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Tag Archives: Trade

Will the Coronavirus Lead to Global Recession?

TweetFebruary 27, 2020 —  At the start of the year, the economic mood was tending toward the optimistic.  True, growth had slowed a bit in 2019. US GDP grew 2.3 % in 2019, down from 2.9 % in 2018.  World growth was weak in 2019 as well: 2.9% according to IMF estimates, down from 3.6 % the year before.  Still, there had been no recession.  And forecasts as recently as January called for world growth to rebound in 2020. Global recession? Now, just since January, there is new reason for...

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Let’s Go Back to Good Old Tariff-Cutting

TweetNov. 30, 2019  — The “bicycle theory” used to be a metaphor for international trade policy.  Just as standing still on a bicycle is not an option — one has to keep moving forward or else the bike will fall over – so it was said that international trade negotiators must continue to engage in successive rounds of liberalization, or else the open global trading system would be pulled down by protectionist interests.  I don’t know if the theory was ever right.  (And, to be honest, I...

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Intellectual property and the trade deficit

"The IP Commission estimates that between $200 billion and $500 billion a year of intellectual property is stolen from the U.S." I found this interesting tidbit in The Atlantic interview of Kevin Hassett, ex CEA chair. (HT Marginal Revolution)Well, suppose China were to pay up, and pay the $200 to $500 billion a year in royalty payments. Where would it get the money from? Hmm. It would have to sell us an additional $200 to $500 billion worth of exports, that's how.  The trade...

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RMB reaches 7.0; US names China a manipulator

TweetAugust 12, 2019 –The US-China trade war heated up in the first week of August.  On August 1, Donald Trump abruptly announced plans to impose a 10 % tariff on the remaining $300 billion of imports from China that he had not already hit with earlier tariffs.   The Chinese authorities then allowed their currency, the renminbi (RMB), to fall in value below the highly visible line of 7.0 RMB/$.  The US Administration promptly reacted on August 5 by naming China a “currency manipulator” —...

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Letter from Argentina

My friend Alejandro Rodriguez, at Universidad del CEMA, sends the following report:Oops we did it again. Macri (the current president) lost in the open primary elections (all parties present their candidates in an open  general election so it is like a very big poll). The formula Alberto Fernandez- Cristina Fernandez (the ex president who ruled between 2007 and 2015 is the candidate to vice president) is expected to win in October. The peso is falling like a rock (down 25%) and...

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Parallel to US-China trade war, Japan & Korea fall out

TweetAugust 8, 2019 — I responded to 9 questions in an interview today with Chosun Ilbo.  They concern the US-China trade war and the new simultaneous dispute between Korea and Japan.  The trade war between the world’s two largest economies continues and it appears the war is spilling over to currency now. What do you think are the fundamental reasons for this conflict? JF         It was legitimate for the outside world to ask China to make some changes.  But we did not sit down in a...

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Trade and the Fed

Nina Karnaukh of Ohio State sent along this lovely graph of the 6 month Fed Funds futures around the beginning of August. Read this as the market's guess about what is happening to the Federal Funds rate over the next 6 months.The first drop in price occurs with the FOMC announcement 2 PM July 31. The price drop is equivalent to a a rise in expected future interest rates of about 5 basis points or 0.05%. This has been read as market disappointment that the Fed did not signal more future rate...

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Trump escalates China trade war

TweetAugust 5, 2019 — The China’s People’s Daily in an interview had three questions about the US threat of August 1 to apply tariffs on the remainder of Chinese goods. As the tariff list of Trump now covers all the goods from China, economists are warning that consumers will pay more for the tariff. Do you share this concern? JF Answer: Yes, the additional tariffs — 10% on the remaining $ 300 billion of imports from China — will clearly raise the price that American consumers have to pay...

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Institutionalized nonsense

When, last week, the Treasury issued its currency manipulation report, I thought it was a joke. Treasury put Germany and Italy on its "monitoring list" of countries suspected of "currency manipulation."Germany and Italy are, of course, part of the Euro, the whole point of which is that they cannot, individually, "manipulate" their currencies, whatever that means. It is precisely this inability to devalue -- to "manipulate" the Drachma to regain "competitiveness" (another meaningless term) --...

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The Trade War Resumes

TweetDonald Trump on May 5 suddenly revealed that a trade agreement with China was not imminent after all.  To the contrary, the Administration on May 10 raised its earlier 10 percent tariff on $200 billion of Chinese goods to 25%, and threatened to extend 25% tariffs to the remainder of imports from China by late June (roughly $300 billion of goods).  China, of course, retaliated against US exports [announcing reciprocal 25% tariffs on $60 billion of US goods, to start June 1.  Surprised...

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