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Here we go again. The U.S. and China resumed trade talks last week, though divisions within the Trump administration make it hard to figure out whether we’re heading for a truce or more tariffs.
Good morning. Jeff Sparshott here to take you through the day’s top economic news. We’ll also look at Amazon’s new headquarters, tech’s battle for talent, oil prices, and why foreigners are shunning U.S. colleges and British jobs.
LET’S TALK
Treasury Secretary Steven Mnuchin spoke with his Chinese counterpart, Vice Premier Liu He, about a deal to ease trade tension. Friday’s phone call didn’t lead to a breakthrough but the renewed discussions indicate the two sides are trying to make progress ahead of a meeting between President Trump and Chinese President Xi Jinping at the end of the month, Bob Davis and Lingling Wei report.
Some U.S. officials say the U.S. and China might be able to reach a kind of ceasefire in the trade battle, with the U.S. refraining from increasing tariffs. That could be followed by detailed negotiations. But the administration remains bitterly divided on China trade, with U.S. Trade Representative Robert Lighthizer arguing that the U.S. needs to continue with tariffs to get China to make necessary concessions.
ADD IT UP
The U.S. has put tariffs on $250 billion of Chinese imports. Of that, levies on $200 billion of goods are set to increase to 25% from 10% on Jan. 1. The U.S. is also putting the finishing touches on tariffs on most of the rest of China’s imports—about another $250 billion, although mobile phones and perhaps laptops may be exempted.
“The tariffs themselves are a cost to the economy in the form of a tax. To date, the $40bn a year annualized increase may not be a major economic factor, but it is a cost nonetheless,” Societe Generale’s Stephen Gallagher and Omair Sharif write.
What do you think happens next: The U.S. and China reach a trade truce or the U.S. raises tariffs on more Chinese goods? Write to Jeffrey Sparshott at realtimeeconomics@wsj.com, tweet to @WSJecon and visit wsj.com/economy for the latest news. (Responses may be quoted in this newsletter.)
WHAT TO WATCH TODAY
U.S. budget figures for October, the first month of the new fiscal year, are out at 2 p.m. ET. In fiscal 2018, the U.S. government ran its largest budget deficit in six years.
There’s a lot of Fed chatter Tuesday. Minneapolis’s Neel Kashkari speaks at a regional economics conference at 10 a.m. ET, governor Lael Brainard speaks about artificial intelligence and the financial landscape at 10 a.m. ET, Philadelphia’s Patrick Harker speaks at a fintech conference at 2:20 p.m. ET, and San Francisco’s Mary Daly speaks at Boise State University at 5 p.m. ET.
Japan’s gross domestic product for the third quarter is out at 6:50 p.m. ET. The economy is expected to have shrunk 1.0% on an annualized basis.
China releases October business activity data at 9 p.m. ET. The retail sales, industrial output and fixed-asset investment numbers will offer the latest look at how the country’s economy is faring as Beijing works to offset the effects of trade tensions with the U.S.
TOP STORIES
IF NEGOTIATIONS DON’T WORK…
The Trump administration is broadening its China trade battle beyond tariffs with a plan to use export controls, indictments and other tools to counter the theft of intellectual property. The opening move in the new strategy came in the form of a recent crackdown on a Chinese state-owned chip maker, which the U.S. administration accused of stealing trade secrets from Idaho-based Micron Technology, Kate O’Keeffe reports.
The initiative opens a new front in Washington’s commercial standoff with Beijing. U.S. officials are looking at additional cases where they could use a similar combination of tools to fight Chinese IP theft. The officials hope that the unprecedented actions taken to defend Micron will encourage more U.S. companies to work with the government to counter intellectual property theft.
HQ2 ARRIVES IN…
New York City and Northern Virginia will be the homes for Amazon.com’s second and third headquarters, ending a more than yearlong public contest that started with 238 candidates and ended with a surprise split of its so-called HQ2.
Amazon is dividing the second headquarters evenly between New York’s Long Island City and Arlington County’s Crystal City neighborhoods, which are both located directly across from the major city centers. The decision effectively gives Amazon a major presence in three coastal hubs that politically lean left, at a time when tech companies are under scrutiny for their perceived elitism and liberal social views, Laura Stevens, Keiko Morris and Katie Honan.
QUEENS AND CRYSTALS
Long Island City, Queens, is the fastest-growing community in New York City, accessible by multiple subway lines, the Long Island Rail Road and two ferry stops. It is also close to La Guardia and John F. Kennedy International airports. What Crystal City lacks in charm, it apparently made up for with proximity to Washington, Reagan National Airport, metro stops, empty office space and Amazon Chief Executive Jeff Bezos’s second home.
BIG EAST
Alphabet Inc.’s Google said it plans to double its workforce in New York City to more than 14,000 employees over the next 10 years, setting up a battle for East Coast talent with tech rival Amazon.com. Google finance chief Ruth Porat said the company is adding talent at a faster pace outside Silicon Valley than at its Mountain View, Calif., headquarters. Google, Amazon and other tech leaders are expanding into outposts across the country and outside the U.S., where talent and real estate is cheaper and a growing class of young workers are quickly gaining tech skills, Douglas MacMillan reports.
I’M A LOSER, BABY
Oil prices notched their longest losing streak on record Monday, as comments from President Trump negated expectations that OPEC and its allies will cut production. Light, sweet crude for December posted its 11th consecutive session of losses, the longest in data going back to 1983.
Mr. Trump’s tweet: “Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!”
FRACKTASTIC
One factor behind oil market jitters? Relentless American shale development. The U.S. is poised to leapfrog the world’s other major oil and gas producers, with the potential for the country to account for roughly half of global crude and natural growth by 2025, the International Energy Agency said Tuesday. Growth is expected to be driven primarily by shale fracking, which should lead U.S. shale oil supply to more than double, reaching 9.2 million barrels a day by the mid-2020s, Christopher Alessi reports.
VOTING WITH THEIR FEET, PART I
U.S. enrollment of international students declined for the second year in a row, sending waves of unease across American colleges and universities.
Foreign students are big business: They pumped $42 billion into U.S. college and university coffers in the 2017-18 school year alone. Students from abroad are still flocking to the coasts, but are less interested in the South and Midwest, Michelle Hackman and Douglas Belkin report. The shift is due to a combination of politics, fear, geography and branding, said Alejandra Sosa Pieroni, an international recruitment expert with Ruffalo Noel Levitz, a company that consults with colleges to improve enrollment.
VOTING WITH THEIR FEET, PART II
The number of workers in the U.K. who hail from elsewhere in the European Union posted the steepest drop on record in September, signaling that Britain’s impending exit from the EU is denting its appeal to those on the continent seeking work, Jason Douglas reports.
TWEET OF THE DAY
[wsj-responsive-sandbox id = "0" ]WHAT ELSE WE’RE READING
The least-educated Americans face higher unemployment, lower insurance coverage, poorer nutrition and other disadvantages. The result? “We show that death rates for the least educated have dramatically diverged from death rates of other groups, in virtually all middle-age race and gender groups. Non-Hispanic whites in the least educated 10% have done particularly poorly. These mortality increases are across a range of causes beyond the widely discussed increases in deaths of despair,” Dartmouth’s Paul Novosad and MIT’s Charlie Rafkin write in a working paper.
Primary school teachers who favor girls over boys are more likely to have female students enroll in advanced level math courses in high school. “These results suggest that teachers’ biased behavior at early stages of schooling has long run implications for occupational choices and earnings at adulthood, because enrollment in advanced courses in math and science in high school is a prerequisite for post-secondary schooling in engineering, computer science and so on,” Victor Lavy and Edith Sand write in the Journal of Public Economics.
UP NEXT: WEDNESDAY
German gross domestic product for the third quarter is out at 2 a.m. ET. Economists expect a very slight drop.
The U.K.’s consumer-price index for October is out at 4:30 a.m. ET.
Eurozone GDP for the third quarter is out at 5 a.m. ET.
The U.S. consumer-price index for October is expected to rise 0.3% from the prior month. That would put the year-over-year reading at 2.5%. Excluding food and energy, prices are expected to rise 0.2% from the prior month and 2.2% from a year earlier.
Fed vice chairman for supervision Randal Quarles delivers testimony on Capitol Hill at 10 a.m. ET, and Chairman Jerome Powell speaks on the global economy at a Dallas Fed event at 6 p.m. ET.
from Real Time Economics https://ift.tt/2qKnQDF
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