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Good morning! Today we look at the next round in the Trump administration’s trade fight, China’s efforts to shore up its economy, Europe’s iffy outlook, a potential tax bomb for student-loan borrowers, and Flippy, the robot chef working at a fast-food joint near you.
NEW FRONT IN TRADE FIGHT
President Donald Trump plans to bar Chinese companies from investing in U.S. technology firms and block additional technology exports to Beijing. The twin initiatives, set to be announced by the end of the week, are designed to prevent Beijing from becoming a global leader in 10 broad areas of technology, including information tech, aerospace, electric vehicles and biotech, Bob Davis reports.
What to watch: 1.) How will China respond? 2.) How will U.S. companies fare under the restrictions? 3.) Will the dollar strengthen further against the yuan? 4.) The new measures would continue the administration’s use of a national-security rationale to justify economic actions. Some trade associations are looking at whether they can challenge the use of the underlying law.
Most economists expect a negotiated settlement rather than an all-out trade war with China. What do you think? Write to Jeffrey Sparshott at realtimeeconomics@wsj.com, tweet to @WSJecon and visit wsj.com/economy for the latest news.
WHAT TO WATCH TODAY
U.S. new-home sales for May are due out at 10 a.m. ET. Economists expect an annual pace of 668,000, up a tad from the prior month but hardly spectacular. In fact, the spring home-buying season is looking like a big bust—year-over-year existing-home sales have declined in four out of the first five months of this year. Prices, however, are climbing due to tight supplies.
The Dallas Fed manufacturing survey for June, out at 10:30 a.m. ET, is expected to settle down to 23.0 from 26.8 the prior month.
The San Francisco Fed’s Mark Gould gives opening remarks at a symposium on Asian banking at 12 p.m. ET.
TOP STORIES
CHINA OPENS THE TAPS
China’s central bank is freeing up more than $100 billion for commercial banks to boost lending and restructure debt. The move comes as Chinese leadership tries to shore up growth amid slowing economic momentum and an intensifying trade brawl with the U.S., Lingling Wei and Chao Deng report.
ICYMI
President Trump Friday again threatened to slap stiff tariffs on European cars. The warning, in a tweet, came just hours after the European Union started imposing duties on a range of American products in retaliation for separate Trump curbs imposed on steel and aluminum.
NO LAST-SECOND GOAL FOR GERMAN ECONOMY
The German soccer team may have pulled off a miracle win in the World Cup over the weekend, but its economy has had no such luck. German business sentiment deteriorated further in June, Nina Adam writes. The Ifo business-climate index fell to 101.8 from 102.3 in May. It marks the lowest reading since May last year. The Ifo Institute last week scaled back its outlook for Europe’s largest economy, forecasting growth of 1.8% in 2018 and again in 2019. Previously, it had predicted growth of 2.6% in 2018 and 2.1% in 2019.
DO YOU REMEMBER THE 21ST NIGHT OF SEPTEMBER?
European Central Bank officials could start to discuss—but only discuss—raising interest rates next autumn, a top ECB policy maker said. After its meeting on June 14, the ECB said that it didn’t expect to raise interest rates through “summer of 2019.” “In this part of the world, summer means until the end of September,” said Vitas Vasiliauskas, who sits on the ECB’s rate-setting committee as head of Lithuania’s central bank. The bank’s key policy rate, the deposit rate, has been minus 0.4% for more than two years, Tom Fairless reports.
THE TAX MAN COMETH
Students seeking relief on their college and graduate-school debt could be sitting on a hidden tax bomb: Billions of dollars in one-time bills from the Internal Revenue Service for any debt they get forgiven, Josh Mitchell reports.
The fuse: Some borrowers are allowed to set their monthly student-loan payments at 10% of their discretionary income. The balances often grow over time because the payments aren’t big enough to cover accruing interest. After 20 or 25 years, any remaining balance would be forgiven.
The bomb: The disappearing debt is considered part of a borrower’s income for that year, and taxed as such. There are now 7 million borrowers owing $389 billion in income-driven repayment. The first borrowers could have debt expunged starting in 2027.
MEET FLIPPY, YOUR ROBOT CHEF
CaliBurger is having a hard time finding workers. The solution: Flippy, a robot that turns the burgers and cleans the hot, greasy grill. The chain plans to install Flippy in up to ten of its 50 restaurants by year end, leaving the machine to handle the gruntwork and freeing employees to tidy the dining rooms and refill drinks, Julie Jargon and Eric Morath report.
The twist: Experts have warned for years that robots will replace humans in restaurants. Instead, fast-food restaurants are turning to machines—not to get rid of workers, but because they can’t find enough.
NOTABLE: ERDOGAN WINS IN TURKEY
Turkey’s President Recep Tayyip Erdogan won a twin victory in presidential and parliamentary elections. The Turkish lira jumped early Monday by as much 3% against the U.S. dollar and euro as European trading hours began, rising to its strongest level in about two weeks. The currency, which has lost about a quarter of its value against the dollar since the start of the year, has suffered from the president’s pledge to play a bigger role in defining monetary policy.
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
There’s a method to President Trump’s trade madness. So says the GailFosler Group’s Gail Fosler: “The process, if successful, will help create investment and jobs in the U.S. manufacturing sector, which has seen a sharp decline in both in recent years. Increasing the number of manufacturing and related operations jobs will also help redress some of the income inequality that dogs the United States by providing well-paying jobs that promote upward mobility.”
Mid Continent Nail Corp. in Poplar Bluff, Mo., laid off 60 temporary workers, could slash 200 more jobs by the end of July and be out of business around Labor Day. The reason? Trump administration tariffs, which hit the steel wire it gets from Mexico. The company is asking for an exemption. “Something would have to happen very fast, within days in order for us to know that things were going to improve. We’re hoping that this could get pushed through very quickly,” spokesperson Elizabeth Heaton told Missourinet.
UP NEXT: TUESDAY
The S&P CoreLogic Case-Shiller 20-city home price index for April, out at 9 a.m. ET, is expected to rise 6.8% from the prior month, continuing a long string of steady gains.
The Conference Board’s consumer confidence index for June, out at 10 a.m. ET, is expected to remain fairly buoyant at 127.5.
The Congressional Budget Office will release its 2018 Long-Term Budget Outlook at 10 a.m. ET.
The Atlanta Fed’s Raphael Bostic speaks at the Birmingham Civil Rights Institute at 1:15 p.m. ET, and the Dallas Fed’s Robert Kaplan participates in a moderated Q&A at Hilton University of Houston at 1:45 p.m. ET.
from Real Time Economics https://ift.tt/2IqDpa6
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