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In today’s issue, the U.S., European Union and Japan will resume trade talks this week, GOP lawmakers openly discuss limiting the president’s trade power, the tariffs are already helping out Granite City, despite new barriers the U.S. will remain dependent on other nations to make aluminum, and the black-white labor-force participation rate gap has all but closed.
TRADE PARTNERS TRY TO SIDESTEP TARIFFS
The U.S., European Union and Japan will pick up talks this week on steel and aluminum tariffs, with the American allies seeking exemptions and the Trump administration appearing intent on holding the line, Emre Peker and William Mauldin report.
“The European Union, wonderful countries who treat the U.S. very badly on trade, are complaining about the tariffs on steel & aluminum. If they drop their horrific barriers & tariffs on U.S. products going in, we will likewise drop ours,” the president said on Twitter.
China, meanwhile, appears ready to retaliate if Mr. Trump slaps new tariffs on its exports.
From a macroeconomic perspective, the steel and aluminum tariffs aren’t a big deal. The concern is a tit-for-tat trade war, which ultimately could shake the global economy.
THIS IS GETTING AWKWARD
Republican lawmakers are openly discussing legislation to limit the president’s trade power. Democrats quite pointedly are not, William Mauldin and Ted Mann report.
The Constitution, of course, grants Congress authority to “regulate Commerce with foreign Nations.” Lawmakers have ceded much of that to the White House and it doesn’t look like political stars are aligned to claw it back.
That leaves the White House in the driver’s seat on trade policy. Mr. Trump may just be getting warmed up.
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WHAT TO WATCH TODAY
It’s quiet day on the economic indicator front.
The U.S. federal budget is expected to show the deficit for February widening to $216 billion from $192 billion during the same month a year earlier. Government deficits are growing, piling more debt onto the federal balance sheet.
Tuesday will be more interesting. The U.S. consumer price index for February is expected to advance 2.3% from a year earlier; excluding food and energy 1.9%. Inflation has shown some signs of firming after years of persistently low and, for central bankers, confounding readings. This particular report, however, may not do much to clear up the bigger picture.
TOP STORIES
LOOKING UP IN GRANITE CITY
To see what Mr. Trump is trying to accomplish with the tariffs, look no further than Granite City, Ill.
When U.S. Steel scaled back operations in 2015, layoffs for hundreds of steelworkers rippled through the local economy. At least 26 businesses closed within a year, Andrew Tangel reports.
U.S. Steel last week said week it would fire up one of its two dormant furnaces and start filling 500 jobs. Suddenly, things are looking up for the economically troubled town. “Better times are around the corner,” said Brian Smith, co-owner of Holt Shoe Shop, which, among other products, sells work boots for steelmakers.
RAW MATERIALS
Of course, Granite City and similar places don’t provide the legal justification for the tariffs. That springs from section 232 of the Trade Expansion Act of 1962, which allows the president to protect industries essential for national security.
But if true national security is the goal, then the new tariffs don’t go far enough, Greg Ip writes. You can’t make aluminum without bauxite, yet the U.S. is completely dependent on imports for bauxite; the last domestic mine closed nearly 30 years ago.
This has real consequences: Industries unhappy with paying the tariff could sue to overturn the order, arguing that Mr. Trump overstepped his authority. If other countries believe protection, not national security, is the true goal, they may feel entitled to retaliate without waiting for the World Trade Organization to rule.
BLACK-WHITE PARTICIPATION GAP ALL BUT CLOSED
Labor-force participation by race is now near a crossroad, Sharon Nunn writes.
The share of black Americans actively working or looking for work was 62.9% in February, while the corresponding white rate sat at 63.0%. The gap, which has all but closed, is the smallest in labor-force participation by race since 1972. The return of African-Americans to the labor market is a sign of their improving fortunes as the economy expands. The tight labor market is pulling people from the sidelines who may have been discouraged from looking earlier in the expansion.
JOBS, JOBS, JOBS
It may seem like old news by now, but Friday’s jobs report was a stunner.
Companies ramped up hiring last month and people flooded back into the workforce, a potent mix suggesting the U.S. economy can run strong without overheating, Eric Morath reports.
U.S. payrolls rose a seasonally adjusted 313,000 in February, the largest monthly gain since July 2016. More than 800,000 Americans joined the labor force for the month, the largest one-month labor-pool increase since 1983 (outside of months that included temporary Census hiring).
MARKETS ENJOYING THE RIDE
February’s market volatility may resurface.
Central banks face a delicate balance complicated by “the most recent protectionist rhetoric,” said Claudio Borio, chief economist at the Bank for International Settlements.
“The market wobble may well not be the last,” Mr. Borio said. BIS is a consortium of central banks based in Switzerland, Brian Blackstone reports.
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
Trade agreements increase quality, but do not have much impact on prices and variety. A roughly 7% increase in quality on average “translates into a cumulative reduction in consumer prices of 0.24%, equivalent to savings of €24 billion per year for EU consumers,” the ESSEC Business School’s Giuseppe Berlingieri, University of Nottingham’s Holger Breinlich and LSE’s Swati Dhingra write.
President Trump thinks America’s trade deficit can be fixed by tariffs. “But studies of tariffs show that though they reduce trade, they do not reliably increase the tariff-raising country’s trade balance,” the Economist writes. The newspaper tackles five things the president gets wrong about trade, and one he gets right.
How about those tariffs? “I’ll tell you why they’re a terrible idea,” former Obama administration economic adviser Austan Goolsbee explains on National Public Radio. Mr. Goolsbee’s turn on “Wait Wait Don’t Tell Me” is alternately funny and interesting (at least for nerds like us). Yes, this is more “What Else We’re Listening To.” It’s a also an interlude from some of the heavier stuff we post here.
from Real Time Economics http://ift.tt/2p6DdFi
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