Juhyun Lee contributed to this report.

SEOUL — As U.S. President Donald Trump intensifies his trade battle with China, one of the hardest-hit countries could be South Korea.

Asia’s fourth-largest economy, South Korea is especially vulnerable to the tariff war because of its reliance on foreign trade — in particular, exports to its two biggest trading partners: China and the United States.

After U.S.-China trade talks broke down, Trump last week raised tariffs on $200 billion worth of Chinese imports, and threatened to do so with $300 billion more. China retaliated with tariffs on $60 billion of U.S. goods.

The trade war escalation, which rattled markets and threatened to hold back global growth, comes at an especially bad time for South Korea, whose economy unexpectedly contracted in the first quarter.

“South Korea is particularly vulnerable,” says Xu Xiao Chun, an economist who monitors South Korea for Moody’s Analytics. “It’s not inconceivable that you could see a second consecutive quarter of contraction of GDP, which would make it a technical recession.”

Trade war exacerbates tech woes

As the world’s leading producer of memory chips that go into consumer electronics, such as cellphones and computers, South Korea benefited from years of rapid and consistent growth in the global smartphone market.

But global demand for smartphones has plateaued. That, combined with a slowdown in China and sluggish global growth, has hurt South Korea’s export-driven economy.

In April, South Korea’s exports declined for the fifth consecutive month, falling 2% compared to the same period a year earlier.

“South Korea’s economy was already going down the wrong path… but the latest escalation in the trade war really puts a spanner (obstacle) in the works,” Xu said.

South Korea was always likely to be hurt by the U.S.-China trade war just by virtue of its proximity to China, its biggest trading partner and top export destination.

South Korea’s exports to China could be cut by about $1.3 billion a year, said An Sung-bae with the state-run Korea Institute for International Economic Policy.

But the U.S.-China tariffs also pose a more specific threat to South Korea’s crucial semiconductor industry.

Here’s how it works:

South Korea sends semiconductors to China, where they are placed into smartphones and other electronics. China then ships many of those assembled products to the United States.

Trump’s tariffs could drastically raise the price of those electronics. For example, the cost of an iPhone XS could go up by around $160 if Trump follows through on all his tariff threats, one analyst at Morgan Stanley estimated.

Those higher prices would result in fewer shipments of electronics from China to the United States. Which means South Korea would be selling a lot fewer semiconductors to China.

That could put a major dent in South Korea’s economy, since semiconductors make up nearly half of its total shipments to China.

“Companies that mainly target the Chinese market will suffer… and the South Korean export business relies heavily on the Chinese market,” said Mun Byung-Ki, a senior researcher at the Korea International Trade Association.

A bright spot?

But some analysts say the situation may not be that dire. One reason: even if South Korean exports to China decline, it may make up the gap by shipping more products to the United States — a situation that could potentially provide a major boom for South Korea’s tech industry.

Alex Holmes, a Singapore-based analyst at Capital Economics, says that already may be happening. Though South Korea’s overall export numbers are suffering, its shipments to the United States are growing, he says.

That’s particularly the case for Korean electronics that fall under U.S. tariffs. Those tariffed goods have well out-performed non-tariffed items, Holmes says, “which suggests that U.S. companies have already switched suppliers as a result of tariffs.”

The increased shipments to the United States almost cover the equivalent hit South Korea has taken as a result in the falling Chinese demand, Holmes adds.

Manufacturing shift?

The tariffs could also have a long-term impact on manufacturing in Asia, as companies shift their production bases away from China as a way to shield themselves from the trade war.

A growing number of Asian companies, including some South Korean memory chipmakers, have already begun shifting their manufacturing centers to fast-growing and cheaper countries in Southeast Asia.

“If South Korea wants to find cheaper factories in say Vietnam or one of the ASEAN countries, it could make its money back or potentially even grow more than it would have if it relied on Chinese manufacturing,” Xu said. “But those sort of actions take a lot of time, a lot of capital, and there is a lot of risk involved.”

With no end in sight to the U.S.-China trade tensions, it’s a pattern that could be repeated, threatening China’s reputation as a low-cost production base.

“The knock-on effect of this trade war will be to locate a lot more production capabilities in other countries in Asia,” Xu said.

The United States must show sincerity if it is to hold meaningful trade talks, China said on Friday, after U.S. President Donald Trump dramatically raised

the stakes with a potentially devastating blow to Chinese tech giant Huawei.

China has yet to say whether or how it will retaliate against the latest escalation in trade tension, although state media has taken an increasingly strident tone, with the ruling Communist Party’s People’s Daily publishing a front-page commentary that evoked the patriotic spirit of past wars.

China’s currency slid to its weakest in almost five months, although losses were capped after sources told Reuters that the central bank would ensure the yuan did not weaken past the key 7-per-dollar level in the immediate term.

The world’s two largest economies are locked in an increasingly acrimonious trade dispute that has seen them level escalating tariffs on each other’s imports in the midst of negotiations, adding to fears about risks to global growth and knocking financial markets.

Foreign ministry spokesman Lu Kang, asked about state media reports suggesting there would be no more U.S.-China trade talks, said China always encouraged resolving disputes between the two countries with dialog and consultations.

“But because of certain things the U.S. side has done during the previous China-U.S. trade consultations, we believe if there is meaning for these talks, there must be a show of sincerity,” he told a daily news briefing.

The United States should observe the principles of mutual respect, equality and mutual benefit, and they must also keep their word, Lu said, without elaborating.

On Thursday, Washington put telecoms equipment maker Huawei Technologies Co Ltd, one of China’s biggest and most successful companies, on a blacklist that could make it extremely difficult for the telecom giant to do business with U.S. companies.

That followed Trump’s decision on May 5 to increase tariffs on $200 billion worth of Chinese imports, a major escalation after the two sides appeared to have been close to reaching a deal in negotiations to end their trade battle.

‘Wheel of destiny’

China can be expected to make preparations for a longer-term trade war with the United States, said a Chinese government official with knowledge of the situation.

“Indeed, this is an important moment, but not an existential, live-or-die moment,” the official said.

“In the short term, the trade situation between China and the United States will be severe, and there will be challenges. Neither will it be smooth in the long run. This will spur China to make adequate preparations in the long term.”

The impact of trade friction on China’s economy is “controllable,” the state planner said on Friday, pledging to take countermeasures as needed, Meng Wei, a spokeswoman for the National Development and Reform Committee (NDRC), told a media briefing.

The South China Morning Post, citing an unidentified source, reported that a senior member of China’s ruling Communist Party said the trade war with the United States could reduce China’s 2019 growth by 1 percentage point in the worst-case scenario.

Wang Yang, the fourth-most senior member of the Communist Party’s seven-member Standing Committee, the top decision-making body, told a delegation of Taiwan businessmen on Thursday that the trade war would have an impact but would not lead to any structural changes, the paper said, citing an unidentified source who was at the meeting.

One company that says it has been making preparations is Huawei’s Hisilicon unit, which purchases U.S. semiconductors for its parent.

Its president told staff in a letter on Friday that the company had been secretly developing back-up products for years in case Huawei was one day unable to obtain the advanced chips and technology it buys from the United States.

“Today, the wheel of destiny has turned and we have arrived at this extreme and dark moment, as a super-nation ruthlessly disrupts the world’s technology and industry system,” the company president said in the letter.

The letter was widely shared on Chinese social media, gaining 180 million impressions in the few hours after it was published on the Weibo microblogging site.

“Go Huawei! Our country’s people will always support you,” wrote one Weibo user after reading the letter.

The Afrobytes and Viva Tech conferences in Paris this week have provided an opportunity to look at the progress that high-tech startups have made in Africa, where fundraising is booming.

According to Partech Africa, a venture capital firm, 146 startups in 19 African countries raised $1.16 billion for African digital entrepreneurs in 2018. Kenya, Nigeria and South Africa received 78% of the total funding, with Egypt close behind. 

In French-speaking Africa, Senegal is the leading hub with $22 million raised in four deals. Compared with their Anglophone peers, Africa’s Francophone countries operate in smaller markets, and lack capital and mentors.  

A key: Seeking advice

 

Marieme Diop, a venture capital investor at Orange Digital Ventures, said that “unfortunately in Francophone Africa, it is not in our DNA. People who succeed in business or in electing positions do not necessarily reach back to help their peers to show them how to be successful. In the Anglophone world, it is a must for anyone who wants to start something: seeking advice. So the gap is not only financial” between the regions. 

 

Africa is seen by many as the next frontier for venture capital, with its booming population and mobile-first economy. That’s why Google, Facebook and PayPal participated in Paris in Afrobytes 2019.  

 

“We do not want people globally to see African high-tech as an exotic stuff,” said Afrobytes CEO Ammin Youssouf. “We want to be heard and talk about AI, blockchain, what is happening in Silicon Valley, because it has an impact on us. We already have brilliant minds in Africa, especially in tech, to have those conversations.”

Unlike the global trend, where men dominate the high-tech industry, women are leading the movement in Africa.

“Actually, what we see in the statistics is that women’s involvement and participation on in the African continent is much higher than what you would find in New York, for example, or San Francisco,” said Ben White, chief executive officer of venture capital platform VC4Africa, who has been supporting startups on the continent for more than 10 years. “I think it is an advantage. It also means having women investors who are very sensitive to gender-related questions and can also ensure that the system we are building is inclusive.”

Governments’ role

 

Governments in Africa are trying to regulate the activity and even support the sector. Forty Senegalese startups last November secured a total of $2 million in government funding. But some experts say governments lack the skills needed to pick good investments.

Kenza Lahlou, co-founder and managing partner at Outlierz Ventures, said the public sector “should not invest [in startups]. States should build funds of funds. We have that in Morocco in partnership with the World Bank. The government started Innov Invest, to invest in local venture capitalist funds, to lower the risk for local funds.”

 

With a population expected to reach 1.4 billion people by 2021, and a continent that will put about 1 billion smartphones into use within two years, Africa is a promising area for the world’s leading high-tech and telecom companies.

President Donald Trump’s high-profile trade offensives have grabbed headlines and rattled financial markets around the world. He’s battling China over the industries of the future, strong-arming Canada and Mexico into reshaping North American trade and threatening to tax cars from Europe. 

 

But his trade warriors are fighting dozens of more obscure battles — over laminated woven sacks from Vietnam, dried tart cherries from Turkey, rubber bands from Thailand and many others.

Under the radar, the Trump administration has launched 162 investigations into allegations that U.S. trading partners dump products at cut-rate prices or unfairly subsidize their exporters — a 224% jump from the number of cases the Obama administration pursued in the same time in office.  

  

If the U.S Commerce Department finds that U.S. companies have been hurt — and ultimately if the independent International Trade Commission goes along — the offending imports are slapped with duties that can price them out of the market.

On Thursday, for instance, the department announced levies of up to 337% in combat over kitchen and bathroom countertops — or at least over the imported quartz slabs from China that many of them derive from. 

 

These cases have nothing directly to do with the mother of all Trump’s trade wars: a cage match with China over Beijing’s aggressive push to transform Chinese companies into world leaders in cutting-edge industries like artificial intelligence and electric cars. In that one, the world’s two biggest economies have slapped tariffs on hundreds of billions of dollars’ worth of each other’s products. 

Companies target competitors

 

The smaller anti-dumping and “countervailing duty” (aimed at unfair subsidies) cases are usually brought by U.S. companies or industries that say they’re being victimized by foreign competitors. But for the first time in more than 25 years, the administration in 2017 brought a case on its own — against a common alloy aluminum sheet from China — without waiting for an industry’s plea for help. 

 

“They’re much more aggressive in every way,” said Mary Lovely, a Syracuse University economist.  

Commerce Secretary Wilbur Ross says that the administration’s trade policies have “irrevocably changed the conversation on trade” and that the dumping and subsidy cases “help level the playing field for U.S. companies and workers.” 

 

Like any conflict, though, the battles over remote patches of the commercial marketplace leave winners and losers. Lovely says the Trump administration’s intervention in trade cases risks “tilting the playing field toward particular industries,” driving up prices and making the economy less efficient by driving away competition. 

 

Whatever the impact, the administration’s America First approach to trade is encouraging more companies to bring more cases.  

  

“Everybody knows that this administration is concerned about unfair trade and is very willing to offset unfair trade where that is warranted.,” said Gilbert Kaplan, the Commerce Department’s undersecretary for international trade. 

 

The dollar amounts in anti-dumping and countervailing duty cases are too small to make a real dent in the $21 trillion U.S. economy. But for the companies involved, the stakes often couldn’t be higher. 

Newsprint duties

 

America’s struggling newspapers, for instance, saw their costs spike when the Commerce Department last year imposed anti-dumping and countervailing duties on Canadian newsprint. Some newspaper companies planned layoffs as a result. But in August, the trade commission, which acts as an independent tribunal in trade cases, overturned the duties, sparing newspapers devastating cost increases. 

 

The newsprint case was brought by a single company: a hedge fund-owned paper producer in Washington state.  

  

Likewise, the offensive against imported quartz slabs from China originated from a single complaint: Cambria, a maker of quartz products, including high-end kitchen and bathroom countertops, based in Le Sueur, Minn.  

  

Cambria CEO Martin Davis says the U.S. marketplace was flooded by low-priced quartz slabs from China. Commerce Department figures show that imports from China surged 78% in 2016 and 54% in 2017. The influx, Davis said, was subsidized by the Chinese government. 

 

“My company was going down,” he said. 

 

Davis sought relief from the government. He said that pursuing the case has cost him $5 million. Commerce agreed to impose anti-dumping and countervailing duties on Chinese quartz slabs last year.  

  

On Thursday, the department announced its final decision on the duties, hitting Chinese quartz slabs with anti-dumping duties of up to 337% and with countervailing duties of up to 191%.  

​’We will lose money’

  

The levies are bad news for U.S. companies that make countertops from imported quartz. Jeff Keck of Marble Uniques in Tipton, Ind., says the higher duties struck while his company was working on a contract to provide quartz countertops to an apartment complex. 

 

“We will lose money on the project,” he said. 

 

Making things worse from his perspective: The duties are retroactive to August. 

 

Paul Nathanson, spokesman for the American Quartz Worker Coalition set up to fight the duties, said that Cambria is abusing trade law. 

 

“They are using the U.S. government to try to wipe out their competitors,” he said. 

 

The ITC held a hearing last week at which opponents of the duties argued that high-end Cambria doesn’t actually compete with inexpensive Chinese imports. The commission is expected to rule on the case next month. If it finds that Cambria wasn’t hurt by the imports, the ITC could strike down the duties. 

 

For now, the sanctions on quartz imports are helping some businesses, and not just Cambria. Among them is Blackbird Manufacturing, an Owensboro, Ky., company that makes stone countertops. CEO David Thomas said that Blackbird couldn’t compete with low-priced Chinese quartz for contracts with penny-pinching hotel chains. 

 

Now that Chinese quartz slabs are now being taxed out of the market, “we’re getting jobs landing twice a week, and they’re big jobs,” Thomas said. Blackbird has hired about 15 workers since June and now has a staff of 52. He plans to add 20 more this year. 

 

But as the administration mounts trade cases in dozens of industries, many companies, especially small ones, can be blindsided by duties they didn’t see coming, said Paula Connelly, a trade lawyer in Woburn, Mass. 

 

“I’ve been in this business a long time, and I’ve never seen this volume of investigation,” she said.  

  

Recently, she has fielded calls from importers who were hit unexpectedly by the big tariffs on quartz. One business owner said he might have to close shop. 

 

“They had two days to come up with a couple of hundred thousand dollars in anti-dumping and countervailing duties,” she said. 

Executives from major global retailers played down the threat to employment in stores from artificial intelligence and automation on Thursday and pledged more training to help staff adopt more high-value tasks as machines take over their work.

Retail is one of the largest employers in many developed economies and experts have predicted automation puts millions of low-skilled jobs in the sector at risk, particularly as the introduction of self-checkouts makes cashiers redundant.

“Technology can liberate people from repetitive tasks,” Barbara Martin Coppola, chief digital officer at Swedish furniture giant IKEA, told Reuters on the sidelines of the World Retail Congress, an annual industry gathering.

“These jobs are not gone. We are believers in the talent we have in our house and we look to repurpose it into more fulfilling tasks.”

Martin Coppola said IKEA needs far fewer people to select the goods displayed on the firm’s website, known as online merchandising, as algorithms get more sophisticated. But these people can be trained in digital marketing instead.

“It is important to see technology as an enabler and not to let it be at the expense of human beings and the planet,” she said.

Walmart, the world’s biggest private employer with 2.2 million staff, has been adding self check-outs and announced last month that it would be rolling out automated shelf scanners, to check product availability, and cleaning robots.

“Cleaning the floor is not a thing that brings a person fulfillment,” said Tom Faitak, Walmart’s senior manager for AI, robotics and automation, adding that automating repetitive tasks gives staff more time to help customers.

“Robots are not fantastic at interacting with people,” he said. “Robots are good at doing the same task over and over, not finding an item on the shelf.”

Walmart staff who are freed up from some repetitive tasks are increasingly being redeployed to pick orders placed online and prepare them for curbside pickup.

Consultants McKinsey estimate that 53 percent of activities in retailing are automatable, particularly in stock management and logistics. It predicts that next generation automated grocery stores could see the number of labor hours for inventory and stocking cut by two thirds.

Walmart and Kroger – the biggest U.S. supermarket chain — say they are committed to developing their store workers so they are not left behind.

Walmart offers training to tens of thousands of associates through an “Academy” program, while Kroger launched a new scheme last year to promote continued education, from high school certificates to doctorates.

Kroger Chairman and Chief Executive Rodney McMullen, who started out as a store clerk at the chain and had his college education supported by the company, noted that U.S. unemployment was at its lowest for decades, pushing automation.

“Part of it is because you just can’t find people,” he said, noting that the company was creating higher-paid jobs in software engineering as it seeks to modernize the business. The Cincinnati-based company has built robot-aided warehouses and is trying out self-driving vehicles to improve delivery.

U.S. homebuilding increased more than expected in April and activity in the prior month was stronger than initially thought, suggesting declining mortgage rates were starting to provide some support to the struggling housing market.

Land and labor shortages, however, continue to constrain builders’ ability to construct more lower priced houses. This segment has experienced an acute shortage of inventory, holding back home sales. Investment homebuilding has contracted for five straight quarters.

Housing starts rose 5.7% to a seasonally adjusted annual rate of 1.235 million units last month, driven by gains in the construction of both single- and multi-family housing units, the Commerce Department said on Thursday. Groundbreaking was also likely boosted by drier weather in the Midwest.

Data for March was revised up to show homebuilding rising to a pace of 1.168 million units, instead of falling to a rate of 1.139 million units as previously reported.

The government revised the seasonally adjusted data back to January 2014. The unadjusted series will be revised in July.

Building permits rose 0.6% to a rate of 1.296 million units in April. Building permits had declined for three straight months. Permits for single-family housing, however, fell for a fifth straight month, likely reflecting the supply challenges.

Economists polled by Reuters had forecast housing starts would increase to a pace of 1.205 million units in April.

The 30-year fixed mortgage rate has dropped to 4.10% from a peak of about 4.94% in November, according to data from mortgage finance agency Freddie Mac. Decreasing mortgage rates reflect a recent decision by the Federal Reserve to suspend its three-year monetary policy tightening campaign.

Strong labor market

Relatively cheaper home loans and a strengthening labor market, characterized by the lowest unemployment rate in nearly 50 years, are underpinning demand for housing. In a separate report on Thursday, the Labor Department said initial claims for state unemployment benefits dropped 16,000 to a seasonally adjusted 212,000 for the week ended May 11.

The robust job market should underpin the economy as the boost from the White House’s $1.5 trillion tax cut package fades and President Donald Trump’s escalating trade war with China disrupts supply chains at factories, which are already struggling with an inventory bloat that has cut production.

A survey on Wednesday showed confidence among homebuilders rose to a seven-month high in May. While lower borrowing costs are boosting demand, builders said they “continue to deal with ongoing labor and lot shortages and rising material costs that are holding back supply and harming affordability.”

The housing market has been mired in a soft patch since last year. Investment in homebuilding contracted at a 2.8% annualized rate in the first quarter.

Prices of U.S. Treasuries fell after the release of the data while the dollar rose to a session high against a basket of currencies. U.S. stock index futures were trading higher. Last month, single-family homebuilding, which accounts for the largest share of the housing market, increased 6.2% to a rate of 854,000 units. Single-family homebuilding surged in the Midwest, which had suffered flooding in prior months. Single-family starts also rose in the Northeast and West, but fell in the South, where the bulk of homebuilding occurs.

Permits to build single-family homes dropped 4.2% to a rate of 782,000 units in April.

Starts for the volatile multi-family housing segment advanced 4.7% to a rate of 381,000 units last month. Permits for the construction of multi-family homes rebounded 8.9% to a pace of 514,000 units last month.

Turkey needs to put a comprehensive and credible economic plan in place if it is to avoid another cut to sovereign credit rating, a senior Moody’s sovereign analyst said on Thursday.

New analysis from the rating agency shows Turkey’s recession, the slump in the lira, upcoming refinancing pressures and dwindling reserves have pushed it to right near the top of its worldwide external vulnerability index.

“Failure to put forward a credible broad-based plan to address the structural issues, and in the near-term dampen the market volatility pressure on the lira…that would be a pressure point from a rating perspective,” Moody’s Managing Director of Sovereign Risk, Yves Lemay, told Reuters.

Moody’s downgraded Turkey to Ba3 – three rungs into junk territory – last August, but it also kept it on a ‘negative’ outlook which is a warning that another cut could happen in 12-18 months.

It gives it some time and one of Turkey’s main plusses is that it has a low debt-to-GDP level of about 30 percent, but the likelihood is that an economic plan would be laid out after Istanbul’s mayoral elections have been re-run on June 23.

“For us, the critical issue is whether this administration has the capacity to move aside the political issues and focus on the economic needs of the country,” Lemay said, adding that the repeat of the Istanbul vote had underscored concerns.

“It is another manifestation of the domestic political risk in this instance, and the weakening of the institutions of the country.”

With regards to the drop in currency reserves, he added: “When we look at the size of what [sovereign and bank debt] is coming due in the next year against the size of the reserves, it is a signal of significant vulnerability.”

“The amount of reserves is very much insufficient to refinance the external obligations.”

Moody’s calculates the Turkish government’s interest payments rose 30.4% in nominal terms last year and almost 50% in the first three months of 2019 due to the weak lira and a rise in payments.

As a result it expects interest payments to increase to around 8.2% of the government’s revenue in 2019 from only 5.9% in 2017, “eroding” the government’s fiscal strength.

As the U.S. and China escalate their trade standoff, consumers in both countries are starting to see the impact. VOA’s Mykhailo Komadovsky reports from Washington.

The acting head of the Federal Aviation Administration defended the way his agency certifies airline safety after two deadly crashes of the now-grounded Boeing 737 Max jet.

Daniel Elwell called the system in which FAA-approved employees at plane manufacturers inspect the aircraft they built themselves “a good system.”

But skeptical Democrats on the House Transportation Committee questioned the agency’s credibility.

They told Elwell that the closeness between Boeing and the FAA may be one of the reasons it took the agency a relatively long time to ground the Boeing jets.

“The public perception is you were in bed with those you were supposed to be regulating,” Nevada’s Dina Titus said, while committee chairman Peter DeFazio wanted to know “How can we have a single point of failure on a modern aircraft?”

A Boeing 737 Max crashed off the coast of Indonesia in October and another 737 Max crashed in Ethiopia in March, killing a total of 346 people.

Both planes were equipped with a system designed to push the nose downward to prevent a midair stall.

Faulty sensor readings kept pushing the planes down while the pilots struggled to regain control.

The pilots did not know the planes were equipped with the anti-stall system and their manuals had no explicit information.

Elwell defended the FAA’s approval of the system on the Boeing jets, but admitted the system should have been better explained in the pilots’ operational and flight manuals.

He also faulted Boeing for failing to inform airlines and the FAA that a light that is supposed to flash when there is a faulty reading from the sensors did not work.

But Elwell said pilot error may have also contributed to the Indonesian and Ethiopian disasters.

The Justice Department has opened a criminal investigation of Boeing, and Congress is looking into the relationship between Boeing and federal regulators.

Boeing plans to submit changes to the 737 Max software to the FAA, which will study the new software and carry out tests flights. Boeing will train pilots before allowing the planes to fly again.

 

The costs seem to be mounting in the U.S. from President Donald Trump’s tit-for-tat trade tariff war with China, both for farmers whose sales of crops to China have been cut and U.S. consumers paying higher prices for imported Chinese products.

The government said Wednesday that to date it has paid out more than $8.5 billion to American farmers to offset their loss of sales to China and other trading partners because of foreign tariffs imposed by Beijing and other governments.

Trump last year pledged up to $12 billion in aid to farmers — chiefly soybean, wheat and corn growers, and those who raise pigs. Trump says he could ask Congress for another $15 billion if U.S. farmers continue to be hurt by China’s tariffs of as much as 25%  on U.S. agricultural imports.

The U.S. had been shipping $12 billion worth of soybeans a year to China, but Beijing’s imposition of the tariff severely cut down on the U.S. exports as China bought the beans from other countries.

Trump said Tuesday on Twitter, “Our great Patriot Farmers will be one of the biggest beneficiaries of what is happening now. Hopefully China will do us the honor of continuing to buy our great farm product, the best, but if not your Country will be making up the difference based on a very high China buy. This money will come from the massive Tariffs being paid to the United States for allowing China, and others, to do business with us. The Farmers have been ‘forgotten’ for many years. Their time is now!”

White House economic adviser Larry Kudlow acknowledged to a television interviewer last weekend that “to some extent” U.S. consumers will bear the brunt of higher costs on Chinese goods after Trump’s tariffs have been levied on the imported goods.

Trade Partnership Worldwide, a Washington economic consulting firm, estimates in a new study the typical American family of four people would pay $2,300 more annually for goods and services if Trump imposes a 25% tariff on all Chinese imports, as he says he is considering.

Such higher tariffs would hit an array of Chinese-produced consumer goods — clothing, children’s toys, sports equipment, shoes and consumer electronics — that are widely bought by Americans.

If that does not happen, but the existing U.S. tariffs remain in place, the research group says the average U.S. family would pay $770 in higher costs each year.

The U.S. imported almost $540 billion in Chinese goods in 2018, while the U.S. exported $120 billion, a trade imbalance that Trump is seeking to even out with imposition of the tariffs. The U.S. exported almost $59 billion in services to China, while importing only $18 billion, but services are not directly affected by tariffs.

The typical routines of life on a family farm carry a heavier burden these days for Pam Johnson.

“First thing I do is make a pot of coffee,” she told VOA in an interview in one of the cavernous sheds that contain her green and yellow John Deere farming equipment. Once she has that coffee, she “(goes) to the computer and look at what grain prices have done overnight and usually do a gut clutch, because they’ve been going down. They’re at five-month lows.”

Driven there in part by retaliatory tariffs imposed by one of the largest importers of U.S. soybeans – China.

Johnson and her husband are proud sixth-generation farmers but say they are dealing with some of the harshest economic conditions of their lives.

“We’re all tightening our belts,” she says.

The ongoing trade dispute between the United States and China, initially sparked by U.S. tariffs on imported aluminum and steel, is now impacting most farms across the country. 

As U.S. farmers head to the fields to plant this spring, they are facing a potential sixth consecutive year of declining farm income, because of international tariffs that have depressed prices for their grain products as well as increased costs for the materials to produce and store them.

​Short-term concern over U.S. trade policy is turning into long-term fear for farmers, who face uncertainty over congressional support for a new trade agreement with Canada and Mexico, and the impact of China’s retaliatory tariffs on U.S. grain exports. 

“We hear it may be out to 2025 before we see some of those markets come back to us, if they ever do,” Johnson said. “I think that’s the thing that hurts the most is, what is the damage being done that is irreparable?”

It is damage her son Ben Johnson, the seventh generation in the family business, may eventually have to deal with.

“All farms are going to suffer because of this,” he explained. “There’s a difference between ‘making it’ and flourishing.”

The Johnsons feel there is a growing disconnect between farmers and the rest of the American workforce, fueled by politicians increasingly hostile to trade policies the agricultural industry depends on.

“We need as much trade as we can and to be openly trading with as many places as we can,” Ben Johnson says. “It’s no different to any business – you want as many customers as you can. And to intentionally discourage them is frustrating.”

Neither Johnson nor his mother voted for President Donald Trump in the 2016 presidential election, largely because if his trade positions, they say. 

​Nothing that has happened since the election has eased Pam Johnson’s concerns.

“Saying that ‘I’m a tariff man’ and that ‘trade wars are easy to win’ concerns me,” she says, quoting comments the president has made. “There are still a lot of farmers who still support President Trump. I think there are more seeds of doubt being planted as we look forward into 2019 and no resolution and the light at the end of the tunnel seems to be getting dimmer about getting these things done.”

Politics aside, Pam Johnson admits success for her family business is closely tied to U.S. trade policy.

“I don’t want to see President Trump fail in these trade endeavors. We all need him to make this work so that all of us win,” she says.

A win her son Ben says can’t come soon enough.

“We’ve already missed the peak soybean export season, so in a way, it’s already too late… I guess it’s never too late, but before now would have been great,” he says.

While negotiations continue, the Trump administration says it is actively working on a new financial assistance program to help farmers weather the continuing trade storm.

Ford Motor Co plans to start production of new luxury Lincoln models in China for that market as they are launched, starting with the new Corsair later this year, to benefit from lower costs and avoid the risk of tariffs, a top executive said Monday.

“It’s a huge, huge opportunity for Lincoln because we see China as ground zero for Lincoln given the size of the market and how well the brand has been received,” Chief Financial Officer Bob Shanks said at a Goldman Sachs conference in New York.

Ford has lower levels of localized production than rivals General Motors Co or Volkswagen AG, who make more vehicles in China for Chinese consumers, benefiting from lower labor and material costs, and avoiding tariffs in the burgeoning trade war between the United States and China.

Shanks said all new Lincoln models, with the exception of the Navigator assembled in Louisville, Kentucky, will also be produced in China.

He declined to say how much Ford will save through localized production.

Ford has been struggling to revive sales in China, the automaker’s second-biggest market. Ford sales slumped 37 percent in 2018, after a 6 percent decline in 2017.

Shanks said that all of the problems the automaker experienced in China last year were related to the Ford brand, not Lincoln, which is popular with Chinese customers.

The ongoing trade dispute between the United States and China is having an impact on most farmers across the country. Their corn and soybean crops are subject to tariffs and increasing competition from other suppliers. As VOA’s Kane Farabaugh reports, U.S. farmers aren’t just concerned about their bottom lines this year. They’re also worried about the long term consequences of a trade war on the only business many have ever known.

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.”