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In today’s issue, President Trump readies a decree on tariffs while allies and antagonists prepare to respond, China’s exports surge and the U.S. trade gap widens, the European Central Bank wraps up a two-day policy meeting, the White House weighs candidates to succeed outgoing adviser Gary Cohn, and the spring home-selling season may be a dud.
WHITE HOUSE READIES TARIFFS
President Donald Trump as soon as Thursday is expected to sign a decree laying out new tariffs on steel and aluminum.
The measure will spare both Canada and Mexico, for now, Michael C. Bender and Peter Nicholas report. Still, it marks a turn in policy that could recalibrate relations between the U.S. and its allies and trading partners, and ripple through the economy.
The decision follows intense lobbying efforts by lawmakers, aides, industries and trade partners—some hoping the president would back down and others pushing to ensure he doesn’t back off. “We are definitely going to end up with these tariffs,” Treasury Secretary Steven Mnuchin said on Fox Business, “and we’re going to roll this out very, very quickly.”
MIND THE GAP
The latest data is providing some talking points for the pro-tariff crowd.
The U.S. trade deficit widened for the fifth straight month in January, reaching its highest level in more than nine years. A separate report showed that China’s exports surged in February, expanding that nation’s global trade surplus.
The wider U.S. deficit “will only add fuel President Donald Trump’s protectionist rhetoric in recent weeks,” said Michael Pearce, senior U.S. economist at Capital Economics.
The steel and aluminum tariffs will hit South Korea, Europe and other allies much more directly than China. But China remains in the administration’s crosshairs. Mr. Trump on Twitter said the White House asked Beijing to “develop a plan for the year of a One Billion Dollar reduction in their massive Trade Deficit with the United States. Our relationship with China has been a very good one, and we look forward to seeing what ideas they come back with. We must act soon!”
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WHAT TO WATCH TODAY
The European Central Bank wraps up a two-day policy meeting on Thursday. A statement is due out at 7:45 a.m. ET, followed by ECB President Mario Draghi‘s press conference at 8:30 a.m. Watch for any signals the ECB sends about ending its bond-buying program, as well as comments on potential trade wars, fallout from Italian elections, and recent market volatility.
U.S. jobless claims, out at 8:30 a.m. ET on Thursday, are expected to rise slightly to 220,000 from 210,000.
TOP STORIES
W.T. UH OH
Will brewing trade battles spell the end of the World Trade Organization?
President Trump’s planned tariffs on steel and aluminum threaten a world-trading regime already battered by mounting protectionism and its struggle to tame China’s state-driven capitalism, Emre Peker and Jacob Schlesinger write.
WTO supporters concede they face a difficult choice: Challenge the U.S. using WTO rules and risk exposing it as inadequate to the task, or circumvent its rules and risk destroying the whole institution. For more than three decades the WTO has functioned because members, led by the U.S., deferred to its rulings, even when they disagreed with them. Now Mr. Trump is questioning that approach. The EU response to his tariffs could challenge it, too.
TARIFFS GOOD
Some U.S. steel and aluminum makers are restarting idle mills and boosting capacity to make up for imports that could be priced out of the market once tariffs take hold, Bob Tita and Andrew Tangel report.
United States Steel said it would fire up a blast furnace in Granite City, Ill., and call back 500 workers. Century Aluminum will restart lines at a smelter in Kentucky that have been curtailed since 2015, doubling its workforce there to 600.
“Our Granite City Works facility and employees…have suffered too long from the unending waves of unfairly traded steel products that have flooded U.S. markets,” U.S. Steel Chief Executive David Burritt said.
TARIFFS BAD
Small manufacturers that fashion metal into parts for makers of cars, appliances and other products fear they could be the hardest hit by new tariffs on aluminum and steel, Andrew Tangel, Bob Tita and Josh Zumbrun report.
There were 29,288 steel-consuming firms in the U.S. employing more than 900,000 workers as of the second quarter of 2017, according to the latest U.S. Bureau of Labor Statistics data. That compares with 916 steel producers with a combined workforce of more than 80,000. (The data include steel consumers that make products such as springs, vehicle parts and wire, but not major manufacturers such as auto makers.)
Many smaller metal-consumer manufacturers worry new import duties would drive up prices and significantly increase their costs. Research firm Trade Partnership Worldwide, which produced a study commissioned by metal-consuming trade groups, estimated this week that tariffs would increase employment in the steel and aluminum producing sectors by nearly 33,500 jobs, but cost over 179,300 jobs throughout the rest of the economy.
COHN WARS: SPHERE OF INFLUENCE
Gary Cohn’s resignation from his post as director of the National Economic Council leaves a big opening in President Donald Trump’s economic team. Who will replace him?
Potential candidates to replace him include CNBC commentator and former Trump campaign adviser Lawrence Kudlow; Council of Economic Advisers Chairman Kevin Hassett; and Peter Navarro, a trade adviser who won out over Mr. Cohn in the White House battle over steel tariffs, Nick Timiraos reports.
While that’s not an exhaustive list, it shows a range of potential ideologies for the White House policy shop. Mr. Kudlow just last week said the tariffs were shortsighted. Mr. Navarro has been a staunch proponent of the trade measures. Mr. Hassett advocated for fewer restrictions on trade before joining the administration, though at a congressional hearing Wednesday he said the costs of new tariffs would be outweighed by benefits to national security.
HOME BUYING, HIGH PRICES (AND TARIFFS)
This could be one of the weakest spring home-selling seasons in recent years.
Rising mortgage rates, a new tax law that reduces the incentives for homeownership and a growing weariness among first-time buyers being priced out of the market are expected to damp demand for homes this year, Laura Kusisto reports.
There can’t possibly be a trade angle here, right? Well, higher lumber costs are one reason home prices are rising. Lumber prices started climbing last year as the Trump administration threatened tariffs on Canadian softwood lumber. The U.S. ultimately imposed tariffs of 20% or more on Canadian sawmills. Canada provided about a third of U.S. timber.
AUTOMATION AND THE ELDERLY
The spring 2018 Brookings Papers on Economic Activity is out Thursday.
Eric Morath has a writeup of a study by MIT’s David Autor and Utrecht University’s Anna Salomons showing that automation hasn’t reduced the number of jobs but has resulted in laborers taking home a smaller slice of an expanding economic pie.
Ben Leubsdorf digs into a paper questioning the imbalance between government spending on the elderly and children. “This imbalance is of particular interest given the fact that spending on children can be viewed as an investment while spending on the elderly is not,” said University of California, Berkeley economist Hilary Hoynes and Northwestern University economist Diane Whitmore Schanzenbach.
QUOTE OF THE DAY
“Because tariffs are taxes that make U.S. businesses less competitive and U.S. consumers poorer, any tariffs that are imposed should be designed to address specific distortions caused by unfair trade practices….” – Rep. Kevin Brady (R., Texas) and 106 Republican colleagues, in a letter to Mr. Trump
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
Blue-collar cities are shedding white-collar jobs at an alarming rate. An analysis by the Associated Press shows cities like Toledo and Canton, Ohio, have had a harder time retaining jobs in offices than on factory floors. “Without a foundation of white collar jobs, it becomes difficult for these areas to reinvent themselves in an era when the economy more and more requires specialized knowledge and technological skill.”
U.S. data clearly show lower unemployment rates for people with more education. But it’s not because a person with a degree is any better at finding a job; rather, he or she is more likely to keep one. “Empirically, these workers have similar job finding rates but much lower and less volatile separation rates than their less educated peers. We argue that on-the-job training, being complementary to formal education, is the reason for this pattern,” Isabel Cairó and Tomaz Cajner write in the March 2018 issue of the Royal Economic Society’s Economic Journal.
And on International Women’s Day, here’s a reminder about the gender pay gap. Women are paid 14.1% less than men across Organization for Economic Cooperation and Development’s member nations. “Many factors drive the gender pay gap, including gender segregation in fields of study and jobs, women’s higher likelihood of interrupting their careers for caregiving and—through harder to identify—discrimination and biases against women,” the OECD said in a 2017 report.
UP NEXT
We get a biggie on Friday. U.S. nonfarm payrolls for February, out at 8:30 a.m. ET, are expected to rise 205,000, continuing a record-long streak of employment gains. Economists are forecasting an unemployment rate of 4.0%, down from January’s 4.1%, and a 0.2% rise for average hourly earnings.
The Bank of Japan wraps up a policy meeting on Friday.
from Real Time Economics http://ift.tt/2HhxuUu
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