This is the web version of the WSJ’s daily economic newsletter. You can sign up for daily delivery here.
In today’s issue, Trump’s new tariffs spark worries of a trade war, big votes are coming up in Germany and Italy, U.S. incomes get a boost from tax cuts, the White House leans toward a pragmatist for the Fed’s No. 2 job, and Japan’s jobless rate is the lowest in almost 25 years.
TARIFFS FIRST, TRADE WAR NEXT?
President Donald Trump’s pledge to impose stiff tariffs on steel and aluminum imports sparked worries of a global trade war.
The quick reaction: Stocks tumbled, American industries dependent on the metals protested, and trade partners threatened retaliation, Jacob M. Schlesinger, Peter Nicholas and Louise Radnofsky write.
Mr. Trump’s announcement marks his biggest move to date to carry out his “America First” trade policy. And far from shying away from trade-war talk, Mr. Trump is embracing it. “When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win,” he said early Friday morning on Twitter. “Example, when we are down $100 billion with a certain country and they get cute, don’t trade anymore-we win big. It’s easy!”
The tariffs of 25% on steel imports and 10% on aluminum are meant to help domestic manufacturing.
ECONOMIC FALLOUT
Steel and aluminum tariffs will likely lead to fewer imports, higher prices and more domestic production. But aluminum and steel imports combined account for only about 2% of all U.S. goods imports and roughly 0.2% of gross domestic product, leaving the immediate economic impact muted.
Michael Gapen at Barclays estimates across-the-board steel and aluminum tariffs could reduce trade volumes, and restrain consumer and business spending enough to reduce GDP growth by 0.1-0.2 percentage point, hardly enough to knock the economy off track. Higher prices, meanwhile, may boost year-over-year core inflation gauges by 0.1 percentage point.
“The risk to the outlook lies in the response of U.S. trading partners and whether the administration’s decision to impose restrictive trade policies is only the first in a series of moves,” Mr. Gapen said.
Already, there are threats. The president of the European Commission vowed “countermeasures against the U.S. to balance the situation.” In past trade disputes, the EU has targeted goods from states with hotly contested Congressional elections. That’s meant products like Harley-Davidson motorcycles and Tropicana orange juice in the crosshairs.
Comments or suggestions for Real Time Economics? Write to Jeffrey Sparshott at realtimeeconomics@wsj.com, tweet to @WSJecon and visit wsj.com/economy for the latest.
WHAT TO WATCH TODAY
University of Michigan consumer sentiment for February is due out at 10 a.m. ET. Economists expect a reading of 99.5, reflecting a broadly positive outlook on the economy.
On Sunday, keep an eye on Europe.
Members of Germany’s Social Democratic Party are voting whether to renew a coalition with Chancellor Angela Merkel‘s Christian Democratic Union. A no vote would push Europe’s largest economy into uncharted political territory. The results are due on Sunday.
Italians are voting in national elections to pick members of the country’s two houses of parliament. The vote will be watched closely across Europe as a possible barometer of both the continent’s antiestablishment sentiment and the appetite for change in the eurozone’s third-largest economy.
TOP STORIES
U.S. INCOMES JUMP
President Trump’s steel and aluminum tariff announcement buried other economic news. But there’s been plenty.
The incomes of U.S. households jumped in January, reflecting tax law changes that are reducing tax withholding and led to one-time bonuses for some, Eric Morath writes.
After-tax income, including earnings from salaries, investments and other sources, matched the largest monthly gain since December 2012, when incomes were distorted by looming tax increases.
Unfortunately, the extra cash isn’t yet showing up in consumer spending, an important driver of economic growth. Personal-consumption expenditures, a measure of household spending on everything from doctor visits to groceries, matched its smallest monthly increase since June.
WHO BENEFITS FROM CORPORATE TAX CUTS?
Clearly, American workers are seeing some benefits from lower income taxes. But U.S. companies are buying back their shares at an aggressive pace, stirring questions in Washington and on Wall Street about the way that the new corporate tax cuts are being used, Akane Otani, Richard Rubin and Theo Francis report.
The tax overhaul cut the tax rate on large corporations to 21% from 35%. Combined with investment incentives, the new law is meant to boost broader economic growth, and increase wages over time, in part by funneling newfound cash into spending on research, upgrading equipment and raising employee wages.
Instead, some of the money is being returned directly to investors in the form of bigger dividends and buybacks. Share buybacks announced by large U.S. companies have exceeded $200 billion in the past three months, more than double the prior year.
COLUMBIA ECONOMIST FOR THE FED
President Donald Trump is likely to nominate Columbia University economist Richard Clarida to become vice chairman of the Federal Reserve Board, Nick Timiraos and Harriet Torry write.
Mr. Clarida is a Republican economist whom colleagues describe as more of a pragmatist than an ideologue. Such a temperament fits the mold of Fed Chairman Jerome Powell, a lawyer and former investment executive who began a four-year term as the central bank’s leader in February.
POWELL: NO EVIDENCE ECONOMY IS OVERHEATING
Fed Chairman Jerome Powell offered an upbeat view of the economy over two days of testimony on Capitol Hill this week, opening the door to four quarter-point interest-rate increases this year, Nick Timiraos reports.
At the same time, Mr. Powell didn’t suggest the Fed felt any urgency to plot a steeper path of rate increases in reaction to stronger economic data, and federal tax cuts and spending increases. “There’s no evidence that the economy is currently overheating,” he said.
JAPAN’S JOBLESS RATE NEARS 25-YEAR LOW
Japan’s jobless rate fell to the lowest level in almost 25 years in January, the latest sign the labor market is tightening as the world’s third-largest economy continues its growth streak, Megumi Fujikawa writes.
Another indicator showed the number of jobs available for every job seeker remained at a 44-year high. Policy makers hope that a stretched labor market will lead to larger pay increases and ultimately stronger consumer spending.
BANK OF JAPAN LOOKS FOR AN EXIT
The Bank of Japan will likely start considering an exit from its aggressive monetary easing beginning as early as next year, Gov. Haruhiko Kuroda said Friday, his first reference to a time frame for winding down Japan’s massive monetary stimulus program.
The remark surprised markets, nearly doubling the yield on 10-year Japanese government debt and sending the yen higher against the U.S. dollar, Mayumi Negishi and Megumi Fujikawa report.
CHART OF THE DAY: JOBLESS CLAIMS
The number of Americans filing new applications for unemployment benefits fell last week to the lowest level since December 1969, offering fresh evidence of health in the labor market.
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
Americans are more likely to pay their taxes when they share the same political party as the president. Why? “Overall, our pattern of results suggests that individuals who disapprove of government tax and spending policies evade more, relative to comparable individuals who have a more positive outlook about the government,” University of California, San Diego’s Julie Berry Cullen, the Federal Reserve’s Nicholas Turner and Yale University’s Ebonya Washington write. Evasion is concentrated in categories that are subject to little third-party reporting, such as income from small businesses.
The number of same-sex couples filing taxes jointly reached just over a quarter million people in 2015, just two years after the Supreme Court struck down part of the Defense of Marriage Act. “Same-sex joint filers are generally younger, higher income, less likely to claim dependent children (especially for male couples), and more geographically concentrated than are different-sex filers,” the Tax Policy Center’s Robin Fisher, Geof Gee and Adam Looney write. Still, the number accounts for less than one-half of 1% of all joint filers.
from Real Time Economics http://ift.tt/2oDt5EF
No comments:
Post a Comment