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Larry Kudlow is usually wrong

Larry Kudos is usually wrong

by Bill McBride on 3/13/2018 01:29:00 PM

With all the discussion that Larry Kudlow might be named the new director of the White House’s National Economic Council, I’ve been asked to repost a post I wrote in 2016 “Larry Kudlow is usually wrong“. On Kudlow, see from Bloomberg: Trump Says Kudlow Has ‘Very Good Chance’ at Taking Cohn’s Job and CNN Trump tells people he is selecting Larry Kudlow to replace Gary Cohn

Most of the following is a repeat of the 2016 post …

Larry Kudlow is usually wrong and frequently absurd, as an example, in June 2005 Kudlow wrote “The Housing Bears are Wrong Again” (link has been replaced) and called me (or people like me) “bubbleheads”.

Homebuilders led the stock parade this week with a fantastic 11 percent gain. This is a group that hedge funds and bubbleheads love to hate. All the bond bears have been dead wrong in predicting sky-high mortgage rates. So have all the bubbleheads who expect housing-price crashes in Las Vegas or Naples, Florida, to bring down the consumer, the rest of the economy, and the entire stock market.

I guess I was one of those “bubbleheads”!

In December 2007, he wrote: Bush Boom Continues

There’s no recession coming. The pessimistas were wrong. It’s not going to happen. At a bare minimum, we are looking at Goldilocks 2.0. (And that’s a minimum). Goldilocks is alive and well. The Bush boom is alive and well. It’s finishing up its sixth consecutive year with more to come. Yes, it’s still the greatest story never told.

Note the date of the article. The recession started in December 2007!

Note: At the beginning of 2007 I predicted a recession would start that year – made it by one month.  It seems I’m always on the opposite side from Kudlow of each forecast – and one of us has been consistently wrong.

In 2014, Kudlow claimed: “I’ve always believed the 1990s were Ronald Reagan’s third term.”

In that piece, Kudlow was rewriting his own history.  Near the beginning of Clinton’s first term, Kudlow was arguing Clinton’s policies would take the economy into a deep recession or even depression.  Kudlow was wrong then (I remember because I was on the other side of that debate), so he can’t claim he “always believed” now.  Nonsense.

Also in 2007, right before the crash during President George W. Bush’s 2nd term, Kudlow wrote: A Stock Market Vote of Confidence for Bush:

“I have long believed that stock markets are the best barometer of the health, wealth and security of a nation. And today’s stock market message is an unmistakable vote of confidence for the president.”

Well, maybe Kudlow had a point … about President Obama!

Now Larry Kudlow might be the new director of the White House’s National Economic Council. Oh my.

Read more at http://www.calculatedriskblog.com/2018/03/larry-kudlow-is-usually-wrong.html#2Wfov55DmX7ecFIy.99

Published at Tue, 13 Mar 2018 17:29:00 +0000

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Trade War Fears

Trade War Fears


The MSM hasn’t exactly been short of clickbait lately as one supposed global crisis is chasing the next. But suddenly a purported ‘trade war’ between the United States and China is all rage now, and I mean that in the literal sense since everyone seems to be getting their panties in a twist about an issue that in my not so humble opinion has been on the forefront of Chinese/U.S. relations for many years now.

At the same time the loss of about 50,000 factories and the impact on U.S. employment since NAFTA took effect on 1/1/1994 apparently has never been worth much media attention. And sure, of course there are various arguments challenging that perspective. And not being an economist by trade nor ambition my simple response would be: Just take a trip to Baltimore or Detroit and talk to anyone you meet in the streets. Then come back and let’s go over your gripes with the fact that U.S. workers have been squeezed hard over the past few decades.

Whether or not import tariffs on steel and various other products will be a net negative for the U.S. economy and labor remains to be seen. But what clearly does not work is business as usual as has been practiced without care or regard for workers and their families over the past quarter century.

Anyway, be this as it may – all that clickbait cost me a perfectly well running E-Mini campaign. I got out at about 2R in profits which is fine but a long shot from where it was yesterday afternoon.

If I wasn’t leaving tomorrow I would be tempted to grab a long position here but looking at the mess of the past few weeks on the short term panel makes me appreciate the fact that we’re banking profits in equities in the first place. And I’m not going to push my luck ahead of my little trip.

Plus the Dollar keeps dropping (and by extension the EUR is rising). Suffice to say I am not amused. Look at that hourly panel and share your thoughts if you would. All I’m seeing is a market turning on a dime on various  fronts. Could lead to quite a bit of ugliness if buyers don’t start taking shit seriously instead of chasing every single headline. I know, I know – who am I kidding?

Tired Of Winning?

Seems to me that market participants are tired of winning, but not in a Trumpian fashion. Maybe after a ten year bull market investors are subconsciously longing for a big market correction wiping out a big chunk of their assets in the process. A growing cultural malaise that now seems to be seeping into our financial markets as well.

I say bring it on! Bring on the pain! Honestly I’ve grown sick of all the snow-flaking and imaginary threats lurking behind every corner. Some cultural crisis or scandal chasing the next all across the Western hemisphere. A mindset apparently prevalent among a generation that has had the luxury of never experiencing war or true hardship (yes I know there are exceptions). No sweetheart – losing WiFi access or a shortage of soy milk at your favorite Starbucks does not constitute a personal tragedy. Again my previous advice applies, take a road trip to B-more or Detroit and we talk.

So hey, what’s with all the bitching? First up a bit of venting here and there is healthy. But I’m trying to make a point and for once it’s more anthropological than down to business and technical. Although I pride myself as being a no-nonsense kind of guy there are times when you have to heed those intangibles, the nagging voices in the back of your head (your mileage may vary based on your lithium dosage).

Look, we obviously don’t live in the 1990s anymore. Things have changed quite a bit, and perhaps I’m a bit jaded but to me it feels like as if the whee are coming off. I actually think what we all desperately need actually is a large market correction, a big cleansing of sorts. There would be a lot of pain in the short term but I think we all would be better off over the long term. Let’s just get it over with and then look forward perhaps with a bit of hope and optimism in our hearts. Too much to ask? Probably.

Alright let me climb off my soap box. My crude campaign was also rudely interrupted at about 0.6R in profits. Grrrr…  Okay, a win is a win – we executed perfectly and perhaps we trailed a bit too early. Here as well a re-entry would be on my radar but as I’m traveling tomorrow I don’t want to worry about open positions.

Now gold for one is behaving well and I just moved my stop to break/even. I really like that formation and I got big plans for precious metals going forward. Especially if equity traders continue to screw around as discussed above.

What do ya know? The ZB campaign just got another lease on life and has reversed upwards breaching my entry range. That’s very positive but it’s time it’s getting out of the gate.

Alright, this will be my last post for this week and per the above it looks like I clearly need a vacation! Scott has promised to post here tomorrow and as often as he can over the next 10 days or so. No worries – I’ll be popping by as well but don’t expect extended contributions as I’m working off a lappy and being spoiled by 30 glorious inches of screen estate over the years my perspectives will be more narrow.

And yes, once again all services will run as usual, no worries. If you run into any trouble/issues then just email me at admin@. See you once I’m settled near my ocean hide out.

Published at Wed, 07 Mar 2018 13:53:26 +0000

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Wall Street is asking: Which Trump will we get?

Wall Street is asking: Which Trump will we get?

1. Trump vs. Trump: It’s been 16 months since the election, but Wall Street is still trying to figure out which President Trump it will get.

Will it be pro-business Trump? His big corporate tax cuts and deregulation agenda fueled the stock market boom.

Or populist Trump? He demonized Goldman Sachs(GS) and hedge funds on the campaign trail and attacked American icons like Ford(F) on Twitter.

More recently, there’s been protectionist Trump, whose love of tariffs and tirades against trade deals have raised the specter of an unwinnable trade war.

The pro-business crowd has been sounding the alarm about Trump the trade hawk since the White House proposed steep tariffs on aluminum and steel imports. They are set to go into effect in two weeks.

The Business Roundtable, a powerful business lobby, called the tariffs a “major unforced error” by Trump that will put “tens of thousands of American jobs at risk.”

The Wall Street Journal’s editorial page went a step further, saying Trump’s “protectionist eruption” is a “dangerous moment” for his presidency. The risk, the paper said, is that he “veers into the Herbert Hoover ditch.”

Wall Street seems to be betting that pro-business Trump will win, or at least that his tax cuts will provide a cushion against trade turbulence.

That bet may be based in part on Trump’s own obsession with the performance of the stock market. Surely he wouldn’t do anything to risk that, right?

Stocks climbed on Thursday after Trump softened his tariff stance by offering indefinite exemptions for Mexico and Canada. Trade fears were firmly in the rearview mirror by Friday as the Dow surged after a “Goldilocks” jobs report revealed strong employment gains coupled with modest wage increases.

But the risk of trade trouble is hardly over. Much will depend on how trading partners, especially the European Union, respond if they don’t get exemptions of their own.

S&P Global Ratings warned in a report on Friday that Trump’s tariffs raise the risk of a “retaliatory spiral.” While a “full-scale trade war” isn’t expected, the report said, “such an outcome is not assured.”

And don’t forget: Trump has signaled a bigger trade crackdown more squarely aimed at China is coming.

Chris Krueger of Cowen Washington Research Group lamented in a recent report that “predicting what is going to happen on trade policy is impossible.”

The path for a more muscular trade agenda has been cleared by the resignation of Gary Cohn, Trump’s top economic adviser and a staunch defender of free trade.

Cohn’s eventual replacement could offer clues to Trump’s next steps.Will he tap a defender of free trade like Larry Kudlow or even a Cohn-like deputy and Wall Street veteran, such as Shahira Knight?

Or will he go the other way and select a trade hawk like Peter Navarro?

If it’s Navarro, Wall Street may be forced to prepare for protectionist Trump.

2. Inflation watch: On Tuesday, the Labor Department plans to release the Consumer Price Index for February. Wall Street will pay close attention to the inflation indicator.

In January, inflation rose faster than economists expected. That’s bad news for investors, who fear that inflation could prompt the Fed to raise interest rates more quickly — and steeply — than it had planned. The Dow dipped slightly in early morning trading when the inflation figure was reported last month.

The market also reacted wildly following January’s jobs report, which revealed that wages grew at the fastest pace in eight years.

Inflation fears have receded in recent weeks, especially after the February jobs report showed strong employment gains but a slowdown in wage growth. The Dow surged 441 points on the news.

3. Consumer snapshot: The Commerce Department on Wednesday will release February’s retail sales. On Friday, the University of Michigan will reveal its consumer sentiment index for March.

Taken together, the two will shed light on how American consumers are feeling.

In January, US retail and food services sales ticked down 0.3% from December, but were 3.6% higher than in January 2017. And Michigan’s index showed that Americans were out shopping in February: consumer sentiment was at its second highest level since 2004.

4. Jewelers report earnings:Signet Jewelers(SIG) is set to report earnings on Wednesday, and Tiffany(TIF) on Friday. The two jewelers are facing very different challenges.

Signet, which owns mall-based Kay, Jared and Zales, reported weak sales last quarter and over the holidays. Mall closures are hurting the affordable jewelery brands, and will likely continue to pose a threat.

Tiffany, on the other hand, had a good third quarter and great holiday sales. But the luxury jeweler is worried about this year — in January, the company lowered its expectations for 2018.

5. Coming this week:

Tuesday — Consumer Price Index; Dick’s Sporting Goods(DKS) earnings

Wednesday — Signet Jewelers earnings; US retail sales

Thursday — Dollar General(DG), Broadcom(AVGO) earnings

Friday —Tiffany(TIF) earnings

Published at Sun, 11 Mar 2018 13:29:51 +0000

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Trump sets steel and aluminum tariffs but exempts Canada, Mexico

By Capri23auto from Pixabay

Trump sets steel and aluminum tariffs but exempts Canada, Mexico

WASHINGTON (Reuters) – U.S. President Donald Trump pressed ahead on Thursday with import tariffs of 25 percent on steel and 10 percent for aluminum but exempted Canada and Mexico and offered the possibility of excluding other allies, backtracking from an earlier “no-exceptions” stance.

Describing the dumping of steel and aluminum in the U.S. market as “an assault on our country,” Trump said in a White House announcement that the best outcome would for companies to move their mills and smelters to the United States. He insisted that domestic metals production was vital to national security.

“If you don’t want to pay tax, bring your plant to the USA,” added Trump, flanked by steel and aluminum workers.

Plans for the tariffs, set to start in 15 days, have stirred opposition from business leaders and prominent members of Trump’s own Republican Party, who fear the duties could spark retaliation from other countries and hurt the U.S. economy.

Within minutes of the announcement, U.S. Republican Senator Jeff Flake, a Trump critic, said he would introduce a bill to nullify the tariffs. But that would likely require Congress to muster an extremely difficult two-thirds majority to override a Trump veto.

Some Democrats praised the move, including Senator Joe Manchin of West Virginia, who said it was “past time to defend our interests, our security and our workers in the global economy and that is exactly what the president is proposing with these tariffs.”

Trump’s unexpected announcement of the tariffs last week roiled stock markets as it raised the prospect of an escalating global trade war. He appeared to have conceded some ground after concerted lobbying by Republican lawmakers, industry groups and U.S. allies abroad.

Canada, the largest supplier of both steel and aluminum to the United States, welcomed the news it would not immediately be subject to the tariffs, but vowed to keep pressing Washington until the threat of tariffs had disappeared.Trump offered relief from steel and aluminum tariffs to countries that “treat us fairly on trade,” a gesture aimed at putting pressure on Canada and Mexico to give ground in separate talks on renegotiating the North American Free Trade Agreement.

Mexican Economy Minister Ildefonso Guajardo said NAFTA talks were “independent” of Trump’s tariff actions and should not be subject to outside pressure.

In Beijing, China’s Commerce Ministry said on Friday it “resolutely opposed” the tariffs and that they would “seriously impact the normal order of international trade.”

While Chinese steel exports to the United States have been suppressed by previous anti-dumping duties, the broad “Section 232” national security tariffs are widely seen as aiming to pressure Beijing to cut excess steel and aluminum production capacity that has driven down global prices.

U.S. steel stocks, which have gained for weeks on anticipation of the tariffs, fell after the announcement, with the Standard and Poor’s composite steel index .SPCOMSTEEL ending down 2.53 percent against a half percent gain in the broad S&P 500 .SP500 index.

Century Aluminum (CENX.O) shares fell 7.5 percent, while Alcoa (AA.N) dipped 0.9 percent. The Canadian dollar and Mexican peso gained slightly against the U.S. dollar.


A senior Trump administration official said other countries could seek talks with U.S. Trade Representative Robert Lighthizer to find “alternative ways” to mitigate the threat to U.S. national security posed by their steel and aluminum exports to the United States.

It was unclear whether they would involve quotas or voluntary export restraints, but the official said that permanent exemptions for Canada and Mexico might result in higher tariffs on other countries to maintain 80 percent capacity usage targets for domestic producers.

European Union Trade Commissioner Cecilia Malmstrom said: “The EU is a close ally of the U.S. and we continue to be of the view that the EU should be excluded from these measures. I will seek more clarity on this issue in the days to come.”

U.S. steel- and aluminum-consuming industries sharply criticized the tariffs as damaging them with higher costs.

“The U.S. will become an island of high steel prices that will result in our customers simply sourcing our products from our overseas competitors and importing them into the United States tariff-free,” the Precision Metalforming and National Tooling and Machining associations said in a joint statement.


Several major trading partners have said they might respond to the tariffs with direct action.

Countermeasures could include European Union tariffs on U.S. oranges, tobacco and bourbon. Harley-Davidson Inc (HOG.N) motorcycles have also been mentioned, targeting Republican U.S. House of Representatives Speaker Paul Ryan’s home state of Wisconsin.

Even as Trump threatened tariffs and prodded his NAFTA partners, 11 nations gathered in Chile to sign a landmark Asia-Pacific trade pact, one that Trump withdrew from on his first day in office last year.

Trump, who won the White House after a career in real estate and reality TV, has long touted economic nationalism, promising to bring back jobs to the United States and save the country from trade deals he views as unfair. That has put him at odds with many in his Republican Party, traditionally a supporter of free trade.

(For a graphic on ‘Global trade and GDP growth’ click reut.rs/2FtPzhW)

(For a graphic on ‘U.S. visible trade balance’ click reut.rs/2Fmon8N)

(For a graphic on ‘U.S. steel imports by country’ click reut.rs/2Fkjb5g)

Additional reporting by Antonio De la Jara and Dave Sherwood in Santiago, Michael Martina, Elias Glenn, Kim Coghill, Brian Love, Nichola Saminather, Doina Chiacu and Andrea Hopkins; Writing by David Stamp, David Chance and David Lawder; Editing by Jonathan Oatis and Peter Cooney

Published at Fri, 09 Mar 2018 02:21:00 +0000

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11 countries sign TPP trade pact without the United States

TPP explained
TPP explained

11 countries sign TPP trade pact without the United States

President Trump is going one way on trade. The world is going very hard in the other direction.

Trump imposed tariffs on steel and aluminum Thursday only a couple hours after 11 nations signed the Trans-Pacific Partnership, a sweeping trade agreement that was once thought to be dead after Trump withdrew the United States from talks.

Leaders from Mexico, Canada, Japan and other nations officially signed TPP on Thursday at a ceremony in Santiago, Chile.

TPP’s revival stands — and its very nature as a multi-country trade pact — defies Trump’s trade views. His administration has sought one-on-one trade pacts, initiated dozens of trade investigations and started to renegotiate existing deals.

In January 2017, Trump withdrew the United States from TPP discussions before it became law, arguing that it was an unfair deal for the country. At the time, some leaders, such as Japanese Prime Minister Shinzo Abe, declared TPP “meaningless.” But eventually, world leaders revived the agreement that encapsulates 14% of the global economy.

The TPP countries are Australia, Brunei, Chile, New Zealand, Peru, Singapore, Vietnam, Japan, Malaysia, Canada and Mexico.

Some of these countries — particularly Japan, Mexico and Canada — may get entangled in a tit-for-tat trade war with the Trump administration. It imposed a 25% tariff on steel and a 10% tariff on aluminum from all countries except Canada and Mexico. Despite their exemptions, Trump has hinted they may be subject to the tariffs if there isn’t major progress in the renegotiation of NAFTA, the three-nation trade pact. So far, Mexico, Canada and the United States have made little progress after seven months of negotiations.

Japan accounts for 5% of US steel imports, double the share from China, the world’s largest steel producer. Although there is widespread agreement that China has produced and exported too much steel worldwide, other nations and even Republican leaders on Capitol Hill asked Trump not to impose the tariffs, fearing it would risk retaliation.

Trump said the tariffs would take effect in 15 days.

Published at Thu, 08 Mar 2018 20:28:58 +0000

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For most workers, the tax cut windfall will disappear

For most workers, the tax cut windfall will disappear

Millions of workers have received a small cut of Corporate America’s tax cut bonanza. Unfortunately, the windfall for most workers will be fleeting.

53% of the investments in workers announced by Russell 1000 companies have been one-time bonuses, according to an analysis shared exclusively with CNNMoney by the nonprofit group JUST Capital.

In other words, most of the benefit to workers will beshort-lived.

Another 6% of the worker windfall has been in the form of one-time contributions to employee 401(k) plans, JUST Capital found after examining announcements by 93 companies in the Russell 1000. The index is home to 1,000 of the largest US public companies.

Less than one-third of the investment in workers will be permanent. JUST Capital found that 29% of the money is going toward wage hikes, while another 2% is being set aside for ramping up 401(k) programs by raising matching contributions.

“A permanent wage increase sends a stronger signal of investing in your workforce than a one-time bonus,” said Martin Whittaker, CEO of JUST Capital, which fights for equal treatment of workers. The nonprofit was founded in 2013 by a group that includes hedge fund billionaire Paul Tudor Jones, Arianna Huffington and Deepak Chopra.

“If you’re struggling to make ends meet stacking shelves at Home Depot, would you rather get a one-time bonus or a permanent wage increase?” Whittaker said.

Home Depot(HD) is among dozens of major companies that announced $1,000 tax cut bonuses for workers after the tax cut became law in late December. Bank of America(BAC), Verizon(VZ), Comcast(CCZ) and Pfizer(PFE) did the same.

Goldman Sachs CEO Lloyd Blankfein recently told CNN the one-time bonuses won’t make a lasting difference for workers.

“I think a lot of it is symbolic and making a statement,” Blankfein said. “We’re dealing in a world of sentiment. Symbolism matters.”

President Trump pointed to these one-time bonus payments during his State of the Union address as evidence that the tax cuts are trickling down to workers.

Other companies, such as Wells Fargo, FedEx(FDX) and JPMorgan Chase(JPM), have opted for a more lasting benefit in the form of higher wages. And some companies including Starbucks(SBUX), Walmart(WMT) and PNC Financial(PNC) handed out one-time bonuses as well as pay raises.

About 10% of the worker investments announced so far aregeneral benefits such as improved vacation policy, health care policies or skills training. For instance, Boeing(BA) announced plans to spend $200 million on retraining and other worker benefits.

Of course, any benefit from employers is on top of personal tax cuts Americans have seen from the tax law.

The nonpartisan Joint Committee on Taxation has estimated that in 2019, more than half of filers making $40,000 and up will see an average tax cut of more than $500.

Still, the biggest winners from the tax law so far are companies and shareholders.

companies spending tax windfall chart

Companies in the Russell 1000 are distributing 61% of their tax savings to shareholders via fatter dividends and booming share buybacks, JUST Capital found in a recent analysis.

Only 6% of the windfall is going directly to workers, while another 20% is being set aside for jobs. The rest is being allocated for customers, products and communities.

JUST Capital wrote a letter to the CEOs of all 1,000 companies in the Russell 1000 requesting estimates on their tax windfall and plans to spend it.

“Companies will hopefully realize that people are taking notice of what they’re doing with their money. They would be advised to be thoughtful about how they allocate it,” Whittaker said.

Critics of the tax law complain that Wall Street is cleaning up while workers are getting the scraps.

“That tax cut was made on the promise that money would be used for wages,” former Labor Secretary Robert Reich told CNN.

Wells Fargo(WFC), Cisco(CSCO) and many more companies have showered Wall Street with $214 billion worth of stock buyback announcements so far this year, according to research firm TrimTabs.

When companies buy back their own stock, it raises the stock price for shareholders because fewer shares are available. But stock buybacks do little to create jobs or reduce America’s inequality problem.

“Stock buybacks are purely for the shareholder,” said Ian Winer, head of equities at Los Angeles-based Wedbush Securities. “It is very difficult to argue buybacks are good for the overall economy or average worker.”

— CNN’s Jeanne Sahadi contributed to this report.

Published at Thu, 08 Mar 2018 16:13:06 +0000

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Trump promises U.S. friends ‘flexibility’ as trade war warnings rise

Trump promises U.S. friends ‘flexibility’ as trade war warnings rise

WASHINGTON/PARIS/BEIJING (Reuters) – President Donald Trump promised on Thursday to show great flexibility and cooperation toward the United States’ “real friends” as he prepared to impose import tariffs that have provoked warnings of a trade war from Europe and China.

Trump had been expected later in the day to sign a proclamation imposing 25 percent tariffs on steel imports and 10 percent on aluminum, but this could slide into Friday.

A White House official also said on Wednesday night that Trump planned to offer Canada and Mexico – fellow signatories of the North American Free Trade Agreement (NAFTA) – the possibility of a 30-day exemption from the tariffs.

But both Brussels and Beijing made clear they were ready for any trade war, with one European Union official saying retaliation could also target goods from areas governed by Trump’s Republican Party.

Trump tweeted that he was looking forward to a meeting at 3.30 p.m. (2030 GMT) at the White House. He did not say whether he would sign the proclamation then.

However, he added: “We have to protect & build our Steel and Aluminum Industries while at the same time showing great flexibility and cooperation toward those that are real…and treat us fairly on both trade and the military.”

Trump did not name the countries he regarded as friends, or say what he had in mind for them. However, he has argued that the tariffs would counter cheap imports, especially from China, which he says are undermining U.S. industries and jobs.

The European Commission raised the prospect that Trump could also consider exempting the EU’s 28 member states.

Some countries advised against any overhasty reaction to Trump’s tariff plan, which has drawn fire at home as well as rattled global financial markets, particularly Canada which as a close trading partner of the United States has perhaps most to lose.

But the EU talked tough. “If Donald Trump puts in place the measures this evening, we have a whole arsenal at our disposal with which to respond,” European Financial Affairs Commissioner Pierre Moscovici said.

Counter-measures would include European tariffs on U.S. oranges, tobacco and bourbon, he said, adding that some products under consideration for an EU riposte were largely produced in constituencies controlled by Trump’s Republicans.

“We want Congress to understand that this would be a lose-lose situation,” Moscovici told BFM TV.

The EU is by far the biggest trading partner of the United States by value and, after China, member states have together the biggest trade surplus with the country. Once approved by Trump, the tariffs would go into effect after two months.

FILE PHOTO: U.S. President Donald Trump holds a joint news conference with Swedish Prime Minister Stefan Lofven in the White House East Room in Washington, U.S. March 6, 2018. REUTERS/Leah Millis


In Beijing, Foreign Minister Wang Yi said history showed that trade wars were not the correct way to resolve problems.

“Especially given today’s globalization, choosing a trade war is a mistaken prescription. The outcome will only be harmful,” he said on the sidelines of an annual meeting of China’s parliament. “China would have to make a justified and necessary response.”

China had a record $375.2 billion goods surplus with the United States last year.

Trade tensions between the world’s two largest economies have risen since Trump took office in 2017, and although China accounts for only a small fraction of U.S. steel imports, its massive industry expansion has helped create a global glut of steel that has driven down prices.

Data on Thursday showed Chinese exports were up 44.5 percent in February from a year earlier. That left it with a global trade surplus of $33.74 billion, and a January-February surplus with the United States of $42.92 billion.


Trump’s administration has faced growing opposition to the tariffs from prominent congressional Republicans and business officials worried about their potential impact on the economy.

The White House has said there could be a 30-day tariff exemption for Mexico and Canada – and some other countries – based on national security.. Trump wants to renegotiate the NAFTA and a White House official linked any extension of the exemption to progress in NAFTA talks.

In Brussels, European Commission Vice President Jyrki Katainen said he had read that Britain might be in line for an exemption too. While Britons have voted to leave the EU, the country remains a member until next year.

“If they try to make an exemption for one of our member states, it means the EU as a whole,” he told a news conference, adding that the EU was still trying to persuade Washington that tariffs were a bad idea.

Katainen cited tit-for-tat trade measures which have been blamed for deepening the Great Depression, and more recent experience. “We don’t need to go to the 1930s. It’s enough to go to the beginning of the 2000s when the U.S. authorities imposed steel tariffs for Europe. It meant in practice that in the U.S. they lost thousands and thousands of jobs,” Katainen said.

Canada urged caution. Prime Minister Justin Trudeau said Trump had made it clear in a phone call that if he could get a good trade deal there would be no need for tariffs on Canada.

Trudeau declined to say whether or how Canada would retaliate. “We need to wait and see what this president is actually going to do,” he said.

Additional reporting by Michael Martina, Elias Glenn, Kim Coghill, Brian Love, Nichola Saminather, Doina Chiacu and Andrea Hopkins; Writing by David Stamp; Editing by Mark Heinrich

Published at Thu, 08 Mar 2018 15:42:25 +0000

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Trump to authorize tariffs as White House opens way for more exemptions

By Oldiefan from Pixabay

Trump to authorize tariffs as White House opens way for more exemptions

WASHINGTON (Reuters) – The White House raised the possibility on Wednesday that impending hefty U.S. tariffs on steel and aluminum imports could exclude a clutch of countries besides Canada and Mexico as President Donald Trump looked set to authorize the measures as early as Thursday.

Trump was expected to sign a presidential proclamation to establish the tariffs during a ceremony on Thursday, but a White House official said later it could slide into Friday because documents had to be cleared through a legal process.

A senior U.S. official said the measures would take effect about two weeks after Trump signs the proclamation.

The tariffs would impose duties of 25 percent on steel and 10 percent on aluminum to counter cheap imports, especially from China, that the president says undermine U.S. industry and jobs.

It was not immediately clear whether the proclamation would list countries to be exempted, as pressure grew for Trump to exclude U.S. allies from the action.

“We expect that the president will sign something by the end of the week and there are potential carve-outs for Mexico and Canada based on national security, and possibly other countries as well based on that process,” White House spokeswoman Sarah Sanders told a regular media briefing. “It will be country by country, and it will be based on national security.”

Action that does not include exemptions risks retaliatory tariffs on U.S. exports – not least by Canada and Europe – and complicates already tough trade talks on the North American Free Trade Agreement.

Trump said on Monday that Canada and Mexico would only be excluded after the successful renegotiation of NAFTA.

The benchmark Standard & Poor’s 500 stock index ended slightly lower following a volatile session after Trump promised the tariffs but then said Mexico and Canada could be exempt.

The S&P closed 0.05 percent lower after being down 0.4 percent, while the Dow Jones Industrial Average ended down 0.33 percent. The U.S. dollar pared gains to end little changed, while the Canadian dollar and Mexican peso pared some losses.

Markets were rattled by Tuesday’s resignation announcement by Trump’s chief economic adviser, Gary Cohn, who was seen as a bulwark against Trump’s economic nationalism.

Cohn’s departure, after an internal White House battle over Trump’s plans to impose the tariffs, clears the way for greater influence by trade hardliners such as Commerce Secretary Wilbur Ross and Peter Navarro, Trump’s trade policy adviser.

Sanders said Trump was considering several candidates to fill Cohn’s position, while Navarro said he was not short-listed for the job.

In his first tweet on Wednesday, the Republican president showed no sign of backing away from the tariffs, saying the United States had lost more than 55,000 factories and 6 million manufacturing jobs and let its trade deficit soar since the 1989-1993 administration of President George H.W. Bush.

Later, his tweets turned to trade with China, demanding that Beijing lay out plans for reducing its trade surplus with the United States by $1 billion, which appeared to have been raised during a meeting with a top Chinese official last week.

“China has been asked to develop a plan for the year of a One Billion Dollar reduction in their massive Trade Deficit with the United States,” Trump tweeted, without saying where the message had been conveyed.

China ran a record goods trade surplus with the United States last year of $375.2 billion


Opposition to the blanket tariffs mounted among lawmakers and the business community. More than 100 House of Representative Republicans, including Kevin Brady, chairman of the House Ways and Means Committee that oversees U.S. trade policy, wrote to Trump praising him for standing up to “bad actors,” but emphasized that fairly traded products should be excluded from the tariffs.

In a separate letter, Iowa’s congressional delegation, including two Republican senators, warned that the tariffs would hurt the state’s farmers and manufacturing.

The head of the influential U.S. Chamber of Commerce, Tom Donohue, warned about the impact to the economy.

“We won’t drive the economy to over 3 percent growth or continue to create jobs if we go down this path,” said Donohue, the chamber’s president and chief executive. “We urge the administration to take this risk seriously.”

A report from the Federal Reserve on Wednesday noted that four of the U.S. central bank’s 12 districts saw a “marked increase” in steel prices partly because of a decline in foreign competition.

With an expected increase in U.S. steel demand, United States Steel Corp said it would restart one of two blast furnaces and steel-making facilities and rehire 500 employees at its Granite City, Illinois, plant. Shares of Nucor, U.S. Steel and AK Steel lifted the S&P 1500 steel index.

Additional reporting by Roberta Rampton, David Shepardson, Susan Heavey, Makini Brice and Jason Lange in Washington, Tom Miles in Geneva and Phil Blenkinsop in Luxembourg; Writing by Robin Pomeroy and Lesley Wroughton; Editing by James Dalgleish and Peter Coone.

Published at Thu, 08 Mar 2018 01:06:58 +0000

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Pushback on Trump tariffs gathers steam, Mexico rejects bid to split NAFTA

by RonnyK from Pixabay

Pushback on Trump tariffs gathers steam, Mexico rejects bid to split NAFTA

WASHINGTON/MEXICO CITY (Reuters) – Republican lawmakers stepped up calls for President Donald Trump to pull back from proposed tariffs on steel and aluminum imports as key trading partner Mexico rejected a bid by Washington to drive a wedge between it and Canada in talks to renegotiate the North American Free Trade Agreement.

Few details have emerged from the White House over the scope and timing of Trump’s tariffs – 25 percent on steel imports and 10 percent on aluminum – after a surprise announcement by the president last week.

Financial markets have rallied off their lows on expectations the measures may be watered down in the face of an intense lobbying effort from leading Republicans, although so far Trump has stuck to his guns in public.

On Tuesday, Representative Mark Meadows, the head of the Freedom Caucus, a staunchly conservative Republican grouping in Congress, raised concerns about the impact of the tariffs on American manufacturing and agriculture. Agriculture is a potential target for retaliatory tariffs from China if Trump pushes ahead.

Meadows, who spoke to reporters after a closed-door meeting with House Republicans, said he had heard little support for the tariffs. “Most of the conversation I heard was not in support of that particular decision.”

Those comments came after sharp criticism of the tariffs from House Speaker Paul Ryan and Representative Mark Walker who both on Monday issued statements critical of the proposals. Walker heads the Republican Study Committee, which has about 150 members, a majority of the party’s lawmakers in the House.

Legislators and industry groups opposed to the duties have warned that the proposed tariffs would cause more damage to American companies and workers than they would help. They also note that the move would hit key allies such as Canada hardest, rather than having a direct impact on global dumping of steel and aluminum by China.

“We fear that the proposed tariff may do more harm than good, hurting rather than helping the 97 percent of aluminum industry jobs in mid-and-downstream production processes,” the Aluminum Association said in a statement on Tuesday.

Members of the administration have repeatedly said that the cost of the tariffs will be minimal for American consumers. Commerce Secretary Wilbur Ross said they would add less than $200 to the cost of a car, for example.

Opponents have fought back, saying that consumers would end up paying more for a wide range of goods from cars, to canned beer and canned soup.


Washington on Monday said that if Canada and Mexico agreed to their demands in the NAFTA talks, they could be exempted from the proposed steel and aluminum tariffs. The trilateral talks have gone on for six months with few signs of progress.

Mexico’s Economy Minister Ildefonso Guajardo raised the prospect of reprisals if Washington pushed ahead with tariffs and insisted NAFTA remain “a trilateral accord” in response to a U.S. proposal to hold talks with Canada and Mexico separately.

“There’s a list (of U.S. products) that we are analyzing internally, but we won’t make it public, we’re going to wait,” Guajardo told the Televisa network in an interview.

Canada has also said it would take counter-measures over the steel and aluminum tariffs, without specifying what it would do. The European Union has identified industries it would target, including Harley Davidson motorbikes, which are made in Wisconsin, Paul Ryan’s state.

Despite the pressure, Trump and the administration have stood firm in public comments. They say that exemptions for specific countries to the tariffs would only allow China – whose huge plant expansions have driven a global glut of steel and aluminum – to skirt the duties by exporting through third countries.

Trump has vowed to cut America’s trade deficit and accuses countries like China of cheating. He has launched an investigation into intellectual property abuses by China, a move that could dwarf any impact of the steel and aluminum proposals and trigger a sharp response from Beijing.

Fred Bergstein, who has held top economics posts in a series of U.S. administrations and is a senior fellow at the Peterson Institute for International Economics thinktank, warned on Tuesday that the proposed tariffs would undermine Washington’s efforts to rein in China by alienating potential allies.

“President Trump’s recent trade actions, especially the announced plans to impose tariffs on steel and aluminum, will have little effect on China. In fact, they will make confronting China with an alliance of trading partners much harder,” he said.

Additional reporting by Jason Lange, Lisa Lambert and Richard Cowan; Writing by David Chance; Editing by Susan Thomas

Published at Tue, 06 Mar 2018 19:42:37 +0000

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A Trump trade war would hit red states hard

Did Trump start a trade war America will lose?
Did Trump start a trade war America will lose?

A Trump trade war would hit red states hard

President Trump’s tariffs — and the trade war they could start — may hurt the very states that sent him to the White House.

Car plants from Michigan to South Carolina could pay more for the steel used to make engines and auto parts. Retaliatory action by the European Union could hurt bourbon distilleries in Kentucky and Harley-Davidson factory workers in Wisconsin.

Farmers across the Midwest would be a prime target for China, the biggest buyer of some American crops.

“Coming from an agriculture state that supported Trump, it’s certainly a disappointing development for Montana and the rest of rural America,” says Herb Karst, a grain farmer in Billings, Montana, and a representative of Farmers for Free Trade, an advocacy group.

“It just seems that agriculture is going to be paying the price for the protection of the steel and aluminum industries,” he said.

Trump said last week that he plans to impose a 25% tariff, or tax, on imported steel, and a 10% tariff on imported aluminum.

American manufacturers buy a lot of that imported steel and aluminum to make products including cars, kitchen appliances, baseball bats and medical equipment. Tariffs would raise their costs. Companies typically pass those costs on to their customers, which can cool sales and lead to job cuts.

The top five states that depend the most on manufacturing, based on employment, all voted for Trump in 2016: Alabama, Indiana, Iowa, Michigan and Wisconsin.

Some of these states alsoemploy workers in the steel and aluminum industries. Theycould benefit from tariffs because their companies would face less foreign competition. And it may encourage more foreign investment.

But overall, manufacturers would probably face higher costs. They would struggle against foreign competitors that don’t have the same trade barriers. For example, if a foreign-made car is cheaper and roughly the same quality, consumers abroad will likely lean toward Volkswagen over Ford, GM or other US car brands.

South Carolina is one red state that could be vulnerable in a trade war. The state has hung its economic hopes on manufacturing and trade. Those two industries make up about 30% of the state’s jobs, according to Labor Department figures.

Experts say the tariffs could cut two, drastically different ways.

On one hand, they could benefit the state by forcing foreign companies to increase investment in the United States, says Douglas Woodward, an economics professor at the University of South Carolina. The state has already positioned itself as an attractive hub for foreign investment. Samsung recently opened a plant there.

Trade barriers can encourage foreign companies to invest in the United States if the cost of exporting becomes too onerous and the companies still want to sell to Americans. When President Ronald Reagan imposed a limit on Japanese cars in the 1980s, Toyota and some other automakers moved production to Kentucky.

But if other countries retaliate against Trump’s tariffs, the benefits could be negated for states like South Carolina.

“It could really have a big impact on a trade-dependent state like ours,” Woodward says. “That’s the big risk here, we could get retaliation, we could get a trade war … that could be damaging.”

One in every 11 jobs in South Carolina depends on the state’s four seaports, where shipping containers move in and out, according to the South Carolina Ports Authority. In total, 187,000 South Carolina jobs depend on trade at the ports.

On the other side of the state, the largest BMW plant in the worldemploys 9,000 workers in Spartanburg. BMW is the state’s largest manufacturer by employment — and it exports more cars from the United States, by value, than any other auto company.

Boeing is another major employer in South Carolina, with roughly 7,500 employees in North Charleston. It uses less aluminum for its new plane models than it used to, but Boeing sells a lot of planes overseas. More than half its revenue comes from abroad, and that could be subject to retaliation. Another alternative is that airlines and governments could buy planes from European makers such as Airbus.

Trump hasnot exempted any countries from the tariffs. Boeing’s top foreign markets are China, Canada and Japan. The first two have promised to retaliate if Trump goes through with the tariffs.

South Carolina also produces soybeans, and China is the No. 1 buyer of American soy. The crop stands to be one of the first targets if China and other countries retaliate.And it’s not just soy farmers who will feel it.

Karst, the grain farmer in Montana, doesn’t grow soy, but he’s worried that soy will be targeted. If Americans can’t sell soy to China, he argues, that will create a glut in the United States. And he says a glut of one crop tends to lower prices for others.

“That’s just devastating,” says Karst, 69. As for Trump’s tariffs, they’re “counterproductive to his stated goal of making sure America wins.”

Published at Mon, 05 Mar 2018 20:51:15 +0000

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Trump’s relationship with big business hits another speed bump

Former commerce secretary on tariffs: There will be retaliation
Former commerce secretary on tariffs: There will be retaliation

 Trump’s relationship with big business hits another speed bump

President Trump prides himself on being a business-friendly leader.

“We are freeing our businesses and workers so they can thrive and flourish as never before,” Trump told corporate titans at the World Economic Forum in Davos, Switzerland, in January.

But for the CEO president, the reality is much more complicated.

Yes, Trump enacted major tax cuts for businesses and has begun to tear down regulations. Those moves have been cheered by Corporate America — and, of course, the stock market.

Yet Trump is now planning to impose aluminum and steel tariffs that businesses have warned are a terrible idea. Even The Wall Street Journal editorial page condemned Trump’s tariff plan as the “biggest policy blunder of his presidency.”

Trump’s tweets sound like he’s itching for a trade war, an outcome that would scare any CEO.

It’s not just tariffs. Trump has repeatedly taken positions that put him at odds with business, including on immigration reform, DACA, the Trans-Pacific Partnership, NAFTA, the Paris climate accord and race.

That’s not to mention Trump’s attacks on executives like Merck(MRK) CEO Ken Frazier and American corporate icons like Apple(AAPL) and Ford.

Trump’s tax cuts and deregulatory agenda may have been a boon to business. But on so many other issues, he is hardly business-friendly.

Trade war fears

Trump’s tariff plans caught Wall Street off guard and started a sell-off. He announced them without warning at ahastily arranged meeting with executives, providing a fresh reminder of the unpredictability corporate leaders must grapple with in the Trump era.

Trump’s plan for a 25% tariff on imported steel and 10% on foreign aluminum raised fears of retaliation that could devolve into a trade war.

While American steel and aluminum executives cheered the idea, it was roundly criticized by trade groups and even some of the president’s allies.

Larry Kudlow, Art Laffer and Stephen Moore, three conservative economists who advised Trump during the campaign, warned in a CNBC op-ed that “steel and aluminum users and consumers will lose.” They blasted Trump’s tariffs a “regressive tax on low-income families” and called the plan a “crisis of logic.”

The Business Roundtable, a powerful lobbying group chaired by JPMorgan Chase(JPM) CEO Jamie Dimon, said Trump’s tariff plan will “hurt the U.S. economy and American companies, workers and consumers.”

Trade groups representing American oil companies, auto dealers, beer makers, chemicals companies and retailers also slammed the tariffs.

Even Hershey(HSY), which uses aluminum in the foil for its chocolate Kisses, warned of a “negative impact on the entire U.S. economy.”


One of Trump’s first acts as president was to kill the Trans-Pacific Partnership, a would-be12-nation trade deal that had the strong support of the Chamber of Commerce, a vocal representative of business interests.

Trump has repeatedly threatened to withdraw the United States from NAFTA, a trade alliance with Canada and Mexico that is firmly embedded within the economy and supply chains. The Chamber of Commerce estimates that NAFTA supports about 14 million American jobs. Trump’s tariffs on aluminum and steel could hinder already fragile talks to renegotiate NAFTA.

Dreamers and the travel ban

Business leaders including the CEOs of Amazon(AMZN), Apple, Wells Fargo(WFC) and Best Buy(BBY) have urged Trump and Congress to protect their employees who are Dreamers.

Yet Trump decided in September to end the Deferred Action for Childhood Arrivals program, whichprevents Dreamers from being deported. Trump punted to Congress, giving lawmakers six months to reach a solution.

Trump’s six-month deadline came on Monday, but court rulings against the administration effectively rendered that deadline meaningless. Still, millions of Dreamers remain in limbo as Congress debates the issue.

FWD.us, an immigration advocacy organization, argues that Dreamers are part of America’s “global competitive advantage” that allows the economy to grow and create jobs. The group has said that the U.S. economy could lose $460 billion if DACA is not resolved.

Recall that Trump’s travel bans early in 2017 were criticized by a broad range of business leaders that included the CEOs of JPMorgan, Amazon, Ford(F) and General Electric(GE).

Corporate America has long pushed for comprehensive immigration reform, an outcome that looks unlikely under Trump.

Paris climate accord

Over the objections of hundreds of major American businesses, Trump announced plans last year to yank the United States from the Paris climate accord. The deal had the backing of companies from ExxonMobil(XOM) to Starbucks(SBUX) and Nike(NKE).

The Paris decision prompted a rebuke from Goldman Sachs(GS) boss Lloyd Blankfein, who sent his first tweet to slam it as a “setback” for American leadership. Elon Musk and Robert Iger, the leaders of Tesla(TSLA) and Disney(DIS), immediately quit Trump’s CEO councils.


Trump’s ties with Corporate America frayed further last summer after he insisted that both sides were to blame for violence at a white nationalist rally in Charlottesville, Virginia.

Executives scrambled to cut ties with Trump, and the two CEO councils disbanded.

Trump responded to the exodus by lashing out at Frazier, the Merck CEO and one of America’s most prominent black CEOs. Trump wrote on Twitter that Frazier’s resignation would give Frazier “more time to LOWER RIPOFF DRUG PRICES!”

Attacks on American icons

Before and after the election, Trump has unleashed his Twitter cannon on major businesses based in the United States.

Last year he warned General Motors(GM) to make its Chevy Cruze in the United States or face a heavy tax. During the campaign he repeatedly accused Ford(F) of shipping jobs from Michigan to Mexico — claims that Ford has said were wrong.

Trump also took aim at Boeing for “out of control” costs for Air Force One. At one point in early 2016 Trump even called for a boycott of Apple unless the company helped the FBI break into the iPhone of a San Bernardino shooter.

Trump’s standoffs with business typically have had little impact on the stock market. Until now. The steel and aluminum tariffs clearly spooked Wall Street last week.

Corporate America is hoping this negative reaction in the stock market — Trump’s favorite barometer of success — will force him to back down.

Published at Mon, 05 Mar 2018 21:45:50 +0000

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U.S. Treasury to close ‘carried interest’ loophole in new tax law

U.S. Treasury to close ‘carried interest’ loophole in new tax law

WASHINGTON (Reuters) – The U.S. Treasury said on Thursday it will close an unintended loophole created by the Republican tax overhaul that let some Wall Street financial managers dodge new limits on“carried interest” by operating as businesses known as S-corporations.

Carried interest refers to a longstanding Wall Street tax break that let many private equity and hedge fund financiers pay the lower capital gains tax rate on much of their income, instead of the higher income tax rate paid by wage-earners.

President Donald Trump vowed to close the loophole during the 2016 presidential election campaign.

Republican tax legislation signed into law by Trump in December required fund managers to hold investments for at least three years before becoming eligible for the lower capital gains rate, but it exempted corporations.

Media reports soon followed saying that some investment funds were setting up pass-through entities known as S-corporations in the hopes of qualifying for the corporate exemption and skirting the carried interest restriction.

On Thursday, the Treasury and its tax-collecting Internal Revenue Service announced that forthcoming regulations will prevent S-corporations from taking advantage of the carried interest exemption.

S-corporations are a form of business entity that passes profits on to business owners as personal income.

New Treasury rules are expected to specify that the exemption applies only to C-corporations, including publicly traded companies, which pay income tax before distributing net profits to shareholders as dividends.

“We worked expeditiously to take this first step to clarify that S corporations are subject to the three-year holding period for carried interest,” Treasury Secretary Steven Mnuchin said in a statement.

The American Investment Council, which represents private equity investors, welcomed Treasury’s guidance, saying in a statement that the government’s position“correctly clarifies the intent of the law.”

Reporting by David Morgan; Editing by Kevin Drawbaugh

Published at Thu, 01 Mar 2018 17:45:13 +0000

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Asia steel exporters seek more info on U.S. tariffs amid trade war fears

Asia steel exporters seek more info on U.S. tariffs amid trade war fears

SEOUL/TOKYO (Reuters) – Asian steel exporting nations took a wait-and-see approach to plans announced by U.S. President Donald Trump to impose hefty tariffs on steel and aluminum, saying they would talk to U.S. officials and see details of the plans before responding.

Fears of an escalating trade war, hit the share prices of Asian steelmakers and manufacturers supplying U.S. markets particularly hard on Friday following a rough night on Wall Street.

Trump said the duties of 25 percent on steel and 10 percent on aluminum would be formally announced next week, although White House officials later said some details still needed to be ironed out.

Steel has become key focus for Trump, who pledged to restore the U.S. industry and punish what he sees as unfair trade practices, particularly by China.

Although China only accounts for 2 percent of U.S. steel imports, its massive industry expansion has helped produce a global glut of steel that has driven down prices.

“The impact on China is not big,” said Li Xinchuang, vice secretary-general of the China Iron and Steel Association.

“Nothing can be done about Trump. We are already numb to him.”

South Korea, the third-largest steel exporter to the United States after Canada and Brazil, said it will keep talking to U.S. officials until Washington’s plans for tariffs are finalised.

South Korean trade minister Kim Hyun-chong has been in the United States since Feb. 25, the trade ministry said. Kim has met U.S. Commerce Secretary Wilbur Ross and other officials to raise concerns over the so-called Section 232 probe and consider a plan that would minimize the damage to South Korean companies.


Of most concern to Asian producers and exporters is the risk that any U.S. tariffs will trigger retaliation by other countries that spread beyond metal markets into a full blown trade war.

Asian steelmakers also fear U.S. tariffs could result in their domestic markets becoming flooded with steel products that have no where else to go.

The Trump administration also cited national security interests for its action, saying the United States needs domestic supplies for its tanks and warships.

Contrary to the action announced by Trump on Thursday, the Department of Defense had recommended targeted steel tariffs and a delay in aluminum duties.

“We are aware of President Trump’s statement but the details of the measures including which nations will be targeted have yet to be announced,” said Japanese Trade and Industry Minister Hiroshige Seko.

“We continue to seek clarification. I don’t think exports of steel and aluminum from Japan, which is a U.S. ally, damages U.S. national security in any way, and we would like to explain that to the U.S.“

Trump believes the tariffs will safeguard American jobs but many economists say the impact of price increases for consumers of steel and aluminum, such as the auto and oil industries, will be to destroy more jobs than they create.

Japan’s Toyota Motor Corp said the tariffs would substantially raise costs and therefore prices of cars and trucks sold in America.

News of the tariffs hit sentiment on Wall Street due to the potential impact of higher costs on consumers and the potential for damaging tit-for-tat retaliation by affected countries.

“The decision by the U.S. to raise tariffs on aluminum and steel products is a clear step in the wrong direction that risks further escalating global trade tensions,” said Innes Willox Chief Executive of the Australian Industry Group, representing the industrial sector’s interests, in a statement.

Asian steelmakers suffered with shares in South Korea’s POSCO and Japan’s Nippon Steel & Sumitomo Metal Corp down more than 3 percent.

Reporting by Jane Chung in SEOUL, Kaori Kaneko in TOKYO; Additional reporting by Tom Westbrook in SYDNEY, Tom Daly in BEIJING, Minami Funakoshi, Chang-Ran Kim and Yuka Obayashi in TOKYO; Writing by Lincoln Feast; Editing by Simon Cameron-Moore

Published at Fri, 02 Mar 2018 03:15:04 +0000

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Social Security fumbles duty to help widows maximize benefits

Social Security fumbles duty to help widows maximize benefits

CHICAGO (Reuters) – (The opinions expressed here are those of the author, a columnist for Reuters.)

Social Security is underpaying widows and widowers – sometimes by large amounts.

In cases where widows are eligible to claim their own retirement benefits or those of a deceased spouse, the agency often fails to inform of options that would increase their payments. That is the troubling finding of a report issued last month – on Valentine’s Day, no less – by Social Security’s Office of the Inspector General (OIG).

The OIG reviewed cases of so-called dual eligible beneficiaries, and found that in 82 percent of cases, Social Security had failed to follow its own procedures for laying out options for maximizing benefits. That is bad enough – but even worse, this failure disproportionately impacts women, who tend to outlive men and face greater challenges meeting their financial needs in retirement.

Dual-eligible widows have some claiming choices that are not available via the Social Security spousal benefit. They are entitled to receive their own benefit or that of a deceased spouse, whichever is higher. But they also can make a strategic choice to take the lower amount first, and wait to switch to the higher amount later. That approach helps the higher benefit grow even more as it accrues credits for delayed filing, generally 8 percent per year, plus cost-of-living adjustments during the delay and all the ensuing years.

“You can really increase your lifetime payout by timing how you file the two claims for the two different payments,” said Andy Landis, a former Social Security Administration employee and author of “Social Security: The Inside Story,” one of the best guides to the program’s benefits. The book, recently updated with a new edition, contains a chapter on the ins and outs of survivor benefits.

The most unique feature of the widow’s benefit is that she (or he) can receive 71.5 percent of a deceased spouse’s benefit starting at age 60. If she is caring for any of their children under age 16, that amount rises to 75 percent. If she is filing at her own full retirement age, she can receive 100 percent of her spouse’s benefit. The benefit is computed using the deceased worker’s Primary Insurance Amount (PIA), which is the amount a beneficiary would receive if she files at her full retirement age for widow’s benefits (around 66). In many situations, these rules also apply to divorced surviving spouses.

An SSA representative said the agency is looking in to the problem of underpaying widows and developing a plan of action.


Big dollars can be at stake here.

I asked Social Security Solutions, which advises individuals and financial planners on how to optimize benefits, to run a couple of scenarios illustrating how much money might be left on the table. (In both cases, no cost-of-living adjustments have been applied – they illustrate “today’s dollars” scenarios)

In the first example, Barbara is a 60-year-old widow with a $1,600 PIA. Her husband Ron passed away at 63 before claiming his benefits; his PIA is $2,000. She can claim her own reduced retirement benefit of about $1,200 at 62 and switch to the widow’s benefit of $2,000 at her full retirement age for widows.

Or, at 60, Barbara can claim a reduced widow’s benefit of $1,430 (71.5 percent of Ron’s PIA). She then waits for her own benefit to grow through delayed claiming; at 70 she claims her own benefit, which has now grown to $2,112. If she lives to age 89, Barbara will have collected $45,000 more in benefits lifetime.

In the second example, Joan is a 60-year-old widow with a PIA of $1,100. Her husband Jim died at age 63 before claiming, and his PIA is $2,000. She can claim the reduced widow’s benefit of $1,430 at age 60, but she would receive that amount for the remainder of her life since her own benefit is too small to exceed the widow’s benefit by delaying her own claim.

Instead, she claims her own benefit early at age 62, collecting $825 per month. At 66, she claims the widow’s benefit of $2,000. That yields a lifetime gain of $101,000, assuming she lives to age 89.

”All widows or widowers need to assess two possible switching strategies to determine which is better for their situation,” said Bill Meyer, CEO of Social Security Solutions. “In some cases, it will make sense to take the survivor benefit right away at age 60, and switch to your own benefits at 70. But in other cases, it makes more sense to take your own benefit at 62 and switch to a survivor benefit at your full retirement age.”

The OIG studied a random sample of 13,564 widows and widowers who are currently receiving survivor benefits and who were dually eligible; it found that 11,123 would have been eligible to receive a higher benefit had they delayed their retirement application until age 70.5.

The report calls on the SSA to take action to correct benefit underpayments for the people it has already underpaid, and that it “remind employees” of the need to discuss delaying strategies. The OIG’s report said in an appendix that the SSA agreed with the recommendations.

Action cannot come soon enough. Widows have it hard enough without being short-changed by Social Security.

Editing by Matthew Lewis

Published at Thu, 01 Mar 2018 15:28:51 +0000

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Trump breaks his silence on market chaos

Trump used to brag about stocks. Now he's quiet
Trump used to brag about stocks. Now he’s quiet

Trump breaks his silence on market chaos


He broke his silence Wednesday about the market turmoil: “In the ‘old days,’ when good news was reported, the Stock Market would go up,” he wrote on Twitter.

He added, “Today, when good news is reported, the Stock Market goes down. Big mistake, and we have so much good (Great) news about the economy!”

Trump’s complaints came two days after an awkward split-screen moment: The Dow was plunging more than 1,000 points just as he was giving a televised speech touting the economic benefits of his tax plan.

Wall Street’s darkest day since 2011 put the president in a tough spot because he took so much credit for the market’s big gains after he was elected.

So what is Trump talking about?

He has a point about good news and bad news: The market did indeed plunge in recent days after positive economic news. Though that’s not a new thing — it happens from time to time. And there is some logic behind it, even if it’s frustrating to presidents and everyday investors alike.

Consider the rude reaction on Wall Street to Friday’s jobs report, whichshowed that wages grew at the fastest pace since 2009. That’s a clear win for Main Street after years of weak pay increases for workers.

Yet the stock market had a hellish day. The Dow plunged 666 points, or 2.5%, its worst day in more than a year.

Wall Street was focused on the short term. Investors worried that wages could grow so quickly that they will put a dent in record corporate profits and make the Federal Reserve nervous about inflation.

“We’re back in this perplexing phase where good news for the economy is treated as bad news for financial markets,” said Candice Bangsund, portfolio manager at Fiera Capital.

If the Fed aggressively raises interest rates to fight inflation, it will remove one of the drivers of the bull market. Because of that fear, investors sold bonds, which drove yields to four-year highs. Higher yields make risky stocks look less attractive by comparison. Thus the sell-off.

So in that sense, Trump was right: Good news for Main Street was viewed as bad news by Wall Street.

But this happened under Trump’s predecessors, too.

More than once underPresident Barack Obama, Wall Street became nervous that good economic news would force the Fed to raise rates. And in other cases, the opposite happened: Bad jobs news drove stocks higher because it meant theeasy money wasn’t going anywhere.

This inverse reaction was so common that sometimes, as with a strong jobs report in August 2016, it was noteworthy that good news was treated as good news.

Of course, the recent market turbulence is about more than the good news/bad news situation Trump alluded to.

The stock market boom since Trump’s election became overheated. Euphoria set in, making the market more vulnerable to sharp setbacks. A cool-off period was long overdue — and may prove to be a healthy thing.

“Markets do better over the long term when they experience corrections periodically,” Capital Group CEO Tim Armour said in a recent report. “They can’t go up all the time.”

In the past, Trump himself loudly cheered for the market to keep rallying. After the Dow hit 20,000 in early 2017, he said “Now we have to go up, up, up.” It was a big reversal from during the 2016 campaign when he called the market a “big, fat, ugly bubble.”

Published at Wed, 07 Feb 2018 18:54:06 +0000


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Dow slump extends into its second day

Analysis: Yes, President Trump gets credit for the economy
Analysis: Yes, President Trump gets credit for the economy

Dow slump extends into its second day


Dow futures fell 175 points early Tuesday, continuing a rare stock market slump.

Jeff Bezos, Warren Buffett and Jamie Dimon’s plan to get into the health insurance business sent health care companies tumbling. UnitedHealth(UNH) dropped 7%, CVS(CVS) was off 6%, and Walgreens(WBA) shed 3%.

The Wall Street Journal also reported that Apple will make 20 million fewer iPhone X’s this coming quarter than it had originally planned. The iPhone X, Apple’s newest and most expensive phone, hit stores in November. Apple will give investors an update on sales Thursday during its year-end earnings report.

Apple(AAPL) dropped 1% early Tuesday.

The market selloff so far is just minor turbulence in a relentless market climb. The Dow fell 177 points Monday, its worst day since September.

But the Dow is up 8,000 points since President Trump’s election. A growing global economy, strong corporate earnings and a wave of consumer confidence are pushing stocks higher. Congress’ tax cuts and Trump’s deregulation agenda have investors and CEOs feeling optimistic.

There are still warning signs that the market could be entering a long-overdue correction. The VIX(VIX), Wall Street’s fear gauge, hit its highest level since August on Monday.

The bond market is unnerving stock investors. On Monday, the 10-year Treasury yield climbed above 2.7% to the highest level in nearly four years. Yields move in the opposite direction of price.

While bond rates remain historically low, a rapid rise above 3% could spook Wall Street.

If trouble comes to the market, many analysts think it will start in bonds. If investors sell bonds, their interest rates will rise sharply from their current historic lows. And when investors can get better returns from bonds, risky stocks start to look less attractive.

The Federal Reserve’s planned interest rate hikes are also at play.

“We have become an asset price dependent economy and one addicted to artificially low rates,” Bleakley Advisory Group’s Peter Boockvar wrote in a note Tuesday.

Published at Tue, 30 Jan 2018 13:57:20 +0000

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Trump in Davos: ‘Predatory behaviors’ are distorting global markets


Trump's rock star reception at Davos
Trump’s rock star reception at Davos

Trump in Davos: ‘Predatory behaviors’ are distorting global markets


President Trump has issued a firm warning to rival trading nations.

“We support free trade, but it needs to be fair, and it needs to be reciprocal,” Trump said at the World Economic Forum in Davos, Switzerland.

Trump, the first sitting American president to address the conference since Bill Clinton, touted tax and regulatory changes and solicited new investment from business leaders in a speech that lasted just 15 minutes.

The address also included a pledge to “enforce our trade laws, and restore integrity to our trading system.”

“The United States will no longer turn a blind eye to unfair economic practices, including massive intellectual property theft, industrial subsidies and pervasive state-led economic planning,” said Trump.

“These and other predatory behaviors are distorting the global markets, and harming business and workers not just in the U.S. but around the globe,” he added.

The comments, delivered to the crowd of central bankers, government officials and finance titans that attend Davos, suggest that Trump will pursue an aggressive trade agenda in his second year in office.

Trump slapped new tariffs on imported residential washing machines and solar panels this week.

He has less than 90 days to decide whether to apply tariffs on imports of steel and aluminum, and has threatened to withdraw the U.S. from NAFTA if he’s unhappy with the outcome of talks about revising the pact with Canada and Mexico.

Commerce Secretary Wilbur Ross also addressed the administration’s trade agenda in Davos, saying that the “next area of challenge” will be China’s tech industry.

“Many countries are very good at the rhetoric of free trade, but actually practice extreme protectionism,” Ross told reporters on Wednesday. “That is a problem with which the president is quite determined to deal.”

China has thrown its weight behind artificial intelligence, electric cars and computer chips in recent years, pumping money in to create industry champions with global clout.

“That is a direct threat, and that is a direct threat that is being implemented by the technology transfers, by disrespect for intellectual property rights, by commercial espionage, by all kinds of bad things,” Ross said.

Published at Fri, 26 Jan 2018 15:18:00 +0000

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Update: For Fun, Stock Market as Barometer of Policy Success

Update: For Fun, Stock Market as Barometer of Policy Success

by Bill McBride on 1/19/2018 11:57:00 AM

There are a number of observers who think the stock market is the key barometer of policy success.  My view is there are many measures of success – and that the economy needs to work well for a majority of the people – not just stock investors.

However, for example, Treasury Secretary Steven Mnuchin was on CNBC on Feb 22, 2017, and was asked if the stock market rally was a vote of confidence in the new administration, he replied: “Absolutely, this is a mark-to-market business, and you see what the market thinks.”

And Larry Kudlow wrote in 2007: A Stock Market Vote of Confidence for Bush: “I have long believed that stock markets are the best barometer of the health, wealth and security of a nation. And today’s stock market message is an unmistakable vote of confidence for the president.”

Note: Kudlow’s comments were made a few months before the market started selling off in the Great Recession. For more on Kudlow, see: Larry Kudlow is usually wrong

For fun, here is a graph comparing S&P500 returns (ex-dividends) under Presidents Trump and Obama:

Stock Market Performance

Click on graph for larger image.

Blue is for Mr. Obama, Orange is for Mr. Trump.

At this point, the S&P500 is up 23.2% under Mr. Trump compared to up 41.1% under Mr. Obama for the same number of market days.

Read more at http://www.calculatedriskblog.com/2018/01/update-for-fun-stock-market-as.html#yRdiQOsKJzw4p9KO.99

Published at Fri, 19 Jan 2018 16:57:00 +0000

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Trump may weaken ‘outdated’ rules that force banks to lend to the poor


Barney Frank: CFPB out of control? Give me an example.
Barney Frank: CFPB out of control? Give me an example.

Trump may weaken ‘outdated’ rules that force banks to lend to the poor


Imagine having a great credit score and being denied for a mortgage just because you live in a low-income neighborhood.

Redlining, the refusal by banks to lend to poor and minority communities, was so common decades ago that Congress passed the Community Reinvestment Act in 1977 to prevent it.

For years, banks have been fighting these requirements to lend to underprivileged people — and President Trump is listening as he continues his war on regulation.

The Treasury Department plans to recommend changes to the lending rules early this year, building on moves last year to ease the regulations.

In a statement to CNNMoney, Treasury called the CRA “outdated” and in need of “modernization” — echoing words used by the American Bankers Association, a powerful bank lobby that wants to relax the rules.

 Advocacy groups fear the Trump administration will weaken the lending requirements and make it harder for low-income Americans to get mortgages, small business loans or other forms of credit that help people work their way out of poverty.

“We just can’t let that happen,” said John Taylor, CEO of the National Community Reinvestment Coalition, an alliance of organizations that promote fair lending. “The CRA is the holy grail that ensures the financial interests of working class and low-income workers will be considered.”

Taylor, who met with Treasury Secretary Steven Mnuchin about the CRA, said the irony is that these rules benefit the same “blue-collar people Donald Trump maintains he represents.”

Under the rules, banks are banned from denying or raising the cost of banking to residents of low-income and minority neighborhoods. Banks also get graded based on how much credit they provide for mortgages and apartments as well as how many branches they have in low-income areas. In other words, banks aren’t allowed to cater only to rich customers.

The recovery from the Great Recession is accelerating, but the gains have not been shared evenly. Wealth inequality hit a record high in 2016, according to the Federal Reserve.

Trump has repeatedly argued that banks are suffering from too much oversight. In April, he complained that bank CEOs are “petrified of the regulators. They’re petrified. They can’t move.”

Trump’s regulators are acting. Banks are given ratings for how much they’re lending to underserved communities, and in October the Office of the Comptroller of the Currency made it harder for examiners to downgrade lenders for discriminatory practices.

Keith Noreika, the acting leader of the OCC at the time, said the downgrades “unnecessarily distract and divert the bank’s resources from lending, investing or serving the relevant communities.”

While the Trump administration is not expected to kill the CRA entirely, bank lobbyists are pushing for more action.

Last month, the bank lobby urged the Treasury Department to “modernize” CRA, One proposal would give banks credit for financing infrastructure projects and teaching people how to handle money, not just lending to poor people.

Taylor urged the Treasury Department not to do that. He says community development must remain focused on low- and moderate-income communities “that have and continue to experience redlining.”

Rather than weakening the CRA, Taylor had been pushing regulators to strengthen the enforcement of lending rules by beefing up their staff and allowing community groups to play a role in training examiners.

However, recent research suggests there may be unintended consequences to forcing banks to lend more to low-income communities.

High levels of predatory lending in poor neighborhoods can be linked to rules like CRA that focus more on quantity of loans rather than quality of service, according to the paper by Washington University professor Taylor Begley and University of Michigan professor Amiyatosh Purnanandam.

There is an “exceptionally strong” link between high-minority concentration and high levels of complaints, the paper by Washington University professor Taylor Begley and University of Michigan professor Amiyatosh Purnanandam found.

Last year, Wells Fargo’s(WFC) CRA rating was severely downgraded by regulators, who cited the “egregious nature” of “discriminatory and illegal” credit practices at the bank that hurt “large numbers of consumers.”

Downgrades create major public relations headaches for banks and can lead to restrictions on acquisitions and bank branch openings.

JPMorgan Chase(JPM), Bank of America(BAC) and Wells Fargo, America’s three largest lenders, declined to comment on changes to the CRA.

Some Wall Street analysts are cheering talk of relaxing the lending rules.

Changes to the CRA would be a “positive for banks because it supports the narrative of a better regulatory environment,” Brian Gardner, an analyst at investment bank KBW, wrote in a report on Thursday.

Veteran banking analyst Dick Bove said that while greater clarity on regulation is needed banks need clearer rules, the CRA shouldn’t be meaningfully adjusted because because communities depend on the lending.

“The banks get FDIC insurance and that’s backed by the government. So, the banks have a responsibility to make loans that benefit all classes,” Bove said.

Published at Fri, 12 Jan 2018 11:44:18 +0000

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Federal regulator rejects Trump coal rescue plan


Here's what Trump has said about bringing back coal jobs
Here’s what Trump has said about bringing back coal jobs

Federal regulator rejects Trump coal rescue plan


Federal regulators have rejected a controversial Trump administration proposal that would have propped up slumping coal companies.

The Federal Energy Regulatory Commission dismissed Energy Secretary Rick Perry’s call to subsidize power plants like coal and nuclear that maintain a 90-day supply of fuel on site. Perry cited a need to improve the resilience of the nation’s power grid, especially from severe weather.

The proposal, which was supported by coal mining companies like Murray Energy, was widely seen as an attempt to help the coal and nuclear industry. Coal, in particular, has been crushed in recent years by the rise of cleaner energy like natural gas and solar and by tougher environmental regulation.

In a blow to Trump’s campaign promise to help coal country, FERC on Monday terminated a rulemaking process that Perry had launched.

The independent agency, which is run by bipartisan commissioners appointed by the president and confirmed by the Senate, faced a Wednesday deadline to rule on the matter.

FERC did decide to take steps to evaluate the resilience of the power system. It directed regional transmission organizations and independent system operators, which move electricity through the grid, to submit information. FERC said it expects to “promptly decide whether additional Commission action is warranted to address grid resilience.”

“This is a good day for everyone who cares about good governance and healthy markets,” said Justin Gundlach, a staff attorney at Columbia University’s Sabin Center for Climate Change Law.

Gundlach slammed the Energy Department proposal as a “gambit that sought to funnel money to uneconomic coal-fired power plants in a way that would have ignored the law.”

Former New York Mayor Michael Bloomberg, a U.N. special envoy on climate change, called the FERC decision a win for “consumers, the free market and clean air.” He said Perry’s proposal was an attempt to “prop up the coal industry by forcing American consumers to pay more for energy.”

Former FERC commissioners warned in a letter last year that the Energy Department proposal would raise costs for customers and “disrupt decades of substantial investment made in the modern electric power system.”

The FERC decision is bad news for coal companies hurting from a wave of retirements of coal-fired power plants that have switched to cheaper fuels like natural gas. Between 2010 and 2015, coal plants accounted for more than 52% of retired power plant capacity, according to government statistics.

Murray Energy argued the new rule would ensure that coal plants would be there to supply electricity when it’s most needed, especially during extreme weather like the recent cold weather in parts of the United States.

“If it were not for the electricity generated by our Nation’s coal-fired power plants, and nuclear plants, we would be experiencing massive brownouts and blackouts in this Country,” Murray wrote in a statement to CNNMoney. (Murray CEO Robert Murray filed a defamation lawsuit last year against John Oliver, HBO and CNN owner Time Warner(TWX), alleging “character assassination.”)

The Energy Department said the rule was needed to “address the crisis at hand” regarding the resilience of the electric grid. The department cited the 2014 extreme cold snap known as the Polar Vortex as well as natural disasters such as Hurricanes Sandy, Harvey and Irma.

However, some analysts pointed out that power outages are usually caused by downed power lines, not a short supply of fuel. Less than 0.1% of all electricity disturbances over the last five years were caused by fuel supply emergencies, according to a report by the Rhodium Group, a research firm.

Apple(AAPL) wrote a letter to FERC on Monday urging the agency to reject the Energy Department proposal and stating that the “grid is not facing a crisis.”

Apple warned the proposed rule would “inhibit, rather than promote, a well-designed and competitive electricity market that can drive down costs for consumers and unleash competition.”

Climate activists cheered the FERC decision.

“FERC’s announcement is a return to reality after months of billionaire coal and nuclear executives pressuring DOE and FERC to illegally setup bailouts for their uneconomic plants,” Mary Anne Hitt, director of the Sierra Club’s Beyond Coal campaign, wrote in a statement.

Published at Mon, 08 Jan 2018 22:44:28 +0000

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