China files WTO challenge over US tariffs, as its economy slows – business live | Business
Larry Fink: Trade war will hurt America
Larry Fink told Bloomberg TV that America’s economy would suffer if the White House imposes tariffs on an extra $200bn of Chinese imports (as it threatened last week).
Fink said that US economic growth has been strong in 2018, but it will weaken in 2019 if America escalates the trade war with China.
He predicted that:
GDP will slow down dramatically.....we’ll have even more uncertainty about the state of the world.Fink added that shares would tumble if a full-blown trade war broke out, adding that “markets will speak louder than any single voice”.
Williamson explains that the Tempest could be operated by a pilot, or be flown unmanned (using a virtual cockpit, I think).
He hopes that the plane could be operational by 2035, and adds that Britain is open to partnering with other countries on its future fighter programme (as happened with the Eurofighter Typhoon, of course).
Several major engineering and defence firms are already on board, including Rolls-Royce and BAE Systems.
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UK unveils Tempest concept fighter jet
It’s called “Tempest”, and dubbed a next-generation fighter jet that could eventually replace the Eurofighter.
Eurozone trade surplus falls (but not to America!)
However, the euro area’s trade surplus with America has grown - which will not please Donald Trump.
Eurostat reports that the eurozone exported €189.6bn of goods to the rest of the world in May 2018, a drop of 0.8% compared with May 2017.
Imports from the rest of the world rose by 0.7% to €173.1bn, (from €171.9bn in May 2017).
This means the euro area’s goods surplus has shrank to €16.5bn in May, down from €19.3bn a year earlier.
The figures also show that the European Union exported 2.1% more goods to America in the first five months of 2018, but imported 3.1% less.
As a result, the EU’s trade surplus with the US has swelled to £54.8bn, up from £48.1bn a year ago [more details here].
Trump has other things on his mind today, of course, but this data might reinforce his belief that the EU treats America very badly on trade.
China announced it filed a World Trade Organization challenge on Monday to U.S. President Donald Trump’s proposal for a tariff hike on $200bn of Chinese goods, reacting swiftly amid deepening concern about the economic impact of their spiraling technology dispute.
The one-sentence Commerce Ministry statement gave no legal grounds for the challenge or other details. It is an unusually rapid move for a trade case, coming less than one week after the U.S. Trade Representative [USTR] announced the tariff plan, which wouldn’t take effect until at least September.
The USTR said last week that it proposed the levy in response to Beijing’s decision to retaliate for U.S. tariff hikes over complaints China is hurting American companies by stealing or pressuring foreign enterprises to hand over technology....
By appealing to the WTO, Beijing is signalling that it won’t accept America’s proposal to slap 10% tariffs on a wide range of imports - from meat and vegetables to chemicals and consumer products (plus plenty of unusual items).
However, China still hasn’t revealed how it will retaliate against America’s plan to make $200bn of its imports less competitive.
That may be because Beijing can’t announce reciprocal tariffs, as it doesn’t import enough stuff from the US....
China files WTO complaint over US tariffs
According to Associated Press, Beijing is protesting about the plan to hit $200bn of Chinese goods with a new 10% tariff (probably starting in September).
However, he also expects growth to slow in the next few months.
“The data shows that global trade headwinds have yet to grip China’s economy. Despite the heated global rhetoric around trade and associated financial market volatility, China’s export sector performed well in the second quarter of the year and will probably prove quite resilient under the limited tariff actions we anticipate from the US and China.
We are more concerned about slowing domestic demand within China’s economy, with investment persistently weak and consumption also having slowed, and these are much more important drivers of growth than exports.
The fall in industrial output growth in June was notable in this regard. The authorities have begun to loosen policy settings, but will be reluctant to go too far given their desire to curb financial risks. As such, we expect growth to slow in the second half of the year and more markedly in 2019.”
China’s robot production only grew by 7.2% year-on-year in June, compared to 23% for 2018 as a whole.
That signals that factory bosses are worried about the future, and refusing to invest in new equipment right now.
European stock markets are subdued this morning, with the FTSE 100 dipping by 18 points (0.2%) in early trading.
Germany’s DAX has made a better start, up 0.35%, while the French CAC is flat (maybe Parisian traders are recovering from the World Cup).
Neil Wilson of Markets.com says investors are awaiting developments in Helsinki, and not too alarmed by the Chinese growth figures....
Looking ahead, the Trump-Putin summit could have an impact on risk assets as the US president continues to show a willingness to disrupt the established world order. After calling the EU a ‘foe’ on trade, European leaders in particular will be wary about just how much Trump cosies up to Putin, which may dampen risk appetite. But at the very least it deflects attention away from Chinese trade wars for the time being.
Asian stocks fell as overnight China GDP data disappointed a touch but we can look through the noise here. There is little change from the last several quarters with growth holding just below the 7% level. The chatter is that trade war concerns are weighing on business confidence but this sounds more like a lot of noise.
European Council President Donald Tusk has urged the world’s major powers, including China, to help prevent a global trade war that would hurt the global economy.
Speaking at the 20th EU-China summit, Tusk called for policymakers to strengthen and reform the ‘rules-based’ international setup, rather than unravelling it.
He also gave a pointed nudge towards the US-Russia summit which is taking place in Helsinki later today, saying:
Tusk has also tweeted that he hopes his message reaches the leaders of the US and Russia in Finland.
“We are all aware of the fact that the architecture of the world is changing before our very eyes. And it is our common responsibility to make it a change for the better.
Let us remember, here in Beijing, and over there, in Helsinki, that the world we were building for decades, sometimes through disputes, has brought about peace for Europe, the development of China, and the end of the Cold War between the East and the West.
It is a common duty of Europe and China, America and Russia, not to destroy this order, but to improve it. Not to start trade wars, which turned into hot conflicts so often in our history, but to bravely and responsibly reform the rules-based international order.”
“They need to slow financial deleveraging slightly and to turn their focus more on growth-supportive measures, for example increasing liquidity through (bank reserve requirement) cuts.
“If the situation gets worse a lot faster than what we expect I do think Chinese authorities need to beef up supportive measures, both fiscal and monetary.”
Bloomberg: Chinese GDP is a 'worrying omen'
They fear that the ‘spillover effects’ of China’s slowdown could hurt other countries, arguing:
Confirmation that China’s economy is slowing amid an escalating trade war is a worrying omen for global growth.
Data released since Friday has affirmed what’s been expected for some time: That an ongoing campaign to curtail credit is putting the brakes on the world’s second-largest economy. Given that China generates as much as a third of global growth, that’s adding to signs that the best world expansion in years is plateauing.
The International Monetary Fund, which has repeatedly warned that the trade spat between the U.S. and China will reverberate globally, is scheduled to release fresh growth forecasts later Monday.
The Chinese economy grew at an expected 6.7 percent in the second quarter, its slowest pace since 2016, while key readings on investment growth and industrial output slowed in June. Retail sales held up.
“If the US and China do not resume talks in the next two months or so, the conflict will escalate further, with major economic implications for themselves and the global economy,”
That clampdown is now hitting growth, argues Haibin Zhu, chief China economist at JPMorgan in Hong Kong.
“A main reason for the slowdown is that infrastructure investment began to slow down in the first quarter as the government was trying to control local government debt.
“The good news is that there is space to provide more fiscal support through tax cuts and higher infrastructure investment. We expect they will move along these lines.”
Reuters has more details:
Noting increasing external uncertainties and the fact that China is still going through a critical stage in structural adjustment, Mao said the country would stick to the supply-side structural reform and coordinate efforts to ensure stable and sound economic performance.
The agenda: Chinese growth figures
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
China’s growth rate has dipped to its lowest rate since 2016, in a sign that the trade dispute with America maybe hitting its economy.
Chinese GDP rose at an annual rate of 6.7% in the second quarter of 2018, partly due to slower-than-expected growth in factory output.
That’s a slight deterioration on the first three months of this year, when the economy expanded by an annual rate of 6.8%.
Although this is above Beijing’s goal of growth “above 6.5”, it will stoke concerns that the tariffs imposed by America this year are hurting. It could also show that the campaign to rein in shadow banking and risky lending is also restraining growth.
Official government figures also show that industrial output only grew by 6.7% year-on-year in June, down from 6.9%. However, retail sales jumped by 9% year-on-year, up from 8.5%.
China’s National Bureau of Statistics warned that there are “increased uncertainties” in the global economy (no prizes for who they’re thinking of...). It also argued that the Chinese economy is still on a “steady and improving trend”, despite the shadow of a trade war with America.
Asian stock markets dipped following the data, with the Shanghai Composite down around 0.8%. European markets are also set for an underwhelming start to the new week.
I’ll pull together some reaction now.
Also coming up todayThe International Monetary Fund is publishing its latest assessment of the global economy this afternoon. We also get new eurozone trade stats and US retail sales figures.
Investors will be watching Helsinki, as Donald Trump and Vladimir Putin hold a summit. The meeting comes just days after 12 Russian military intelligence officials were indicted for allegedly trying to hack the Democratic party’s emails and computer networks during the 2016 election campaign.
Trump has given European leaders fresh cause for alarm, declaring that the EU is a “foe” given how it trades with America.
Plus, there’s always Brexit. Overnight, Conservative MP and former minister Justine Greening has called for a second referendum, creating yet another headache for Theresa May ahead of more crunch votes in parliament this week.
Brexit will also be high on the agenda at Farnborough, as the aerospace industry gather for the International Airshow.
- 10am BST: Eurozone trade balance
- 1.30pm BST: US retail sales
- 3pm BST: International Monetary Fund releases its latest World Economic Outlook