Stocks climbed on Tuesday and clawed back a chunk of their losses from Monday’s rout, the latest whipsaw move as investors weigh just how badly the escalating U.S.-China trade war will hurt the economy. 

The day’s rally was nearly a mirror image of Monday’s plunge, when the S&P 500 had its worst day since early January, just not as severe: Technology companies led the way higher after bearing the brunt of the selling on Monday, Treasury yields rose modestly and gold gave back a bit of its gains. 

The S&P 500 rose 22.54 points, or 0.8%, to 2,834.41. It recovered nearly a third of its loss from Monday, and would now need to rise 3.9% to regain the record it set a couple weeks ago. The Dow Jones Industrial Average rose 207.06, or 0.8%, to 25,532.05, and the Nasdaq composite index jumped 87.47, or 1.1%, to 7,734.49. 

Of course, stocks are still lower than they were last week, following China’s pledge to raise tariffs on U.S. goods. Stocks also remain lower than they were on May 5, when President Donald Trump ignited this latest round of fear for markets by announcing on Twitter that the U.S. would raise tariffs on Chinese goods. 

Tuesday’s rally came after another round of morning Trump tweets on trade. He said, “When the time is right we will make a deal with China,” and he cited his “unlimited” respect for and friendship with China’s leader.

Investors are looking for a “place of equilibrium,” said Mark Hackett, chief of investment research for Nationwide Investment Management.

“My skepticism is that there’s really not a lot of news driving the rally,” he said. “It feels like an attempted recovery that may not have legs.”

‘Looking for path to progress’

In the meantime, any further hints of resolution on the trade dispute — or Twitter storms — could drive markets into their next swing. 

“We’re not counting on a full resolution,” said John Lynch, chief investment strategist at LPL Financial. “But, we’re looking for a path to progress.”

The worries about trade have shattered what had been a remarkably steady rise for stocks at the start of this year. As 2019 began, investors increasingly bet that a trade deal would happen, and the Federal Reserve said it would take a pause in raising interest rates, which helped the S&P 500 rocket to its best start to a year in decades. 

If the trade dispute gets worse, or lasts longer than many expect, it could hurt confidence among businesses and households. If that in turn drives spending lower, it would lead to lower economic growth and corporate profits. 

On Tuesday, at least, such worries eased. An index known as Wall Street’s “fear gauge,” which measures how much traders are paying to protect themselves from upcoming price swings for stocks, dropped 12.1%. A day earlier, it had spiked 28.1%. 

The VIX index remains higher than it’s been for much of the past five years, but fear is considerably lower than it was during the market sell-off late last year sparked by worries about a possible recession. 

Tech companies post gains

Investors also returned to stocks of tech companies, which may have the most to lose from a protracted U.S.-China trade battle because many of their customers and suppliers are abroad. Tech stocks in the S&P 500 jumped 1.6%, with semiconductor companies making particularly big gains. 

A day earlier, tech stocks had taken the market’s heaviest losses. 

On the flip side were utility stocks, which were the only one of the 11 sectors that make up the S&P 500 to fall. A day earlier, when all the fear in the market put an alluring spotlight on the utility sector’s steady profits and dividends, they had been the only S&P 500 sector to manage a gain. 

Other investments seen as safe harbors also dropped, such as U.S. government bonds. When a bond’s price falls, its yield rises, and the yield on the 10-year Treasury rose to 2.41% from 2.40% late Monday. It was at 2.45% at the end of last week. 

Gold is another investment that tends to do fade when investors are feeling more optimistic, and it fell $5.50 to settle at $1,296.30 per ounce. 

In overseas stock markets, European indexes gained. The French CAC 40 jumped 1.5%, the German Dax rose 1% and the FTSE 100 in London climbed 1.1%. Asian markets were mixed. The Hang Seng in Hong Kong dropped 1.5%, Japan’s Nikkei 225 fell 0.6% and South Korea’s Kospi ticked up 0.1%.

Silver jumps 4 cents

In the commodities markets, silver rose 4 cents to $14.81 per ounce, and copper gained a penny to $2.73 per pound.

Benchmark U.S. oil rose 74 cents to settle at $61.78 per barrel. Brent crude, the international standard, gained $1.01 to $71.24 a barrel. 

Natural gas rose 4 cents to $2.66 per 1,000 cubic feet, heating oil rose 2 cents to $2.06 per gallon and wholesale gasoline rose a penny to $1.98 per gallon. 

The dollar rose to 109.64 Japanese yen from 109.34 yen late Monday. The euro slipped to $1.1207 from $1.1231, and the British pound fell to $1.2905 from $1.2965. 

For sale: waterfront property with sweeping views of the Atlantic Ocean. Waves erode beach regularly. Flooding gets worse every year. Saltwater damage to lawn.

Asking price: anyone’s guess.

Some research suggests rising sea levels and flooding brought by global warming are harming coastal property values. But other climate scientists note shortcomings in the studies, and real estate experts say they simply haven’t seen any ebb in demand for coastal homes.

So how much homeowners and communities should worry, and how much they should invest in remedies, remains an open question.

Nancy Meehan, 71, is considering putting her coastal condo in Salisbury up for sale this year, but she worries buyers will be turned off by the winter storms that churn the seas beside the summer resort town. Her home has been largely spared in the nearly 20 years she’s lived there, she said, but the flooding appears to be worsening along roads and lower properties.

‘My life savings’

“All my life savings is in my home,” Meehan said of the four-bedroom, two-bathroom condo, which she bought for $135,000. “I can’t lose that equity.”

Nearby, Denis Champagne can’t be sure that rising seas are hurting his waterfront home’s value. The three-story, four-bedroom home has views of a scenic marsh, has been renovated and is blocks from the ocean — yet was assessed around $420,000.

“Do I feel that it should be worth more than that?” Champagne said recently in his sun-soaked living room. “I mean, I’m biased, but where can you find this for that price — anywhere?”

Community relies on real estate taxes

A drop in home values could shatter a community like Salisbury, which relies almost exclusively on beachfront real estate taxes to fund schools, police and other basic services, researchers warn. And, they say, families could face financial ruin if they’ve been banking on their home’s value to help foot the bill for pricey college tuitions or retirement.

“People are looking at losing tens of thousands of dollars of relative value on their homes,” said Jeremy Porter, a data scientist for the First Street Foundation, which describes itself as a “not-for-profit organization of digitally driven advocates for sea level rise solutions” on its Facebook page. “Not everyone can sustain that.”

Still, home prices in coastal cities have been rising faster than those of their landlocked counterparts since 2010, according to data provided by the National Association of Realtors.

And waterfront homes are still generally more expensive than their peers just one block inland, said Lawrence Yun, the association’s chief economist.

“The price differential is still there,” he said. “Consumers are clearly mindful that these climate change impacts could be within the window of a 30-year mortgage, but their current behavior still implies that to have a view of the ocean is more desirable.”

One $16 billion estimate

A nationwide study by the First Street Foundation suggests climate change concerns have caused nearly $16 billion in lost appreciation of property values along the Eastern Seaboard and Gulf Coast since 2005.

The study singles out Salisbury as the hardest-hit community in Massachusetts. Coastal homes there would be worth $200,000 to $300,000 more if not for frequent tidal flooding and powerful coastal storms, the study suggests. Champagne’s property, for example, would be worth about $123,000 more, according to Flood iQ, a property database the group has developed.

In another recent study, researchers at the University of Colorado Boulder’s School of Business found coastal properties most exposed to sea level rise sold, on average, for 7% less than equivalent properties the same distance from shore but not as threatened by the sea.

And in Florida’s Miami-Dade County, higher-elevation properties are appreciating faster than lower ones as companies and deep-pocketed buyers increasingly consider climate change risks, a study in the publication Environmental Research Letters found last year.

​Studies laudable, but may be flawed

The three studies are laudable because they attempt to quantify what the insurance industry and federal government had long suspected: that climate change is having tangible harm on home values, said S. Jeffress Williams, a scientist emeritus with the U.S. Geological Survey in Woods Hole, Massachusetts, who wasn’t involved with any of the research.

But Williams and other researchers note the First Street Foundation study uses sea-level rise predictions from the Army Corps of Engineers that are more dire than figures from the National Oceanic and Atmospheric Administration, which usually provides the go-to numbers for such studies.

The decision to use Army Corps projections has “minimal impact” on the study’s assessment of current property values since those figures are based on where flooding is already happening, but it does factor into the study’s future estimates, said Steven McAlpine, a data scientist for the foundation.

“We feel it is a reasonable projection,” he said.

The other two studies largely rely on data from Florida, which is so low and highly developed that in many ways it is an outlier, unaffiliated researchers point out. They also focus only on single-family homes, leaving out huge numbers of condos, high-rises and other multifamily properties.

Just build a seawall

In Salisbury, real estate broker Thomas Saab insists something is happening with home prices but is not sure whether climate change is behind it.

Two clients in the otherwise strong real estate market, he said, were recently forced to lower their asking prices by tens of thousands of dollars when prospective buyers voiced concerns about storm damage and risks.

“Do I worry prices are coming down? Sure,” Saab said. “Fewer buyers are willing to take the risk. People don’t want to live through nor’easter after nor’easter with no protection.”

He argues there’s a simple solution: Invest in sturdy seawalls as Hampton Beach, the lively resort town just over the border in New Hampshire, did generations ago.

“We can overcome any kind of rising seas if you just let us protect our properties,” Saab said. “Who cares about the climate change? You build a seawall and this whole discussion goes away.”

With the Trump administration locked in an escalating trade war with China, much of the media focus is on the immediate impact of decisions by leaders on both sides to impose sharp tariffs on goods flowing between the two countries. But while consumers and exporters in both countries will suffer in the near-term, an even more disruptive possibility looms in the long term: a “decoupling” of two massive economic systems that have become deeply interdependent over the past several decades.

At the root of the dispute is a U.S. effort to force China to bring its trade policies in line with other major industrialized countries.

Specifically, the U.S. wants to see China stop subsidizing domestic firms to help them compete on the world stage, eliminate the widespread theft of intellectual property by Chinese businesses, and open its markets to foreign competition.

The U.S. is also putting pressure on specific Chinese telecommunications firms, out of concern that they could be used by the Chinese government to spy on global rivals.

In recent days, the two countries have both ratcheted up economic pressures. As negotiations over a major trade deal stalled last week, President Trump announced that he would direct his administration to hike tariffs to 25% on Chinese goods that accounted for $200 billion in imports last year.

He indicated that he would eventually move to place that same levy on all $540 billion of annual Chinese imports. The Chinese government retaliated Monday with the imposition of tariffs on $60 billion worth of U.S. goods that flow into its country, and indicated that it will take more drastic steps if necessary.

While many experts believe that the two countries will strike a deal before the new tariffs really start to bite, there is increasing concern that strife between the world’s two largest economic powers could persist, forcing a disruptive overhaul of global supply chains that would echo around the world.

In fact, there is evidence that companies are already taking the first steps in a significant reorientation of global supply chains.

According to Paul Triolo, practice head for Geo-Technology at the Eurasia Group, there already has been a significant amount of decoupling by companies in the information and communications technology industries, as well as furniture, apparel, and agricultural products.

“US technology companies are already withholding new investment in manufacturing facilities based in China, and shifting parts of supply chains as feasible to southeast Asia and beyond,” he said in an interview. “There is a spectrum of potential options here, and so far most of the ‘easy’ stuff has been moved. The equation becomes much more complicated for things like advanced electronics.”

Understanding why this would be so disruptive requires digging below the surface of most discussions of US-China trade.

Political rhetoric about trade, much of it originating in President Trump’s Twitter feed, tends to oversimplify — and frequently misrepresent — the reality of global trade flows. The exchange of goods between the two countries is portrayed as a zero-sum game, in which U.S. consumers face a simple choice between buying widgets manufactured in China and buying competing products manufactured in the U.S.

Bilateral trade, intermediate goods

The truth is far more complex. Combined exports and imports between the two countries totaled $650 billion in 2018, according to U.S. government figures. Goods moving from China to the U.S. make up just under two-thirds of that total, and they are not limited to the cheap clothes and toys that made up a large portion of Chinese exports a generation ago. Smartphones, appliances, computers and other goods travel in a constant stream across the Pacific to U.S. markets.

Importantly, though, those finished goods often contain key elements, like microchips, that were originally manufactured in the U.S. and exported to China. These “intermediate goods” represent a huge market for U.S. technology firms.

Similarly, intermediate goods made in China find their way into finished products that bear the “Made in the U.S.A.” stamp. As a whole, intermediate goods make up between 60% and 65% of all global trade flows, which further illustrates the complexity of worldwide supply chains.

Restructuring supply chains

These complex manufacturing relationships have grown up over decades, and are very much baked into the way companies in both countries do business. Now, as the trade war escalates, they are facing the real possibility that ongoing conflict between Washington and Beijing could require companies to restructure global supply chains in a way that will provide more certainty and stability in the future.

But doing so would be a long and difficult process, experts warn.

“These value chains, or supply networks are both highly specialized and quite idiosyncratic,” said Scott Miller, a senior adviser to the Center for Strategic and International Studies’ Abshire-Inamori Leadership Academy said in an interview. “Company A and Company B might be in the same business, but the way they organize their supply network could be quite different.”

“The idea of ‘decoupling,’ well, if you’re in a business that requires assembly at scale, you’re going to find it hard replacing China,” Miller said. “It can be done, but it’s real work.” The problem is even worse if a company has developed a network of qualified suppliers in China. Replacing them is not like flipping a switch, he said. “It takes time, energy and capital to develop suppliers,” Miller said.

Should it come to that, economists warn, the effects on both countries, at both the macro- and microeconomic levels, could be immense.

Cost of tariffs

Within the U.S. alone, the potential damage from the proposed tariffs would be huge, warned Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Writing in a note to investors on Wednesday, he said, “The hit from 25% tariffs on all imports would be at least 0.6% of GDP, and probably much more as companies would have to rebuild entire supply chains. The hit to earnings growth would be of the order of 10%.”

It is also apparent that many of the supposed benefits of decoupling won’t necessarily accrue to the United States. President Trump has suggested that his trade policies will bring manufacturing jobs back to the U.S., but by all indications, the manufacturers who are already starting to move away from China are relocating to other low-wage countries, like Vietnam and Mexico.

As grim as some of these predictions are, there is a school of thought in which the divisions between the U.S. and China, and their global impacts, become much, much worse.

Worst scenario

In an appearance on the television program Face the Nation on Sunday, former U.S. Treasury Secretary Henry Paulson warned that if China and the U.S. successfully isolate themselves from one another — particularly in the realm of technology — the result could be a bifurcated global system that will devastate economic relationships.

“The real risk is that both countries through their actions will throw up or create an economic iron wall which means we’ll be decoupling global supply chains, right?” said Paulson, who also served as CEO of the investment bank Goldman Sachs.

“We’ll be having two systems with incompatible standards and rules,” he added. “And so as I look at it the defining strength of America is innovation and we need to protect our technology, need to protect our innovation. But if we close ourselves off from other, you know, other innovative economies and entrepreneurs, we jeopardize our leadership position in the world and we’re much less attractive as a destination for foreign investment.”

Triolo, of the Eurasia Group, gave voice to a concern that fewer commentators are willing to discuss out loud, but which must lurk in the back of many business leaders’ minds.

“Many companies are now for the first time factoring in the potential for the trade and tech conflict to morph into a real shooting conflict, either by accident or miscalculation or deliberately,” he said. “The potential for actual conflict has now gone way up for the period 3-5 years out, and this has to be taken into account when multinationals are looking at global supply chain risk.

“The best case scenario, a trade truce with China making some limited concessions, will not necessarily improve this dynamic,” he said. “U.S. focus on the nature of China’s political system, the control of the Party over information, [Chinese President] Xi’s unwillingness to cede more state control of the economy, etc. are all contributing to the ‘clash of civilizations’ meme which is gaining traction among the extreme factions on each side, diminishing the room for rebuilding trust, which is now arguably at an all time low.”

A U.S. labor agency has concluded that ride-hailing company Uber Technologies Inc’s drivers are independent contractors and not its employees, which could prevent them from joining unions.

The National Labor Relations Board’s general counsel, in a memo released on Tuesday, said Uber drivers set their hours, own their cars and are free to work for the company’s competitors, so they cannot be considered employees under federal labor law.

San Francisco-based Uber in a statement said it is “focused on improving the quality and security of independent work, while preserving the flexibility drivers and couriers tell us they value.”

Uber shares were up 6.4 percent at $39.46 in late trading on the New York Stock Exchange.

The memo dated April 16 came in an NLRB case against Uber that has yet to reach the five-member board, which is independent of the general counsel.

Under the National Labor Relations Act, independent contractors cannot join unions and do not have legal protection when they complain about working conditions.

In January, President Donald Trump’s appointees to the NLRB adopted a new test making it more difficult for workers to prove they are a company’s employees.

Uber, its top rival Lyft Inc, and many other “gig economy” companies have faced scores of lawsuits accusing them of misclassifying workers as independent contractors under federal and state wage laws.

Employees are significantly more costly because they are entitled to the minimum wage, overtime pay and reimbursements for work-related expenses under those laws.

Uber, in a filing with the U.S. Securities and Exchange Commission last week, said it would pay up to $170 million to settle tens of thousands of arbitration cases with drivers who claim they were misclassified. Uber denied any wrongdoing, but said settling the cases was preferable to drawn-out litigation.

The company has agreed to pay an additional $20 million to end long-running lawsuits by thousands of drivers in California and Massachusetts.

The U.S. Department of Labor in a memo released last month said an unidentified “gig economy” company’s workers were not its employees under federal wage law because it did not control their work.

The company, which appeared from the memo to provide house-cleaning services, had a similar relationship with its workers as Uber does with drivers. The memo signaled a shift from the Obama administration, which maintained that most workers should be considered companies’ employees.

Technology stocks led the S&P 500 and the Nasdaq higher on Tuesday, with U.S. stocks reclaiming ground lost to Monday’s steep sell-off as investors took heart from a tonal shift in ongoing U.S. trade negotiations with China.

All three major U.S. indexes were in the black, recovering some ground from their worst one-day percentage losses in months. The bellwether S&P 500 was hovering more than 3% below its most recent all-time high reached two weeks ago.

Investors’ nerves were calmed after U.S. President Donald Trump referred to the escalating trade war with China as “a little squabble,” adding that “we have a good dialogue going.”

Beijing echoed that sentiment, with a Chinese Foreign Ministry spokesman telling reporters: “My understanding is that China and the United States have agreed to continue pursuing relevant discussions.”

“Either this is a bargain-hunting rally or a dead cat bounce, or there is some consensus that something meaningful is going to come out of the trade talks in the next four to six weeks,” said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.

But Hellwig also feels the rollercoaster of the escalating trade war has had an effect on investor psychology.

“I’m starting to see some investors becoming anesthetized on the negotiations and focusing on what the market’s going to look like a year from now,” Hellwig added.

Boeing Co provided the biggest boost to the Dow, rising 2.1% as tariff-sensitive industrials buoyed the blue chip index.

Ralph Lauren Corp dropped 3.8% after the apparel company posted quarterly results.

Uber Technologies and ride-hailing peer Lyft Inc were both trading higher, reversing course after their post-debut slides. Their stocks were up 1.7% and 5.5%, respectively.

Walt Disney Co announced it would take control of Comcast Corp’s Hulu in a move to challenge Netflix and others in the global video streaming war.

Disney stock climbed 2.0%, while Comcast gained 2.4%. Netflix shares were up slightly.

The Dow Jones Industrial Average rose 344.71 points, or 1.36%, to 25,669.7, the S&P 500 gained 39.29 points, or 1.40%, to 2,851.16 and the Nasdaq Composite added 124.25 points, or 1.62%, to 7,771.27.

Of the 11 major sectors of the S&P 500, all but utilities were in the black. Technology stocks had the largest percentage gains, climbing 2.1%.

Chipmakers enjoyed a reprieve, with the Philadelphia SE Semiconductor Index rising 2.7% after suffering its worst one-day percentage loss since Jan. 3.

First quarter earnings season is winding down, with 453 of S&P 500 companies having reported, 75.3% of which beat analyst expectations, slightly below the 76% beat rate for the last four quarters.

Advancing issues outnumbered declining ones on the NYSE by a 3.70-to-1 ratio; on Nasdaq, a 2.74-to-1 ratio favored advancers. The S&P 500 posted 23 new 52-week highs and 6 new lows; the Nasdaq Composite recorded 41 new highs and 79 new lows.

The future of Bulgaria’s vast number of low-wage truck drivers has become a top campaign issue in the country heading into European Parliament elections, with debates raging on how new EU rules could threaten the workers and deepen divisions between rich and poor nations in the bloc.

The European Commission wants to put restrictions on cargo transport to ensure adequate rest for truck drivers and limit driving distances. Bulgaria, where the transport sector accounts for 15 percent of GDP and employs some 200,000 people, fears it will erode its workforce’s low-cost advantage. It says it could cost jobs and force Bulgarian truckers to move to Western Europe, worsening a wealth gap within the EU.

 

“This package would directly deprive more than 150,000 Bulgarian families of bread and livelihood,” says Angel Dzhambazki, a former member of the European Parliament who is running in this month’s election.

 

The new rules concern truck drivers’ postings, driving and rest times, and access to the market. Especially worrying for Bulgarian truckers is the requirement that they spend their rest time in a hotel rather than in bunks in their trucks. The rules would also force drivers to return home every three or four weeks with an empty truck.

 

Dzhambazki said that the European proposal, called the Mobility Package, would cause thousands of Bulgarians to emigrate to wealthier European countries to be closer to the markets they work with. He sees the proposal as an effort by countries like France and Germany to protect their own businesses from the competition of lower-wage countries like Bulgaria.

 

The proposal has passed a first reading in the European Parliament, with a second approval needed for it to come into force. It has the strong backing of EU heavyweights France and Germany.

 

Bulgaria, which joined the European Union in 2007, will elect 17 members of the European Parliament’s 751 seats on May 26. Germany, by contrast, will provide 96. Bulgaria could seek strength in numbers, as several other countries in Eastern Europe also oppose the new EU transportation rules, but it remains an uphill battle.

 

“In the year of Brexit and the European elections, decisions like the Mobility Package only deepen divisions and fuel nationalist feelings in the EU member countries,” warned Madlen Kavrakova, legal advisor of Bulgaria’s union of international hauliers.

 

Kavrakova told the AP that denying truck drivers full access to the single European market would set a dangerous precedent and could lead to restrictions in other sectors.

 

“Does it mean that Europe is driving at different speeds?” she asked rhetorically.

 

Under the new restrictions, many Bulgarian haulage companies could be forced to relocate to countries closer to their key markets in Western Europe. That could mean the emigration of thousands of truck drivers, depriving countries like Bulgaria of an established industry.

 

Dimitar Rashkov, the owner of transport company Eurospeed, has managed trucks driving across the continent since 1994 and says the new rules will “separate us as people from Eastern and Western Europe, like it was once many years ago.”

 

Truck driver Ivan Gospodinov is convinced that Europe must be equal for all.

 

“Like the Germans or Italians who come to Bulgaria and feel comfortable here, we also need to feel comfortable when we go there because we are a big family,” he says. “That is what the European Union stands for.”

 

Capitol Hill correspondent Michael Bowman and reporter Ira Mellman contributed to this report

President Donald Trump said the United States “can make a deal with China tomorrow” to resolve the trade dispute between the world’s two largest economies, adding the accusation that China prevented the two sides from completing an agreement.

In a series of tweets Tuesday, Trump portrayed the United States as being “in a much better position now than any deal we could have made,” and restated his frequent refrain that under his administration other countries will not “take advantage” of the United States when it comes to trade.

His latest remarks came after he boosted taxes on $200 billion worth of Chinese goods sent to the United States and moved to impose duties on another $300 billion of Chinese exports. China retaliated by imposing tariffs on $60 billion worth of U.S. goods.

China hits back

The Chinese finance ministry said Monday its new 5% to 25% tax would be imposed June 1 and affect 5,140 U.S. products exported to China. Beijing said its response was targeting “U.S. unilateralism and trade protectionism.”

“China will never succumb to foreign pressure,” the foreign ministry said. “We are determined and capable of safeguarding our legitimate rights and interests. We still hope that the U.S. will meet us half way.”

The escalation of the tit-for-tat tariff increases had an immediate effect on the U.S. stock market, with the key Dow Jones Industrial Average plunging nearly 2.4% by the close of trading Monday in New York.

 

Trump has threatened to extend tariffs to an additional $300 billion in Chinese exports that have not been targeted yet, but told reporters Monday: “I have not made that decision yet.”

 

The U.S. Trade Representative’s Office said Monday that a public hearing would be held on July 17 about the possibility of further tariffs on China, which it said could affect 3,805 product categories. It said the new measures could impose an additional duty of up to 25%.

How we got here

The Chinese decision to retaliate with tariffs came after the two countries ended their latest trade talks Friday in Washington without reaching a deal.

Two U.S. lawmakers voiced support for Trump’s trade fight with China, but with reservations.

Republican Sen. Roy Blunt told VOA, “If there’s a trade fight worth having, it’s a trade fight with China. They have not been fair traders.” But he said “there is no doubt” that diminished sales of farm products to China have hurt his home state of Missouri and other parts of the agrarian U.S. Midwest.

Democratic Sen. Chris Van Hollen of Maryland said, “There’s no doubt that we need to challenge China to change a lot of its trade practices and its domestic business practices. For example, they’ve been stealing U.S. secrets for a long time. They have these rules that force U.S. companies to transfer technology. So we’ve got to confront China on that.”

“The question is what’s the smartest, most effective way to do it,” Van Hollen said. “And while I support some of the president’s strategy, I think some of it’s misguided. Obviously, Americans and American consumers are paying more and more by the day. So, it’s important that we address the fundamental issues in China’s economy…. It’s not clear to me that the president’s policies are addressing that, but we’ll see. I see a tariff-only strategy; I don’t see a more comprehensive strategy towards China. I’m not saying that tariffs can’t be part of something, but they cannot be the only tool in your tool box.”

Analyst David Lampton, a fellow at the Stanford Asia Pacific Research Center in Palo Alto, California, said he sees the United States and China as competing to be more than just a dominant economic force.

“It includes a mounting arms race and includes diplomatic competition around the world, with China operating in Latin America and Venezuela and so forth, Middle East, in places where we’ve traditionally seen ourselves as dominant,” Lampton said. “And of course we’re operating on China’s periphery and we’re in Vietnam, trying to keep the Philippines in the U.S. column so to speak.”

U.S. President Donald Trump on Monday said U.S. tariffs on China bring billions of dollars into U.S. coffers. He said China’s retaliatory tariffs can have no effect on the U.S. economy. The escalation of the U.S.-China trade war sent stock markets tumbling on Monday, with the Dow Jones Industrial Average falling more than 600 points. Earlier, China announced new tariffs of up to 25 percent on $60 billion worth of U.S. goods, starting June 1. VOA’s Zlatica Hoke has more.

As Washington and Beijing impose ever-higher tariffs, prompting financial markets to falter, U.S. lawmakers are expressing hope for a swift but comprehensive resolution of America’s deepening trade disputes with China. 

Unease prevailed on Capitol Hill after China retaliated against a new round of American tariffs by hiking duties on U.S.-made goods. Even so, senators of both parties say China must be confronted. 

“We need to challenge China to change a lot of its trade practices and its domestic business practices.”said Maryland Democrat Chris Van Hollen. “For example, they’ve been stealing U.S. (technological) secrets for a long time.”

But Van Hollen faults President Donald Trump’s focus on tariffs.

“What I see is a tariff-only strategy. I don’t see a more comprehensive strategy towards China,” Van Hollen said. “American consumers are paying more and more by the day. It’s not all about how many sales they (Chinese producers) are making and how many sales the United States is making to China.”

 

Among the most vocal about trade war concerns are American farmers. Republican Senator Roy Blunt represents agriculture-rich Missouri.

“We (Missouri farmers) were selling about one out of every four rows of soybeans just to China,” Blunt said. “Soybeans, corn, livestock  that’s a great market that’s being disrupted.”

But Blunt believes Americans understand that short-term economic pain is necessary to secure better trading terms with China.

“If there’s a trade fight worth having, it’s the trade fight with China,” Blunt said. “They have not been fair traders.”

While the U.S.-China dispute is grabbing most headlines, Blunt also urged Congress’ swift consideration of a new U.S.-Canada-Mexico free trade pact.

A drop in the consumer outlook for inflation and intensifying trade tensions drew caution from Federal Reserve officials on Monday as policymakers faced fresh market volatility and a renewed set of risks.

While Fed officials have largely discounted the trade war so far as unlikely to derail the U.S. economic expansion, officials emphasized Monday that a protracted tit-for-tat battle between the United States and China was a different matter that might require a Fed response.

“If the impact of the tariffs — and whatever financial market reaction to those tariffs is — causes more of a slowdown, then we do have the tools available to us, including lower interest rates,” Boston Fed President Eric Rosengren, a voter this year on Fed rate policy, said in an interview with Reuters.

While Rosengren said he was “not necessarily” expecting a rate cut to be necessary, the market sell-off Monday was deep and potentially disruptive to the Fed’s core expectation that interest rates will remain on hold for some time to come.

Major U.S. equity markets were down between 2% and 3.5% on Monday, while bond investors sharply increased their bets that the Fed would be forced to cut rates this year. A closely watched spread between long- and short-term bonds turned negative, seen by some officials as a sign of weakened market confidence in the economic outlook.

After the collapse of U.S.-China talks last week and the threat of tariffs ratcheting ever higher, there was more reason to believe the tensions will last a while.

“If it’s the worst-case scenario and it’s ever-increasing tariffs for an extended period of time, that could change things, that could have a real effect on U.S. GDP growth,” Minneapolis Fed President Neel Kashkari said on CNBC. Traders and analysts on Monday said the volatility is likely to continue.

“You cannot game what two leaders … are going to do from day to day,” said Anthony Saglimbene, global market strategist with Ameriprise Financial Services in Troy, Michigan, of the high-stakes standoff between Trump and Chinese President Xi Jinping.

Rate cuts back on radar 

Fed officials have been careful to say that nothing yet has changed their core outlook, which envisions rates to be held in their current range of between 2.25% and 2.5% until either growth demonstrably weakens and inflation falls further, justifying a rate cut, or faster inflation makes higher rates warranted.

As the trade war intensified over the last few days, however, traders in the federal funds futures market have moved decisively in favor of expecting a Fed rate cut in coming months. 

Data from the CME Group now sees the Fed cutting rates in October, with a near 10 percentage point shift since Friday in the probability of a rate reduction at that Fed meeting. The pressure on the Fed could come from several directions.

Economic growth overall could slow if the tariff wars continue and global trade declines; “wealth effects” could directly impact business and household confidence and spending if the stock declines continue; higher costs could hit company profits, and discourage hiring.

A further complication for the Fed: The inflation outlook among U.S. consumers dipped sharply in April, countering Fed policymaker hopes that inflation dynamics will improve and the pace of price increases soon rise toward their target level.

Survey data released by the New York Federal Reserve on Monday showed consumer expectations of the inflation rate over the next year fell to 2.6% from 2.82% in the March survey.

The nearly quarter point drop was the third-largest since the survey was launched in mid-2013. The outlook for inflation over the next three years also fell, to 2.69% from 2.86%, evidence that medium-term expectations have also weakened in recent weeks.

Following the Fed’s most recent meeting, Chairman Jerome Powell and others said they felt recent weak inflation readings were driven by “transitory” factors that would disappear over time and allow overall inflation to rise.

But a drop in inflation expectations is another matter, and could be evidence that households and businesses are losing faith in the Fed’s ability to deliver on its inflation goal — a worrying development for central bankers who feel their ability to keep expectations set around their inflation target is critical to meeting the goal.

As of the Fed’s last policy statement on May 1, officials said they felt expectations remained stable.

While consumer surveys are discounted by some officials as overly influenced by things like changes in gasoline prices and other costs that consumers closely monitor, some broader market expectation measures have also shifted.

Since late April, for example, a St. Louis Federal Reserve measure of the inflation rate expected five years from now, based on trading in different types of bonds, dipped to 1.9% from 2.1%, a sign traders also see weaker inflation ahead.

The Dow Jones Industrial Average plunged more than 500 points Monday as investors sought shelter from an escalating trade war between the U.S. and China.

The Dow and S&P 500 index each fell more than 2% as investors sold trade-sensitive shares in a broad sell-off that extended the market’s slide into a second week.

Technology stocks led the way lower, with digital storage companies and chipmakers among the big decliners. Heavy equipment makers Deere and Caterpillar drove losses in the industrial sector.

The world’s largest economies had seemed on track to resolve the ongoing trade dispute that has raised prices for consumers and pinched corporate profit margins. Investor confidence that the two sides were close to a resolution had helped push the market to its best yearly start in decades.

Those hopes are now being dashed and replaced by concerns that the trade war could crimp what is otherwise a mostly healthy economy. Analysts have warned that failed trade talks and the deterioration in relations will put a dent in the U.S. and China’s economic prospects.

“The larger issue with the tariffs isn’t the specific amounts of tariffs at any given time, but the uncertainty that’s surrounding these tariffs and the `what’s-next?’ of an escalating trade war,” said Willie Delwiche, investment strategist at Baird. “That weighs on the global economy and could then weigh on the U.S. economy.”

The Dow dove 544 points, or 2.1%, to 25,398 as of 3:08 p.m. Eastern Time. Earlier, it was down 719 points. Boeing and Caterpillar fell the most in the Dow. Both companies get a significant amount of revenue from China and stand to lose heavily if the trade war drags on. Boeing slid 4.2% and Caterpillar was 4.4% lower.

The broader S&P 500 index fell 2.1%. The benchmark index is coming off its worst week since January, though it’s still up sharply for the year. The Nasdaq, which is heavily weighted with technology stocks, slid 2.9%, on track for its biggest daily loss of the year.

Technology stocks were bearing the heaviest losses. Apple fell 5% and Cisco slid 3.4%. Chipmakers and other technology companies have warned that uncertainty over the trade war’s outcome is prompting a slowdown in orders.

Bank stocks also fell sharply. Bank of America dropped 3.8% and JPMorgan Chase fell 2.1%.

Safe-play holdings were the only winners as traders sought to reduce their exposure to risk. Utilities were the only sector to rise on the stock market, and prices for U.S. government bonds, which are considered ultra-safe investments, rose sharply, sending yields lower. The yield on the 10-year Treasury fell to 2.40% from 2.45% late Friday.

Overseas markets also fell. European indexes mostly finished more than 1% lower. In Asia, the Shanghai Composite index fell 1.2%. Japan’s Nikkei 225 index gave up 0.7% and South Korea’s Kospi fell 1.4%.

In another sign of how nervous investors were feeling, an index known as Wall Street’s “fear gauge,” which measures how much volatility the market expects in the future, spiked 27%. The VIX, however, is still far below the elevated levels it reached at the end of last year when the S&P 500 came extremely close to entering a bear market, meaning a decline of 20% or more from a recent peak.

Trade talks between the U.S. and China concluded Friday with no agreement and with the U.S. increasing import tariffs on $200 billion of Chinese goods to 25% from 10%. Officials also said they were preparing to expand tariffs to cover another $300 billion of goods.

China on Monday announced tariff increases on $60 billion of U.S. imports, particularly farm products like soybeans. The price of soybeans slid 0.8% to $8.03 a bushel. They were trading around $9 a bushel last month and are now at their lowest price since December 2008. The falling price has put pressure on U.S. farmers.

Analysts have said investors should prepare for a more volatile stock market while the trade dispute deepens. Many are still confident that both sides will eventually reach a deal.

“Since we see a trade accord being reached in the not-too-distant future, we don’t expect the market to endure more than a short-lived spate of indigestion,” said Sam Stovall, chief investment strategist at CFRA.

The deteriorating trade negotiations follow what has been a mostly calm period of trading where solid economic data and corporate earnings helped push the market steadily higher. The S&P 500 is still up 12.5% of the year with technology stocks blowing away rest of the market with 18.8% gains.

Investors have so far made it through the bulk of first quarter corporate earnings reports in decent shape. Earlier in the year they had expected earnings to severely contract. The results so far show less than a 1% drop in profit.

The escalating trade war threatens to spoil an expected earnings recovery in the second half, however.

“Investors are increasingly worried an anticipated second-half profit rebound may now evaporate as President [Donald] Trump’s threat to tariff the remaining $325 billion in Chinese imports would disproportionately target consumer products like iPhones, thereby posing a greater threat to the consumption-driven US economy,” said Alec Young, managing director of global markets research at FTSE Russell.

Elsewhere in the market, generic drug developers are sinking after many of them were accused of artificially inflating and manipulating prices. The lawsuit from attorneys general in more than 40 states alleges that for many years the makers of generic drugs worked together to fix prices.

Teva, which was specifically mentioned, sank 15.1%. Mylan slumped 9.8%.

Ride-sharing company Uber tumbled another 11% on its first full day of trading following its rocky debut on the stock market Friday. The stock had priced at $45 at its initial public offering but is now trading just below $37.

Gold mining companies were some of the few stocks making gains amid the broad market slump as the price of gold, another safe-play asset, rose 1% to $1,301 an ounce. Newmont Goldcorp rose 2.8%.

The Supreme Court is allowing consumers to pursue an antitrust lawsuit that claims Apple has unfairly monopolized the market for the sale of iPhone apps.

New Justice Brett Kavanaugh is joining the court’s four liberals Monday in rejecting a plea from Cupertino, California-based Apple to end the lawsuit over the 30 percent commission the company charges software developers whose apps are sold through the App Store.

 

The lawsuit was filed by iPhone users who must purchase software for their smartphones exclusively through Apple’s App Store.

 

Four conservative justices dissented.

 

 

China said Monday it would impose tariffs on $60 billion worth of imports from the United States, retaliating after President Donald Trump boosted taxes on $200 billion worth of Chinese goods sent to the U.S. and moved to impose duties on another $300 billion of Chinese exports.

The Chinese finance ministry said its new 5 to 25 percent tax would be imposed June 1 and affect 5,140 U.S. products exported to China. Beijing said its response was targeting “U.S. unilateralism and trade protectionism.”

“China will never succumb to foreign pressure,” the foreign ministry said. “We are determined and capable of safeguarding our legitimate rights and interests. We still hope that the U.S. will meet us half way.”

The new Chinese taxes came hours after Trump, on Twitter, urged China not to strike back, claiming that “China has taken so advantage of the U.S. for so many years, that they are way ahead (Our Presidents did not do the job). Therefore, China should not retaliate-will only get worse!”

The escalation of the tit-for-tat tariff increases had an immediate effect on the U.S. stock market, with the key Dow Jones Industrial Average plunging 1.7 percent at the open of the week’s trading in New York.

The Chinese announcement came after the world’s two biggest economies ended their latest trade talks Friday in Washington without reaching a deal.

‘Both sides will suffer’

Chief White House economic adviser Larry Kudlow told Fox News Sunday that “both sides will suffer” from the escalating trade war.

Trump claimed in another tweet, that “Their (sic) is no reason for the U.S. Consumer to pay the Tariffs, which take effect on China today.” But Kudlow acknowledged, “In fact, both sides will pay. Both sides will pay in these things.”

The U.S. leader has claimed that the Chinese government unfairly subsidizes Chinese companies and steals intellectual property from U.S. firms to manufacture its own products.

Kudlow said that in the U.S. “maybe the toughest burdens” are on farmers who sell soybeans, corn and wheat to China. But he said the Trump administration has “helped them before on lost exports” with $12 billion in past subsidies and that “we’ll do it again if we have to and if the numbers show that out.” Trump has said he will ask Congress to approve another $15 billion in farm subsidies to offset lost sales to China.

‘Right where we want to be’

Trump said on Twitter Sunday “We are right where we want to be with China.”

Trump on Friday more than doubled tariffs on $200 billion of Chinese goods, boosting the rate from 10% to 25%, while also moving to impose tariffs on an additional $300 billion of Chinese products, although Kudlow said it could take months for the full effect of the tariffs to be felt. China had previously imposed taxes on $110 billion of American products before Monday’s tariff increase.

Despite the break-off in trade talks Friday, Kudlow said, “We were moving well, constructive talks and I still think that’s the case. We’re going to continue the talks as the president suggested.”

Kudlow said Trump and Chinese President Xi Jinping are likely to discuss trade issues at the G20 summit in Japan at the end of June.

The economic adviser renewed U.S. claims that China had backtracked from earlier agreements reached in the talks, forcing negotiators to cover “the same ground this past week.”

“You can’t forget this: This is a huge deal, the broadest scope and scale ….two countries have ever had before,” Kudlow said. “But we have to get through a lot of issues. For many years, China trade was unfair, non-reciprocal, unbalanced in many cases, unlawful.”

The U.S. has claimed that China steals technology and forces U.S. companies to divulge trade secrets it uses in its own production of advanced technology products.

On Saturday, Trump suggested that China could be waiting to see if he wins reelection next year, but said Beijing would be “much worse” off during a second term of his in the White House.

 

Honda has confirmed its western England car factory, which employs 3,500 people, will close in 2021.

The Japanese carmaker announced Monday that the Swindon plant will shut in two years, “at the end of the current model’s production life cycle.”

 

Honda makes its popular Civic model at the factory, 70 miles (115 kms) west of London.

 

Reports of the closure first emerged in February, heightening concerns about the impact of Brexit-related uncertainty on the U.K. economy.

 

Honda said the closure is not Brexit-driven but “is part of Honda’s broader global strategy in response to changes to the automotive industry.”

 

It said it had spoken to the British government and union consultants, but “no viable alternatives to the proposed closure of the Swindon plant have been identified.”

 

Usually, the U.S. ambassador in Hanoi brings American interests to Vietnam, but next month he plans to take Vietnamese companies to the United States.

U.S. Ambassador to Vietnam Daniel J. Kritenbrink and his team have been recruiting companies in the Southeast Asian country for a business delegation to Washington, D.C., which sparks a broader question: Is it time for Vietnam’s firms to go abroad?

“Investing in the United States is one of the best decisions that Vietnamese firms can make, especially as the country’s economy continues to rapidly expand,” Kritenbrink said. “As firms benefit from this expansion, they should look to expand into new markets and it’s only natural to consider one of Vietnam’s largest export markets, the United States.”

U.S. economic officers have been holding events in Hanoi and Ho Chi Minh City throughout the year to lobby them to join the delegation to Washington, which is scheduled for June 10-12.

The proposition comes as Vietnam’s economy is maturing, prompting more companies to consider if this is the time for them to take the next step in their growth and expand beyond the country’s borders.

As Kritenbrink noted, the U.S. is the biggest market for Vietnamese products, which is a reminder that the communist country already has a big presence in the international arena, having established itself as an export powerhouse in the past two decades.

​But Vietnam thinks it would be a major achievement if companies take it to the next level, no longer just shipping goods overseas, but actually setting up operations and offices overseas. 

Some corporations have done so already, whether it’s the electronics conglomerate FPT going to Japan or the telecommunications giant Viettel servicing markets from Burundi to Peru.

The trend, however, is broadening to businesses that are not as well resourced. Saigon Innovation Hub (Sihub) announced a program last year to provide support to startups that want to go abroad, a program known as Runway to the World. 

“Following our strategy toward 2020, Sihub targets to gather all local and international resources to realize the key mission of boosting economic growth,” Huynh Kim Tuoc said for the launch. He is the managing director of Sihub, which is under the Ho Chi Minh City Department of Science and Technology.

Supporters say going global is the natural next step in Vietnam’s evolution. In the 1980s, the communist government started allowing business activities typical of a market economy. In the 1990s, the United States lifted its trade embargo, and in the early 2000s, Vietnam joined the World Trade Organization. It has since become a leading exporter of rice, textiles and garments, and phones to the international market.

Standard Chartered Bank executive Nirukt Sapru said the context helps, as Vietnam is still seeing increases in gross domestic product, foreign direct investment (FDI) and FDI-driven manufacturing.

“Vietnamese mid-corporate manufacturers can capitalize on this and shield themselves from headwinds by pursuing strategies, such as investing in technologies and exploring new markets, which will help them move up the value chain,” said Sapru, who is the chief executive officer for Vietnam, Southeast Asia, and South Asia at the bank. “In fact, we are seeing an increasing number of local electronics players expressing interest to venture overseas for growth.”

The headwinds he mentioned include trade challenges that could hurt Vietnam’s exports if they hurt the global economy, such as the trade war between China and the United States, slowing growth in China that could affect demand for products and services elsewhere, and U.S. President Donald Trump’s other tariff fights, such as with Japan and the European Union.

By going abroad, Vietnam’s companies hope not just to strengthen their home economy from foreign trade tensions, but also to help build the national brand around the world.

The U.S. said Sunday it expects that China will retaliate with increased tariffs on U.S. exports after President Donald Trump sharply boosted levies on Chinese products headed to the United States.

Chief White House economic adviser Larry Kudlow told “Fox News Sunday” that “both sides will suffer” from the escalating trade war between the U.S. and China, the world’s two biggest economies.

In the U.S., he said that “maybe the toughest burdens” are on farmers who sell soybeans, corn and wheat to China. But he said the Trump administration has “helped them before on lost exports” with $12 billion in subsidies and that “we’ll do it again if we have to and if the numbers show that out.”

Trump on Friday more than doubled tariffs on $200 billion of Chinese goods, boosting the rate from 10 percent to 25 percent, while also moving to impose tariffs on an additional $300 billion of Chinese products, although Kudlow said it could take months for the full effect of the tariffs to be felt. China had previously imposed taxes on $110 billion of American products, but has not said how it might retaliate against Trump’s latest increase in tariffs.

Trade talks between the two economic super powers have been going on in Beijing and Washington for months, but they recessed again in the U.S. capital on Friday without a deal being reached.

“We were moving well, constructive talks and I still think that’s the case,” Kudlow said. “We’re going to continue the talks as the president suggested.”

Kudlow said Trump and Chinese President Xi Jinping are likely to discuss trade issues at the G-20 summit in Japan at the end of June.

The economic adviser renewed U.S. claims that China had backtracked from earlier agreements reached in the talks, forcing negotiators to cover “the same ground this past week.”

“You can’t forget this: This is a huge deal, the broadest scope and scale…. two countries have ever had before,” Kudlow said. “But we have to get through a lot of issues. For many years, China trade was unfair, non-reciprocal, unbalanced in many cases, unlawful.”

The U.S. has claimed that China steals technology and forces U.S. companies to divulge trade secrets it uses in its own production of advanced technology products.

On Saturday, Trump suggested that China could be waiting to see if he wins reelection next year, but said Beijing would be “much worse” off during a second term of his in the White House.

“I think that China felt they were being beaten so badly in the recent negotiation that they may as well wait around for the next election, 2020, to see if they could get lucky & have a Democrat win,” he said, “in which case they would continue to rip-off the USA for $500 Billion a year.”

“Such an easy way to avoid Tariffs?” the U.S. leader said, “Make or produce your goods and products in the good old USA. It’s very simple!”

 

 

 

 

 

 

President Donald Trump’s combative approach to trade has been one of the constants among his often-shifting political views. And he’s showing no signs of backing off now, even as the stakes intensify with the threat of a full-blown trade war between the world’s two biggest economies.  

  

The president went after China on Day 1 of his presidential bid, promising to “bring back our jobs from China, from Mexico, from Japan, from so many places.” 

 

Trump’s views on trade helped forge his path to victory in states such as Pennsylvania, Michigan, Wisconsin and Ohio, where he linked the loss of manufacturing jobs to the North America Free Trade Agreement and other trade deals. He warned the worst was yet to come with President Barack Obama’s proposed Trans-Pacific Partnership.  

  

His trashing of existing and proposed trade agreements grabbed the headlines, but he also made clear his view that globalization had been bad for America and that he would use tariffs to protect national security and domestic producers. He cited the nation’s Founding Fathers, Abraham Lincoln and Ronald Reagan as leaders whose footsteps he was following when it came to trade and tariffs. 

 

“Our original Constitution did not even have an income tax,” Trump told voters in Monessen, Pa., four months before the 2016 presidential election. “Instead, it had tariffs, emphasizing taxation of foreign, not domestic production.” 

​Taking on China

 

No. 7 on his list of trade promises in that speech: taking on China for “its theft of American trade secrets.” 

 

“This is so easy. I love saying this. I will use every lawful presidential power to remedy trade disputes, including the application of tariffs consistent” with existing trade laws, Trump said. 

 

Those laws include Section 232 of the Trade Expansion Act, which Trump cited to enact tariffs on steel and aluminum imports from China, Canada, Mexico and elsewhere. 

 

They also include Section 301 of the Trade Act, which Trump used last year to apply 25 percent tariffs on $50 billion worth of Chinese goods and 10 percent tariffs on $200 billion of goods. That 10 percent was increased to 25 percent on Friday. Trump is laying the groundwork to extend the 25 percent tariff to all of China’s exports to the U.S. 

 

“Such an easy way to avoid Tariffs? Make or produce your goods and products in the good old USA. It’s very simple!” Trump tweeted on Saturday. 

 

Of course, America’s trading partners haven’t let Trump’s tariffs stand without taking similar action themselves. Farmers, boat makers, and whiskey and wine producers are just some of the U.S. industries caught in the middle. 

 

“Farming is a very small-margin, small-profit business. We rely on lots of volume and lots of sales to generate a profit,” said Brent Bible, a soybean and corn farmer in Lafayette, Ind., who has seen prices for both commodities drop in the past year. “We are operating at a loss now.” 

 

Trump’s philosophy on some issues has evolved over the years. 

 

He once described himself regarding the abortion issue as “very pro-choice.” Now, his administration promotes him as the most “pro-life president in American history.” 

​Complaint about Japan

 

On trade, not so much. In Trump: The Art of the Deal, Trump complained of the Japanese that “what’s unfortunate is that for decades now they have become wealthier in large measure by screwing the United States with a self-serving trade policy that our political leaders have never been able to fully understand or counteract.” 

 

Fast-forward nearly three decades, and Trump declared in his 2015 announcement for the presidency that other nations were prospering at America’s expense. “When was the last time anybody saw us beating, let’s say, China, in a trade deal? They kill us. I beat China all the time,” Trump said. 

 

Trump’s approach on trade is a dramatic departure for the Republican Party, but GOP lawmakers have declined to take action that would block his tariffs. They credit his tactics for getting improvements to a trade deal with Canada and Mexico to replace NAFTA, and for getting China to the negotiating table. 

 

“President Trump is the first president to take China head-on,” said Texas Rep. Kevin Brady, the top Republican on the House Ways and Means Committee. He said “everyone knows I’m not a fan of tariffs, but I think everyone knows as well that China has been cheating for far too long.” 

 

Trump has received some encouragement from Democratic leaders. Senate Minority Leader Chuck Schumer, D-N.Y., tweeted to Trump: “Don’t back down. Strength is the only way to win with China.” 

 

Current and former officials in the administration believe that voters will give the president credit for standing up to China, and not blame him for any pain that may result from the tariffs war. 

 

Overall, AP VoteCast found Americans critical in their assessments of Trump on trade. But that’s not the case with his supporters. According to the survey of more than 115,000 midterm voters nationwide, 45% approved of Trump on trade, while 53% disapproved. Among voters who approved of Trump’s job overall, fully 88% approved of his handling of trade. 

​Who pays?

 

While Trump casts his tariffs as being paid for by China, they actually are paid by the American companies that bring a product into the U.S. This can help some U.S. producers, though, because it makes their goods more competitive pricewise. Still, the burden of Trump’s tariffs on imports from China and other countries falls entirely on U.S. consumers and businesses that buy imports, said a study in March by economists from the Federal Reserve Bank of New York, Columbia University and Princeton University. 

 

Republican-leaning business groups such as the U.S. Chamber of Commerce have warned that the tariffs threaten to derail the economy raise unemployment, but with economic growth at 3.2 percent last quarter and the unemployment rate at 3.6 percent, Trump isn’t changing strategy now. 

 

“Tariffs will make our Country MUCH STRONGER, not weaker. Just sit back and watch!” Trump tweeted on Friday. 

President Donald Trump let loose with a morning round of tweets Friday that downplayed the possible consequences of his trade war with China.   

   

Trump minimized the worth of China’s purchases of U.S. goods and services, which support nearly 1 million jobs in the U.S.; misstated the trade deficit; and ignored the inevitable rise in many costs to consumers when imports are heavily taxed.  

 

The tweets came as his tariffs kicked in on $200 billion worth of Chinese goods, with another round of tariffs in the offing, and as U.S. and Chinese officials negotiated in Washington. With trade relations between the economic giants seemingly rupturing and the stock market sinking, Trump called the talks “congenial.”  

 

A look at some of his statements:  

 

Trump: “Your all time favorite President got tired of waiting for China to help out and start buying from our FARMERS, the greatest anywhere in the World!”  

 

The facts: The notion that China doesn’t buy from U.S. farmers is false. China is the fourth-largest export market for U.S. agriculture. It bought $9.3 billion in U.S. agricultural products last year.  

 

As for calling himself “your” favorite president, polls find Trump’s approval rating to be high among Republicans, but it generally ranges between 35% and 45% among Americans overall.   

 

Trump: “We have lost 500 Billion Dollars a year, for many years, on Crazy Trade with China. NO MORE!”  

 

The facts: That’s wrong. When sizing up the trade deficit, Trump always ignores trade in services — where the U.S. runs a surplus with China — and speaks only of goods. Even in that context, he misstated the imbalance.  

 

The U.S. trade deficit with China last year was $378.6 billion, not $500 billion. On goods alone, the deficit was $419.2 billion.      

Trump is also misleading when he puts the deficit in that ballpark for many years. It’s true that the imbalance has long been lopsided, but the U.S. trade representative’s office notes that exports of goods to China have increased by nearly 73% since 2008 and U.S. exports to China overall are up 527% since 2001.  

 

Nor is the trade gap a “loss” in a pure sense. U.S. consumers and businesses get electronics, furniture, clothing and other goods in return for their money. They are buying things, not losing cash.  

Trump: “Tariffs are NOW being paid to the United States by China of 25% on 250 Billion Dollars worth of goods & products. These massive payments go directly to the Treasury of the U.S.”  

 

The facts: This is not how tariffs work. China is not writing a check to the U.S. Treasury. The tariffs are paid by American companies, which usually pass the cost on to consumers through higher prices. One theory in support of such tariffs is that higher prices for Chinese imports will encourage consumers to buy goods made in the U.S. or elsewhere instead. But the risk is that consumers could simply respond by spending less than they otherwise would, which would hurt growth. 

The burden of Trump’s tariffs on imports from China and other countries falls entirely on U.S. consumers and businesses that buy imports, said a study in March by economists from the Federal Reserve Bank of New York, Columbia University and Princeton University. By the end of last year, the study found, the public and U.S. companies were paying $3 billion a month in higher taxes and absorbing $1.4 billion a month in lost efficiency.  

 

A coalition of U.S. trade organizations representing retail businesses, tech, manufacturing and agriculture said this week: “For 10 months, Americans have been paying the full cost of the trade war, not China.” It said: “To be clear, tariffs are taxes that Americans pay, and this sudden increase with little notice will only punish U.S farmers, businesses and consumers.” 

 

Trump: “Tariffs will bring in FAR MORE wealth to our Country than even a phenomenal deal of the traditional kind. Also, much easier & quicker to do. Our Farmers will do better, faster, and starving nations can now be helped. Waivers on some products will be granted, or go to new source!”  

 

The facts: In addition to repeating the canard that China pays the tariffs, he’s failing to account for the damage that tariffs can do.  

 

By most private estimates, a trade war leads to slower growth rather than the prosperity that Trump is promising. The president’s tweet also goes beyond past claims that tariffs are simply a negotiating tactic to force better terms with China. Trump appears to be suggesting that a tariff increase would generate revenues that could then be spent on farm products and infrastructure, something that might in theory require support from Congress.  

 

But on their own, tariffs are a clear drag on growth.  

 

Analysts at the consultancy Oxford Economics estimate that implementing and maintaining the latest increase would trim U.S. gross domestic product by 0.3%, or $62 billion, in 2020. This would be equal to a loss of about $490 per household.  

 

Economists at Nomura note that gross domestic product this year could take a hit of as much as 0.4% if Trump expands the taxes to all Chinese imports, as business confidence slumped and financial conditions tightened. 

With a ring of the opening bell, Uber began picking up passengers as a newly minted public company Friday and investors waited to bet on a service with huge potential, but a long way from turning a profit.

Shares in the ride-hailing giant were sold in an initial public offering for $45 each, raising $8.1 billion, but it will take several hours for new investors to show how much they’re interested. Officials expect trading to start around 11:30 a.m.

CEO Dara Khosrowshahi and other company officials stood on a balcony above the New York Stock Exchange and clapped as the bell rang to signal the start of the day’s trading.

The IPO price on Thursday came in at the lower end of Uber’s targeted price range of $44 to $50 per share. The caution may have been driven by escalating doubts about the ability of ride-hailing services to make money since Uber’s main rival, Lyft, went public six weeks ago.

Jitters about an intensifying U.S. trade war with China have also contributed to the caution. Stocks opened broadly lower on Wall Street after the two countries failed to reach a deal before Friday’s tariff deadline.

Even at the tamped-down price, Uber now has a market value of $82 billion — five times more than Lyft’s.

Before the opening bell, Khosrowshahi tried to manage expectations for the first day of trading.

“Today is only one day. I want this day to go great, but it’s about what we build in the next three to five years,” he said in an interview with CNBC. “And I feel plenty of pressure to build over that time frame.”

Uber, Khosrowshahi said, is dealing with a potential $12 trillion market so “it makes sense to lean forward.”

He predicted that younger generations will not want to own cars. “I think more and more you’re going to have transportation on demand services, essentially de-bundle the car. They’re going to want to push a button and get the transportation they want.”

Austin Geidt, one of Uber’s first employees, rang the opening bell. She joined the company nine years ago and is now head of strategy for the Advanced Technologies Group, working on autonomous vehicles. Over the years, she helped to lead its expansion in hundreds of new cities and countries.

Both Uber co-founders Travis Kalanick and Garrett Camp were present at the exchange but absent from the podium during the bell ringing.

A black Uber logo was hanging over exchange floor and bright green Uber Eats trucks were parked outside. Men in black T-shirts and hats with the Uber Eats logo handed out drinks and snacks on the trading floor while photos of sedans, helicopters and Jump bikes were shown on screens above.

No matter how Uber’s stock swings Friday, the IPO has to be considered a triumph for the company most closely associated with an industry that has changed the way millions of people get around. That while also transforming the way millions of more people earn a living in the gig economy.

Uber’s IPO raised another $8.1 billion as the company it tries to fend off Lyft in the U.S. and help cover the cost of giving rides to passengers at unprofitable prices. The San Francisco company already has lost about $9 billion since its inception and acknowledges it could still be years before it turns a profit.

That sobering reality is one reason that Uber fell short of reaching the $120 billion market value that many observers believed its IPO might attain.

Another factor working against Uber is the cold shoulder investors have been giving Lyft’s stock after an initial run-up. Lyft’s shares closed Thursday 23% below its April IPO price of $72.

Uber “clearly learned from its `little brother’ Lyft, and the experience it has gone through,” Wedbush Securities analysts Ygal Arounian and Daniel Ives wrote late Thursday.

Despite all that, Uber’s IPO is the biggest since Chinese e-commerce giant Alibaba Group debuted with a value of $167.6 billion in 2014.

“For the market to give you the value, you’ve either got to have a lot of profits or potential for huge growth,” said Sam Abuelsamid, principal analyst at Navigant Research.

Uber boasts growth galore. Its revenue last year surged 42% to $11.3 billion while its cars completed 5.2 billion trips around the world either giving rides to 91 million passengers or delivering food.

Uber might be even more popular if not for a series of revelations about unsavory behavior that sullied its image and resulted in the ouster of Kalanick as CEO nearly two years ago.

The self-inflicted wounds included complaints about rampant internal sexual harassment, accusations that it stole self-driving car technology, and a cover-up of a computer break-in that stole personal information about its passengers. What’s more, some Uber drivers have been accused of assaulting passengers, and one of its self-driving test vehicles struck and killed a pedestrian in Arizona last year while a backup driver was behind the wheel.

Uber hired Khosrowshahi as CEO to replace Kalanick and clean up the mess, something that analysts say has been able to do to some extent, although Lyft seized upon the scandals to gain market share.

Kalanick remains on Uber’s board and while he kept a relatively low profile on Friday, he can still savor his newfound wealth. At $45 per share, his stake in Uber will be worth $5.3 billion. Hundreds, if not thousands, of other Uber employees are expected to become millionaires in the IPO.

Meanwhile, scores of Uber drivers say they have been mistreated by the company as they work long hours and wear out their cars picking up passengers as they struggle to make ends meet. On Wednesday, some of them participated in strikes across the United States to highlight their unhappiness ahead of Uber’s IPO but barely caused a ripple. A similar strike was organized ahead of Lyft’s IPO to the same effect.

In its latest attempt to make amends, Uber disclosed Thursday that it reached a settlement with tens of thousands of drivers who alleged they had been improperly classified as contractors. The company said the settlement covering most of the 60,000 drivers making claims will cost $146 million to $170 million.

Now, Uber will focus on winning over Wall Street.

Uber may be able to avoid Lyft’s post-IPO stock decline because it has a different story to tell than just the potential for growth in ride-hailing, says Alejandro Ortiz, principal analyst with SharesPost. Uber, he said, has plans to be more than a ride-hailing company by being all things transportation to users of its app, offering deliveries, scooters, bicycles and links to other modes of transportation including public mass transit systems.

“Whether or not that pitch will work kind of remains to be seen. It’s nearly impossible to tell now,” he said. “Obviously the risk to the company now is they have a lot more shareholders that they have to convince.”

 

U.S. President Donald Trump began Friday issuing a series of tweets focusing on trade with China, as the United States increased tariffs from 10% to 25% on $200 billion worth of Chinese imports.

“We have lost 500 Billion Dollars a year, for many years, on Crazy Trade with China. NO MORE!”

Trump went on to tweet that trade talks with China are proceeding in a “congenial manner” and “there is absolutely no need to rush – as Tariffs are NOW being paid to the United States by China of 25% on 250 Billion Dollars worth of goods and products. These massive payments go directly the Treasury of the U.S….”

The president noted plans for the U.S. to level tariffs of 25% on the “remaining” $325 billion, pointing out that Washington sells Beijing about $100 billion worth of goods, and with the more than $100 billion in tariffs received, the U.S. will buy the agricultural products from U.S. farmers and send it as humanitarian assistance to nations in need. He also goes on to chide China for trying to “redo” the deal at the last minute after the terms already had been set.

China said Friday it “deeply regrets” the increased tariffs and will take the “necessary countermeasures,” without giving any details.

The increases are going into effect in the midst of talks between Chinese Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin.

Thursday, U.S. and Chinese trade negotiators ended the first of two days of talks aimed at saving a trade deal even as President Donald Trump said the new “very heavy tariffs” on Chinese products” would go ahead.

The White House said late Thursday, “Ambassador Lighthizer and Secretary Mnuchin met with President Trump to discuss the ongoing trade negotiations with China. The Ambassador and Secretary then had a working dinner with Vice Premier Liu He, and agreed to continue discussions tomorrow morning at USTR.”

Liu He is leading the Chinese negotiating team for the talks which threatened to collapse after the Trump administration accused Beijing of backtracking.

“We were getting very close to a deal, then they started to renegotiate the deal,” said Trump earlier in the day at the White House.

“It was their idea to come back” and resume discussion ahead of the Friday deadline for additional tariffs, the president said.

Trump said he had also received “a beautiful letter” from Xi that expressed a sentiment of “let’s work together.”

Trump told reporters that he happens “to think tariffs for our country are very powerful,” in line with a view he has been expressing that such increased punitive taxes would be good for America’s economy.

Some economists, however, predict such tariffs would cut in half U.S. economic growth seen in the first quarter of this year.

 

The Trump administration hopes the new tariffs will force changes in China’s trade, subsidy and intellectual property practices.

 

The two sides have been unable to reach a deal due, in part, to differences over the enforcement of an agreement and a timeline for removing the tariffs.

Trump says despite being poised to impose the additional tariffs, he is not looking for a trade war with Beijing.

“I want to get along with China,” he told reporters Thursday.