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Good morning! Today we look at the Trump administration’s frustration with the Fed and China, U.S. industrial policy, how manufacturers are getting squeezed by rising costs, China’s tech catch-up, freezers full of meat, and why there aren’t enough caregivers for the elderly.
TARGET: THE FED, CHINA
Last week ended with a bang. President Donald Trump signaled for a second straight day his frustration with the Federal Reserve’s policy of gradually raising interest rates, and then said he was prepared to impose U.S. tariffs on $500 billion worth of imports from China as part of his push to narrow U.S. trade deficits. The tough comments suggest the president could continue to escalate a feud with the Fed and take aim at currency markets, Nick Timiraos reports. Earlier in the week, Mr. Trump also reiterated his threat to impose tariffs on European autos. European Commission President Jean-Claude Juncker visits the White House on Wednesday, with trade expected to be high on the agenda.
Fed reaction? “I’m not surprised” by Mr. Trump’s statements, St. Louis Fed President James Bullard said.
DEFINITELY, MAYBE
Treasury Secretary Steven Mnuchin this weekend said “it’s definitely a realistic possibility” that the U.S. will impose tariffs on all $500 billion worth of goods that the U.S. imports from China. Mr. Mnuchin was speaking ahead of a meeting among G-20 finance ministers and central bankers in Buenos Aires. The gathering ended with little progress on resolving global trade tensions. For starters, the U.S. wants China, Japan and the EU to remove tariffs, non-tariff trade barriers and subsidies. French Finance Minister Bruno Le Maire said the EU wouldn’t hold any talks while the U.S. tariffs are in effect because “we refuse to negotiate with a gun to the head.”
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WHAT TO WATCH TODAY
U.S. existing-home sales for June, out at 10 a.m. ET, are expected to rise to an annual pace of 5.45 million from the prior month’s 5.43 million.
TOP STORIES
WINNERS AND LOSERS
President Trump is steering U.S. economic policy in a radically new direction. From trying to revive steelmakers with tariffs to vetoing Chinese technology investments, he is using the federal government to direct which industries prosper and which don’t. Many countries have long tilted the playing field toward favored companies and industries, a practice economists call industrial policy, Greg Ip writes.
Does it work? In practice, industrial policy goes in one of two directions: one is to prop up mature industries, as Mr. Trump seeks to do with steel and coal. Economists think such efforts cost taxpayers and consumers dearly without altering an industry’s long-run fortunes. The other is to give new industries a leg up against foreign competition. This is what Mr. Trump seeks by stopping China from forcibly acquiring American know how. Many economic and national-security experts back this policy because they see China as a unique threat to the U.S.
CHINA CATCHING UP IN TECH RACE
China’s BOE Technology Group makes display screens for Apple’s iPads and MacBook computers, and the company is also the world’s top producer of large liquid crystal screens. Now it is seeking to supply Apple with advanced organic light-emitting diode, or OLED, smartphone screens, Yoko Kubota reports. If it succeeds, BOE will not only prove its manufacturing prowess with a technically challenging product, but also will score a big win for China in its race to catch up to South Korea and Japan in advanced display-screen manufacturing.
FACTORY FLOOR
Manufacturers are booking more orders and delivering higher profits in a strong U.S. economy. But investors are worried that the good times won’t last: Costs are rising at some of the biggest industrial companies due to tariffs and a super-tight labor market, Bob Tita and Doug Cameron report. Upcoming earnings will indicate how much of a dent those pressures are making on the bottom line. This week, 3M, Harley-Davidson and Whirlpool are scheduled to report.
TRADE BEEF
Meat is piling up in U.S. cold-storage warehouses, fueled by a surge in supplies and trade disputes that are eroding demand. Federal data, coming as early as Monday, are expected to show a record level of beef, pork, poultry and turkey being stockpiled in U.S. facilities, Jacob Bunge reports. Mexico and China—among the largest foreign buyers of U.S. meat—have both set tariffs on U.S. pork products in response to U.S. tariffs on steel, aluminum and other goods. U.S. hams, chops and livers have become sharply more expensive in those markets, which is starting to slow sales.
Fire up the grill: Growing stockpiles may bring down prices for U.S. consumers, along with restaurants and retailers. But slowing overseas sales and rising domestic stockpiles threaten profit for meat processors and prices for livestock and poultry producers.
CAREGIVER CRUNCH
In the U.S., an estimated 34.2 million people provide unpaid care to those 50 and older. These caregivers, about 95% family, and long the backbone of the nation’s long-term care system, provide an estimated $500 billion worth of free care annually, Clare Ansberry reports. The problem? The supply of these caregivers is shrinking just as the nation needs them most. In 2020, there will be 56 million people 65 and older, up from 40 million in 2010. Meanwhile, the ratio of caregivers to care recipients peaked in 2010 and has been falling since. The private sector isn’t an option for many. Demand for private home health aides is expected to exceed supply by more than three million in the next decade. Many can’t afford it even if it was available.
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
Vice President Mike Pence’s hometown is the most export-reliant region in the country, with just over half of its economic output linked to foreign purchases. The Washington Post looks the impact of the Trump administration trade agenda on Columbus, Ind.: “Now the aggressive pursuit of foreign trade that made this city a recession-busting economic miracle has made it decidedly vulnerable, with businesses already canceling projects and mulling the depth of job losses.”
The crack cocaine epidemic of the 1980s and 1990s is still rippling through the black community. “We estimate that the murder rate of young black males doubled soon after crack’s entrance into a city, and that these rates were still 70 percent higher 17 years after crack’s arrival. We document the role of increased gun possession as a mechanism for this increase,” William Evans, Craig Garthwaite and Timothy Moore write in a National Bureau of Economic Research working paper. “Elevated murder rates for younger black males continue through to today and can explain approximately one tenth of the gap in life expectancy between black and white males.”
UP NEXT: TUESDAY
Turkey’s central bank releases a policy statement. The Turkish lira plunged 3.5% after President Recep Tayyip Erdogan appointed his son-in-law as finance minister and put in place measures that could curb the independence of Turkey’s central bank.
Eurozone, German and French manufacturing, services and composite purchasing managers’ indexes for July are due out, with national measures at 3:30 a.m. ET and eurozone arriving at 4 a.m. ET.
Markit’s manufacturing and services PMIs for the U.S. are due out at 9:45 a.m. ET.
from Real Time Economics https://ift.tt/2LiO4tR
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