Introduction: China warns US that there are no winners in trade wars
Good morning and welcome to our regular coverage of business, financial markets and the world economy.
Two days after the US election result, countries around the world are chewing over what impact Trump 2.0 will have on their economies – especially if the president-elect starts a trade war.
China would obviously be in the firing line, considering Donald of Trump suggests he may impose a 60% tariff on Chinese imports at the US border.
And with that in mind, it seems, China’s ambassador to the United States has warned that there are no winners in tariff or trade wars.
Ambassador Xie Feng also warned against wars over science, technology or industry, in a speech at a US-China Business Council dinner on Thursday first from Reuters.
Xie encouraged US companies to invest and operate in China and said he looked forward to strengthening dialogue and cooperation on global challenges such as climate change and artificial intelligence.
Taking a conciliatory pose, Xie argued for the merits of partnership:
“China and the United States can achieve many great and good things through cooperation, and the list of cooperation should be expanded more and more.”
“The more success stories of mutually beneficial cooperation, the better.”
“Cooperation,” however, was not at the top of the agenda during Trump 1.0; in 2018, Washington imposed trade sanctions on China, including restrictions on investment and tariffs, prompting retaliation from Beijing.
This time the president of China Xi is leading a much worse domestic economy; if Trump imposes new tariffs, analysts think it could affect $500 billion worth of Chinese goods.
ING’s global head of macro, Carsten Brzeski, predicts the Trump administration will first focus on domestic policy, including immigration and extending/extending tax cuts, before turning to trade issues.
Brzeski told customers:
We think the earliest time for tariffs to be implemented is the third quarter of 2025. China is likely to be affected first, with a gradual series of tariffs introduced on various products from other countries coming later.
The tariffs would be a blow to US consumers – already reeling from rising global inflation in 2022 and 2023 – as they would be passed on by importers.
Last night, America’s top central banker said the US economy was performing well, with stronger growth than other major economies, falling inflation and a solid labor market.
Jerome Powell also insisted he would not resign if Trump asked him to step down, following reports that some of the president-elect’s advisers wanted Powell to resign.
Asked if he would step down if asked by Trump, Powell answered with an emphatic “no”. Powell also said the White House’s removal of Fed governors from their leadership roles “is not permitted under the law.”
PAGE: Federal Reserve Chairman Jerome Powell defiantly told a reporter that if Trump tries to fire him, he can’t.
Powell is right.
Reporter: Do you believe the president has the power to fire or demote you?
Powell: Not allowed by law. NOT ALLOWED WITHOUT… pic.twitter.com/V1yz6EfGRF
— Brian Krassenstein (@krassenstein) November 7, 2024
Agenda
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7.45 GMT: French trade data for September
-
09:00 GMT: Monthly UN food price index
-
13:30 GMT: Canadian non-farm payrolls report for October
-
15:00 GMT: University of Michigan consumer confidence index
Main events
In the City, shares in the parent company of British Airways are up over 7% after it reported strong results this morning.
IAG are leading the growth of the FTSE 100 after posting a 7.9% rise in revenue in the third quarter of the year, with operating profits up 15.4% to just over €2 billion.
Luis Gallego, IAG Chief Executive Officer, says:
“We have achieved a very strong financial performance in Q3 2024, with a 15.4% increase in operating profit compared to the same period last year and improving our margin to 21.6%. This is due to the effectiveness of our strategy and transformation across the Group.
“We are also delivering on our commitment to deliver sustainable returns to shareholders. “Demand remains strong on our airlines and we expect a good final quarter of 2024 financially.”
More Tariffs, Less Red Tape: What Trump Means for Major Global Industries
Investors have also digested the implications of a second Trump term.
The debate about what trades work best with a Trump administration centers on three points, Bob Wildhead of markets strategy and insights into BNYtold customers:
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Tax cuts = higher deficits. Trump’s policy shift from the current administration will revolve around taxes – which are expected to be lower thereby increasing government deficits and borrowing needs.
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Fee = inflation. Investors also fear the role of tariffs as they are expected to disrupt global trade and supply chains as they did in 2016-2020 with the risk of inflation and less investment.
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Deregulation = more lending. Markets also see Trump pushing for less government regulation — leading to easier lending as capital requirements fall, along with more pressure on the FOMC for easing.
Governor of the Bank of England Andrew Bailey is concerned that the new tariffs could cause a ‘disruption of the world economy’.
Speaking of LBC’s Tonight with Andrew Marr yesterday, following the cut in UK interest rates, Bailey explained that growth would suffer:
“What I would call the fragmentation of the world economy, a kind of breakup of the world economy is not a good thing, it’s a bad thing… Tariffs are one of the things that can cause that kind of breakup of the world economy…
Open trade really does stimulate growth. Adam Smith taught us this, open trade is good for growth. Now, there are risks associated with it, and we’ve seen those risks, so there are definitely risks. We saw that with the impact of the Ukraine War, that if you’re overly dependent on one part of the world for something, obviously, if that’s disrupted, that can have a bad effect.
So diversification, spreading your sources of stuff and trading is reasonable and good. But if the world becomes more closed, the cost of trade goes up – protectionism, that’s not a good thing.’
Wang Donga professor of international relations at Peking University, has warned that “Trump 2.0 is likely to be more destructive than the 2017 version.”
In a pre-election interview for Chinese media, Wang said:
“Compared to his first term in office in 2017, Trump’s views in his second campaign in 2024 have not changed much, but the domestic situation and the international environment have changed dramatically… during the Trump 2.0 period, China and the States The United States is likely to have constant friction and conflict.”
Here’s our new analysis of how China is preparing for the return of Donald Trump:
Introduction: China warns US that there are no winners in trade wars
Good morning and welcome to our regular coverage of business, financial markets and the world economy.
Two days after the US election result, countries around the world are chewing over what impact Trump 2.0 will have on their economies – especially if the president-elect starts a trade war.
China would obviously be in the firing line, considering Donald of Trump suggests he may impose a 60% tariff on Chinese imports at the US border.
And with that in mind, it seems, China’s ambassador to the United States has warned that there are no winners in tariff or trade wars.
Ambassador Xie Feng also warned against wars over science, technology or industry, in a speech at a US-China Business Council dinner on Thursday first from Reuters.
Xie encouraged US companies to invest and operate in China and said he looked forward to strengthening dialogue and cooperation on global challenges such as climate change and artificial intelligence.
Taking a conciliatory pose, Xie argued for the merits of partnership:
“China and the United States can achieve many great and good things through cooperation, and the list of cooperation should be expanded more and more.”
“The more success stories of mutually beneficial cooperation, the better.”
“Cooperation,” however, was not at the top of the agenda during Trump 1.0; in 2018, Washington imposed trade sanctions on China, including restrictions on investment and tariffs, prompting retaliation from Beijing.
This time the president of China Xi is leading a much worse domestic economy; if Trump imposes new tariffs, analysts think it could affect $500 billion worth of Chinese goods.
ING’s global head of macro, Carsten Brzeski, predicts the Trump administration will first focus on domestic policy, including immigration and extending/extending tax cuts, before turning to trade issues.
Brzeski told customers:
We think the earliest time for tariffs to be implemented is the third quarter of 2025. China is likely to be affected first, with a gradual series of tariffs introduced on various products from other countries coming later.
The tariffs would be a blow to US consumers – already reeling from rising global inflation in 2022 and 2023 – as they would be passed on by importers.
Last night, America’s top central banker said the US economy was performing well, with stronger growth than other major economies, falling inflation and a solid labor market.
Jerome Powell also insisted he would not resign if Trump asked him to step down, following reports that some of the president-elect’s advisers wanted Powell to resign.
Asked if he would step down if asked by Trump, Powell answered with an emphatic “no”. Powell also said the White House’s removal of Fed governors from their leadership roles “is not permitted under the law.”
PAGE: Federal Reserve Chairman Jerome Powell defiantly told a reporter that if Trump tries to fire him, he can’t.
Powell is right.
Reporter: Do you believe the president has the power to fire or demote you?
Powell: Not allowed by law. NOT ALLOWED WITHOUT… pic.twitter.com/V1yz6EfGRF
— Brian Krassenstein (@krassenstein) November 7, 2024
Agenda
-
7.45 GMT: French trade data for September
-
09:00 GMT: Monthly UN food price index
-
13:30 GMT: Canadian non-farm payrolls report for October
-
15:00 GMT: University of Michigan consumer confidence index