Home / Economics / Real Time Economics: Trade Tensions Escalate (Again) | China’s Economy Advances | Employers Turn to Teens

Real Time Economics: Trade Tensions Escalate (Again) | China’s Economy Advances | Employers Turn to Teens


The Trump administration is readying another salvo against China’s trade practices. In the latest warning shot, the U.S. is examining ways to retaliate against Beijing’s restrictions on U.S. providers of cloud computing and other high-tech services, Bob Davis reports. The U.S. trade representative has yet to decide whether to go ahead with the complaint, which would be in addition to recent moves to ratchet up pressure on China. Already, the White House has threatened tariffs on $150 billion in Chinese imports.


China’s restrictions on cloud computing may help the White House garner public support for its more aggressive trade policy. Beijing requires U.S. cloud-computing firms, such as Amazon.com and Microsoft, to form joint operations with Chinese companies and license their technology to the Chinese partners. As a result, U.S. companies can’t market their cloud-computing services in China or sign up customers directly. Chinese firms, by comparison, are allowed to operate in the U.S. without restriction.

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U.S. housing starts for March, out at 8:30 a.m. on Tuesday, are expected to rise 1.6% from the prior month to an annual pace of 1.26 million.

U.S. industrial production for March, out at 9:15 a.m. on Tuesday, is expected to rise 0.4% from the prior month.

The San Francisco Fed’s John Williams speaks at 9:15 a.m. ET on the economic outlook; Fed vice chairman Randal Quarles appears before the House Financial Services Committee at 10 a.m. ET; the Philadelphia Fed’s Patrick Harker speaks at 11 a.m. ET on education, student loans and the economy; and the Chicago Fed’s Richard Evans speaks on the economy and monetary policy at 1:10 p.m. ET.



China’s trade policy isn’t the West’s only concern. U.S. and British officials struck separate blows at telecommunications-equipment giant ZTE, ratcheting up national-security scrutiny of a big Chinese company amid broader economic tensions, Jason Douglas and Robert Wall report.

British cybersecurity officials warned U.K. phone carriers to stay clear of ZTE’s equipment and services, citing concern that Beijing could force the company to help it infiltrate or sabotage telecoms infrastructure. The U.S. Commerce Department, separately, banned American companies from selling products to ZTE, saying the company violated the terms of a deal last year settling allegations of sanctions busting involving North Korea and Iran.


China’s Ministry of Commerce said it will impose surcharges on imports of U.S. sorghum, part of Beijing’s tit-for-tat retaliation in its trade fight with Washington. The ministry said that it would require importers to pay deposits worth 178.6% of the value of U.S. sorghum shipments, following an investigation that initially found the grain was being dumped at prices that hurt domestic producers, Grace Zhu reports. The ministry also said it wants to reduce trade disputes with the U.S. and “together safeguard trade cooperation.”


China’s trade spat with the U.S. is, for now, barely a drop in the economic bucket. Its gross domestic product expanded at a faster-than-expected 6.8% in the first quarter, bucking expectations for a slowdown.

China’s retail sales held up particularly well, while unexpectedly strong exports in the first two months of the year, and resilient domestic consumption and factory output, helped lift growth, Lingling Wei reports. So far, the simmering trade tensions between Washington and Beijing have had little impact on China, the world’s second-largest economy, though some officials and economists are concerned that a prolonged trade battle could change that.


America’s housing shortage is more wide-ranging than cloistered coastal markets, stretching from pricey locales such as California and Massachusetts to more surprising places, such as Arizona and Utah. Some 22 states and the District of Columbia have built too little housing to keep up with economic growth in the 15 years since 2000, resulting in a total shortage of 7.3 million units, Laura Kusisto reports. One result: Home prices nationally rose 6.2% in the year that ended in January, roughly twice the rate of incomes and three times the rate of inflation.


When it comes to the economy, Federal Reserve officials are some of the most important people most Americans have never heard of. President Donald Trump revealed his latest picks for the central bank: Columbia University economist Richard Clarida as vice chairman and Kansas banking regulator Michelle Bowman as a governor.

Mr. Clarida is a Republican economist and monetary policy specialist. Ms. Bowman has been Kansas’ bank commissioner since January 2017. Both picks illustrate how Mr. Trump, in reshaping the Fed board, has opted against nominating outspoken critics of the central bank, which he repeatedly criticized during the 2016 election campaign, Nick Timiraos reports.


Of course, those new officials (if confirmed by the Senate) shouldn’t expect the same deference offered by previous White Houses. The Trump administration has veered away from a rule of thumb in place at the White House and U.S. Treasury for roughly a quarter-century: Avoid commenting on the dollar, the Federal Reserve or daily moves in stock markets.

The most recent example, President Trump’s tweet taking note of recent currency volatility. “Russia and China are playing the Currency Devaluation game as the U.S. keeps raising interest rates,” he said. “Not acceptable!”


What’s the U.S. consumer waiting for? Spending at U.S. retailers bounced back in March, but the broader trend shows only moderate growth despite a solid labor market, tax cuts and growing worker paychecks, Harriet Torry and Sarah Chaney report. Sales data are watched closely as an indicator of trends in consumer spending, which drives more than two-thirds of economic output. The sales pace in recent months suggest the economy expanded modestly in the first quarter.

“It’s an old recovery, people just don’t need as much,” said Susan Sterne, president of Economic Analysis Associates, an advisory firm specializing in tracking consumer behavior.


After the longest stretch of continuous job creation on record, the U.S. faces its most severe worker shortage in the past two decades. The result: Employers, from General Electric and Michelin North America Inc. to a Wisconsin nursing home and an Ohio turbine-parts manufacturer, are expanding their hunt to the labor market’s youngest echelon, Jennifer Levitz and Eric Morath report.

The 12-month average unemployment rate for teens in March was 13.9%, the lowest year-round average since 2001 and about half that in 2010. In July 2017, the month the most teens work, unemployment for 16-through-19-year-olds fell to 13.3%, the lowest midsummer rate since 1969, when the U.S. was embroiled in the Vietnam War.


The unemployment rate in the U.K. declined in February to its lowest level in more than 40 years, while wage growth strengthened, signs that the labor market remained healthy despite weak growth at the start of the year. The figures will cement expectations the Bank of England remains on track to lift interest rates for the second time in a decade when officials meet in May, Jason Douglas and David Hodari report.


Way back in February, U.S. economic growth was shaping up as positively exuberant for the first quarter. But as hard data has come in, tracking estimates have steadily deteriorated. Here’s evolution of the Atlanta Fed’s estimate, with the latest downgrade following Thursday’s so-so retail sales numbers.



The world doesn’t need any more Elon Musks. “As astute FT readers have pointed out before, Musk’s brilliance–while certainly there–tends to be overstated. We should stop this. Yes, Musk is undeniably working on some pretty cool stuff. But we don’t know how much of it is going to come to fruition. And he certainly didn’t get there on his own,” The Financial Times’s Jemima Kelly writes of the Tesla CEO and tech entrepreneur.

Wage growth has been slow to take off around the world despite falling unemployment rates. “It is our contention that a considerable part of the explanation is the rise in underemployment which rose in the Great Recession but has not returned to pre-recession levels even though the unemployment rate has. Involuntary part-time employment rose in every advanced country and remains elevated in many in 2018,” the University of Stirling’s David Bell and Dartmouth College’s David Blanchflower write.

Want to help struggling small cities? Hook them up to better transportation. “Our findings support the notion that benefits from infrastructure investments accrue in particular to peripheral regions, which gain access to a large pool of qualified workers with a preference for urban life,” the University of Regensburg Daniel Heuermann and Boston University’s Johannes Schmieder write in a study of Germany’s high-speed rail network.


The U.K. consumer price index for March is due out at 4:30 a.m. ET.

The eurozone consumer price index for March is due out at 5 a.m. ET.

The Bank of Canada releases its rate announcement and monetary policy report at 10 a.m. ET on Wednesday.

The Fed’s beige book report is out at 2 p.m. ET.

The New York Fed’s Richard Dudley speaks on the economy and monetary policy at 3:00 p.m. ET and Fed vice chairman Randal Quarles speaks at the Bretton Woods Committee annual meeting in Washington at 4:15 p.m. ET.

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