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Scooped by
Graham Watson
onto International Economics: IB Economics June 30, 12:30 PM
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Thirteen countries with a free trade agreement with Brussels have their quota reduced by just one-third
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The duties mark a major escalation in trade tensions between the North American neighbours.
Graham Watson's insight:
Here we go again, another round of tariffs in the ongoing trade dispute between the US and Canada, with President Trump pledging a 50% tariff on sectors as diverse as wine, cement and ice hockey sticks. It's apparently in response to the unfair treatment of US exports in the car, dairy and alcohol sectors.
Of course, the cynic might suggest that it's a bully throwing his weight around, and/or a tactic to distract from a lack of anything close to a coherent policy agenda. US,
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Why a modest US interest rate rise won’t change much for most businesses | Gene Marks | The Guardian
Rates may rise, but don’t be too concerned – a small increase is unlikely to change major decisions on investment or hiring
Graham Watson's insight:
This is interesting if only because it makes the point that for all we get worked up about monetary policy and interest rate changes, the reality is that monetary fine-tuning is likely to have little effect on the behaviour of economic agents because of the size of the interest rate changes involved.
I always ask my pupils to think about macroeconomic policy decisions in terms of size, causes, consequences, so they should be aware of this sort of thing. Additionally, given the transparency of central banks these days the future direction of interest rates is largely self-evident.
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Weak demand domestically and the impact of the Iran war on oil prices overshadowed the country's strong exports.
Graham Watson's insight:
Chinese growth has slowed to 4.3% in the second quarter, below the 5% of the first quarter and the 4.5-5% growth target that the government set.
It's believed that low levels of domestic demand and the effects of the Iran conflict, although China's export performance has continued to be strong.
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While the US inflation rate fell in June, concerns remain over price rises increasing again due to the renewed conflict in the Middle East.
Graham Watson's insight:
Us inflation dropped in June with the fall in oil prices feeding through into lower gasoline (or petrol) prices, and this feeding through into other markets too. Of course, since then there's been an escalation in the conflict and thus it's expected that the Federal Reserve is unlikely to change interest rates at its next meeting in a fortnight's time.
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coouGovernment has been forced to pay back duties to companies that imported goods into the US that were hit by Trump’s tariffs
Graham Watson's insight:
You couldn't make it up: the US government has repaid a number of companies after the Supreme Court ruled President Trump's tariffs illegal. Of course, the net effect of the intervention will have damaged the US economy.
Not only did the tariffs themselves reduce consumer choice and economic efficiency, but there's an opportunity cost of their introduction and the subsequent refunds.
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Roaming charges also scrapped and trading terms continue for medicines, cars, art, jewellery and other goods
Graham Watson's insight:
The UK has signed another trade deal, this time with Switzerland, and there's the potential for the deal to generate £5.2bn in benefits for the UK, largely through increased service sector exports.
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From
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Official World Cup jerseys can cost as much as $180, while counterfeit versions sell for as little as $4. We visited factories in Bangladesh, one of the world's biggest garment manufacturing hubs, to find out what separates authentic, replica, and fake soccer jerseys and why they cost so much.
Graham Watson's insight:
This Business Insider clip looks at the difference between different replica World Cup jerseys, differentiating between authentic jerseys worn by the players, official replica jerseys and fake jerseys. It highlights the different fabrics and technology used and the extent to which even the authentic shirts have a low unit cost and the degree to which the costs are associated with the marketing.
In essence, the jerseys are cheap to make, but the company's will argue that they have high fixed costs, both in terms of the capital used and the cost of sponsorship deals and so forth.
It's interesting but I'm not sure that it makes enough of the fact that sportwear firms and FIFA are doing exceptionally well out of this market and exploiting their dominant position.
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VW to propose 100,000 job losses to board and says car plants could be put under foreign ownership to save jobs
Graham Watson's insight:
This article lays bare the extent to which the German car industry is under pressure from Chinese competitors, with Volkswagen proposing up to 100,000 job cuts or even the car plants being sold off to foreign owners in the hope of cutting costs. It looks as though there are some tough decisions ahead.
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From
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There had been early signs of a jobs boom from the tournament, but hospitality jobs declined in June.
Graham Watson's insight:
Despite the World Cup, the ability of the US economy to create jobs surprisingly fell over the last month. In isolation, it's not much but does give rise to concerns that the US economy is slowing. It would be a pity if this damaged the President's standing at the forthcoming mid-term elections.
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Thirteen countries with a free trade agreement with Brussels have their quota reduced by just one-third
Graham Watson's insight:
The EU has halved its duty-free steel quota on steel imports, although it's negotiated exceptions with thirteen of its trading partners to ensure that their quotas are reduced by less.
The move is seen as a response to the fact that US steel tariffs have seen producers, notably China, reroute their steel exports for European markets and is designed to protect EU steel manufacturers and steel workers. The UK had hoped that it might be given access to a tariff-free steel club but that's simply not going to happen.
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Parcels of goods worth under €150 will no longer enjoy ‘de minimis’ exemption, exploited by platforms such as Temu and Shein
Graham Watson's insight:
The EU is introducing a 3 euro charge on small parcels entering the regional economic grouping from China, in the hope of reducing the value of Chinese imports although I can't see such a small charge having much effect.
It's designed to protect the High Street and there's also an attempt to justify this protectionism by arguing that many of these imports also contravene health and safety legislation.
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From
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The US president says "Numerous European countries" have been discussing bringing in such a levy.
Graham Watson's insight:
President Trump has pledged to introduce a retaliatory 1005 tariff on any European nation that introduces a digital services tax, which he thinks is an unfair tax on US tech companies.
Yes, it's unfair if you think that elaborate tax avoidance schemes running across Europe, and ending in Luxembourg to minimise tax revenues are either fair, or ethical but is the UK's Digital Services Tax on firms "with global revenues from their digital businesses exceeding £500 million, and total UK revenues surpassing £25 million" really unfair, when it's estimated that Amazon paid around £1bn in tax in the UK last year on around £30bn in revenues, and that excludes a large part of the revenues of Amazon Web Services.
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Plan to levy 5% tax on California billionaires championed by progressives – but state’s super rich are forcefully opposed
Graham Watson's insight:
California is going to vote on a 5% wealth tax on billionaires after politicians in the state couldn't stop the union-led campaign to force a vote on the issue.
Interestingly, Governor Newsom and the tech billionaires are opposed to the move - however, to my mind, the fact that they're prepared to spend so much campaigning and lobbying to oppose the move might imply that the tax has merit.
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The incoming PM is expected to announce fresh support for the North Sea from day one of his premiership.
Graham Watson's insight:
It seems as though Andy Burnham is more open to the exploitation of the UK's fossil fuel reserves in the North Sea than Keir Starmer was. He seems likely to put environmental concerns to one side and permit the development of the Rosebank and Jackdaw oil fields and other sites as well.
If so, this would represent a boost to Britain's supply-side and could also lower energy costs.
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As Cuba swelters under six-month oil blockade imposed by US, tempers are fraying and unrest is growing
Graham Watson's insight:
Is Cuba on the brink of systemic collapse, and if so, what are the consequences? Certainly a mixture of the US oil blockade started 6 months ago and the country's creaking electricity infrastructure have seen three blackouts across the island in the past ten days and adversely affected Cuban living standards, to the extent that the island's Communist government may struggle to survive.
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Country risks new tariffs from US and EU as it looks likely to match or beat last year’s record surplus of $1tn
Graham Watson's insight:
Remarkable news from China, with car exports for last month topping 1m, implying that it's going to run a larger trade surplus than last year, in spite of tariffs in the US and the EU. It also helps explain why Volkswagen are looking to make cost savings in order to remain competitive, as BYD and Jaecoo have started to account for a greater proportion of market share.
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Editorial: Robust action is needed to protect European industries from unfair competition. The alternative is social strife amid growing insecurity
Graham Watson's insight:
This is an interesting editorial suggesting that the fate of Volkswagen is indicative of a broader trend that means that EU firms are under increased pressure from Chinese competitors in a number of sectors and that because this is the result of unfair government intervention, there's a strong case for protectionism.
Sectors as diverse as chemicals and aircraft manufacture are affected, and the EU is starting to adopt a more pro-active industrial strategy.
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From
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The group, which includes Porsche and Audi, has faced a steep fall in profits and tough competition from China.
Graham Watson's insight:
Yesterday's big news was Volkwagen's announcement that instead of the expected 50,000 German job losses, they are looking to make 100,000 workers redundant.
VW is struggling: profits are down, sales in China has significantly decreased, and the company is desperate to cut costs in response to increased levels of Chinese competition.
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Record numbers find there is little demand for their skills, as entry-level tech roles are hit by AI and automation
Graham Watson's insight:
It's clear that youth unemployment isn't only a problem in the UK, with the Guardian reporting that China is struggling to create enough jobs for its young people and record numbers of them, 15.6% of all 16-24 year olds, out of work.
The biggest worry is that this is increasingly including university undergraduates, of whom there 12.7 million this year, are finding entering the labour market difficult as a result of a rise in automation and the use of AI.
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Weather cycle threatens harvests worldwide, adding to inflation already fuelled by the Iran war
Graham Watson's insight:
The implications of this year's Super El Nino weather event for global food prices is causing a concern for a number of analysts, with a diverse group from Italian bank UniCredit to Goldman Sachs forecasting rising food prices, with the worst effects likely, as ever, it would seem, to be felt by the most vulnerable.
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From
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A court in China ruled that Molly Tea had infringed on the luxury brand's four-petal flower design.
Graham Watson's insight:
I'll put this here because it's a demonstration of something quite rare - the Chinese authorities taking a tougher stance on intellectual property rights. Ordinarily, China hasn't got a good record on this since it joined the World Trade Organisation, but it seems that its leaders will step in to protect a luxury brand at the expense of a tea chain. Make of that what you will.
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Scott Bessent says he ‘encourages them to be good actors’ after Trump ranted about prices not dropping fast enough
Graham Watson's insight:
The US government is trying to put pressure on oil companies and petrol retailers to lower petrol prices in the run up to the 250th anniversary celebrations this weekend, with millions of Americans expected to travel and the suspicion that the companies have been engaged in rocket and feather pricing.
Is this a good move? Or does it hint at creeping authoritarianism? And shouldn't the market ensure that petrol prices fall as the costs of oil companies in competitive markets also fall.
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Two sides agree to try to make bilateral relationship ‘more balanced’ after weeks of threats
Graham Watson's insight:
Soumaya Keynes and Chad Bown's excellent "How to Win a Trade War" highlights how trade imbalances can trigger trade wars, and that they are, for the most part largely self-defeating if not conducted with a real eye on the detail and with specific objectives in mind.
This article highlights how the EU and China both face a significant trade imbalance, with the former running a €360bn trade deficit. However, the fact that the two are prepared to sit down and negotiate is a helpful first step in trying to ensure that they're able to make progress towards rebalancing their bilateral relationship.
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Any new tax on the rich won’t raise much money unless many of the exceptions and loopholes are dealt with
Graham Watson's insight:
Eduardo Porter suggests that rather than simply rely on wealth taxes to tackle US income and wealth inequality, and the gap between the super rich and the rest of us, a simpler approach would be to embark upon tax reform to remove most of the loopholes that allow for tax avoidance so that the super rich end up with a lower average tax rate than the rest of us.
He suggests that rather than taxing wealth, ensuring that all incomes are taxed in the same way, perhaps via a better-designed capital gains tax, that could generate the same sort of revenues more reliably, Additionally, he makes the case for a more significant inheritance tax would go further towards broadening the tax base.
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German firm reportedly considering doubling previously announced staff reductions amid Chinese competition
Graham Watson's insight:
The global car market is changing and established manufacturers are under pressure form Chinese upstarts - as a result, VW are contemplating cutting 100,000 jobs, albeit out of a global workforce of 650,000.
That said the original Guardian headline states 10,000 jobs - so I'm left wondering which figure's correct.
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The EU has halved its duty-free steel quota on steel imports, although it's negotiated exceptions with thirteen of its trading partners to ensure that their quotas are reduced by less.
The move is seen as a response to the fact that US steel tariffs have seen producers, notably China, reroute their steel exports for European markets and is designed to protect EU steel manufacturers and steel workers. The UK had hoped that it might be given access to a tariff-free steel club but that's simply not going to happen.