though a majority of members opposed Brexit. They are likely, however, to try to dictate the terms of any agreement.
- The decision was expected. It had not been known, however, whether the court would insist that regional governments of Scotland, Wales, and Northern Ireland must be consulted, which would have at least prolonged the process since each was likely to be opposed. The court ruled, however, that Mrs. May does not need to consult them.
- UK PM May intends "clean Brexit"
-- WSJ: 17
| NYT: 1/18
- Prime Minister Theresa May says UK does not want "partial membership" in EU, meaning that UK will not try to remain part of the common market with zero tariffs on UK-EU trade, and that it will insist on control of immigration.
- Advocates of Brexit say the UK will be better off negotiating its own trade agreements with other countries, which it cannot do as part of the EU, and that it will also be free of the EU's onerous regulations. Opponents fear the loss of access to the EU market and disruption of UK industry.
- May has said that the UK will initiate the exit process by the end of March, thus starting a two-year period of negotiations on the terms of the exit.
- Elite meet at annual gathering in Davos
-- WSJ: 1/18
| NYT: 1/19
- Davos, Switzerland, hosted its annual gathering of heads of state, business leaders, and academics, the World Economic Forum. These are the elites that populist uprisings have opposed in backing Brexit, Donald Trump, and rising political stars in Europe.
- Meetings sought to "reform capitalism" to make markets and globalization more beneficial to the world's middle class. Emphasis was on things like training of workers, rather than on any policies of redistribution that might hurt these elites.
- These leaders were much more optimistic this year than in recent years, as business prospects have improved, and they expect economic stimulus and tax cuts from the incoming Trump administration.
- China's Xi defends globalization at Davos
-- WSJ: 1/17
| NYT: 1/18
| FT: 1/17
- In the first time that China's president has attended the Davos meetings, President Xi Jinping spoke strongly in favor of "economic globalization" (in contrast, perhaps, to just "globalization" which might include openness in non-economic areas).
- Other heads of state were absent from Davos, perhaps concerned with backlash against globalization and the elites. Germany's Angela Merkel did not attend. The US was represented by Vice President Biden and Secretary of State Kerry
- Mr Xi contrasted his own views with those of President-elect Donald Trump though without naming him. Trump has been critical of trade and especially China, . "Countries should view their own interest in the broader context and refrain from pursuing their own interests at the expense of others." "As the Chinese saying goes: People with petty shrewdness attend to trivial matters while people with great vision attend to governance of institutions."
- US to file WTO complaint against China over aluminum
-- WSJ: 1/12
| FT: 1/12
- President Obama has filed a new case at the World Trade Organization objecting to the cheap financing that China provides to its industry, specifically its aluminum industry. The claim is that this financing constitutes and illegal subsidy. Since similar financing is provided to other industries in China, the case has implications beyond aluminum, to other products such as steel which China has also been over-producing.
- Obama: "China gives its aluminium industry an unfair advantage through underpriced loans and other illegal government subsidies. These kinds of policies have disadvantaged American manufacturers and contributed to the global glut in aluminium, steel, and other sectors."
- This US action against China is not unusual. This is the 16th case that the Obama administration has brought against China in the WTO, in addition to many anti-dumping cases brought against China under US law.
- Indonesia relaxes export ban
-- FT: 1/12
- In 2014, Indonesia had banned export of some mineral ores, in an effort to promote the growth of its domestic industries for processing these minerals. This week it announced and end to the ban on exports of nickel ore and bauxite, and extended permission to export copper concentrate.
- The ban, though opposed by mining companies, had prompted them to pledge investment in smelters and other processing facilities. Now those companies and other investors fear that their investments will lose money. Removing the ban also caused the world price nickel (used to produce stainless steel) to fall 5% on Thursday to a 4-month low.
- The government of Indonesia has been under political pressure over various issues, including social inequality. According to one commentator, "The government is doing this at least in part because it is so spooked by the social unrest"
- Currency news
-- WSJ: 1/9
| WSJ: 1/11
| WSJ: 1/12
- China's reserves of foreign currency continue to drop, as it supports the yuan. Its reserves are now the smallest since March 2011. The declining value of the yuan has prompted capital outflows from China, which are resisted by capital controls but nonetheless make the problem worse.
- Turkey's currency, the lira, has been falling ever since the government imposed a state of emergency after the failed coup attempt in July. Efforts to stem the decline, such as exhorting the public to sell off their foreign-currency savings, have not succeeded, and the currency tumbled 1.9% in Istanbul on Tuesday.
- Mexico's peso has fallen to record lows, prompted by concerns about President Trump's trade policies toward Mexico. In his press conference this week, Trump said "Mexico has taken advantage of the United States. It’s not going to happen anymore."