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China wants the U.S. to take Huawei off its blacklist, the U.S. economy is sending mixed signals and homeownership is out of reach for more Americans. Good morning. Jeff Sparshott here to take you through key developments in the global economy. Send us your questions, comments and suggestions by replying to this email.
China Sets Its Terms
Chinese President Xi Jinping plans to present President Trump with a set of terms the U.S. should meet before Beijing is ready to settle a market-rattling trade confrontation, raising questions of whether the two leaders will agree to relaunch talks, Lingling Wei and Bob Davis report.
- Beijing is insisting the U.S. remove its ban on the sale of U.S. technology to Chinese telecommunications giant Huawei and wants the U.S. to lift all punitive tariffs. Officials also want Washington to drop efforts to get China to buy even more U.S. exports than discussed when the two leaders last met in December.
- The U.S. chief trade negotiator, Robert Lighthizer, and his Chinese counterpart, Liu He, talked by telephone this week on ways to get the talks back on track and expect to meet in person before the presidents’ Saturday lunch meeting after a Group of 20 summit in Osaka. It is far from clear what the two will manage—and whether their bosses will approve their work.
WHAT TO WATCH TODAY
President Trump is in Osaka, Japan, for the Group of 20 summit. His first formally scheduled meeting: dinner with Australia Prime Minister Scott Morrison at 7 a.m. ET. See below for Mr. Trump’s full G-20 schedule.
Germany’s consumer-price index for June is out at 8 a.m. ET.
U.S. gross domestic product growth for the first quarter is expected to be revised to 3.2% from 3.1%. (8:30 a.m. ET)
U.S. jobless claims are expected to rise to 220,000 from 216,000 a week earlier. (8:30 a.m. ET)
U.S. pending-home sales for May are expected to rise 1.0% from a month earlier. (10 a.m. ET)
The Kansas City Fed manufacturing survey for June is out at 11 a.m. ET.
Japan’s industrial production for May is out at 7:50 p.m. ET.
Podcast: In the first episode of “The Journal,” a co-production from Gimlet Media and the WSJ, senior correspondent Jon Hilsenrath explains what might kill the 10-year old economic expansion. Listen to the podcast here.
TOP STORIES
Which Direction for the U.S. Economy?
Today, look for confirmation that U.S. gross domestic product advanced at a better-than-3% pace in the first quarter. It’s all downhill from there with trade tensions high, business investment looking tepid, central banks on high alert and uncertainty the new watchword, right? Not necessarily. Second-quarter data is piling up and it’s telling us that, yes, headline GDP growth is going to fall—the Atlanta Fed’s GDPNow is tracking 2Q at 1.9%, Moody’s Analytics 1.8% and Macroeconomic Advisers 1.9%. If Moody’s is right, that would match the weakest pace since Mr. Trump became president.
But the first quarter’s headline number was pumped up by unsustainable growth in business inventories and government spending, and a temporary narrowing of the trade deficit. Strip out those volatile components and the first-quarter economy grew at the weakest pace since mid-2013. This is where the second quarter is looking better. Macroadvisers has that underlying number, real final sales to private domestic purchasers, at a solid if unspectacular 2.5% pace. The big reason? Consumers. As long as the U.S. keeps creating jobs, household spending may be able to offset weak spots elsewhere in the economy.
Warnings and Cheaters
U.S. businesses are warning that new 25% duties on $300 billion a year of Chinese goods will wreak widespread direct and collateral damage, Josh Zumbrun reports. Hundreds of executives—from TV assemblers to retailers to port operators—argued against proposed tariffs during public hearings that ended this week.
China’s exporters, meanwhile, are cheating to get around U.S. tariffs. Billions of dollars worth of China-made goods are dodging levies by entering the U.S. via other countries in Asia, especially Vietnam, Chuin-Wei Yap reports. Such circumvention threatens to crimp U.S. plans as it prepares to add tariffs on to $300 billion of Chinese exports, from toys to electronics, essentially covering all its China trade.
Out of Reach
More American renters believe homeownership is financially out of reach. Only 24% of renters said it was “extremely likely” that they would ever own a home, 11 percentage points lower than four years ago, according to a new survey by mortgage finance giant Freddie Mac. Saving for a downpayment is the big obstacle. The kicker: Rising rents also are creating hardships. Of the renters who moved in the last two years, 44% said they did so because they could no longer afford their rent, Will Parker reports.
Mr. Trump Goes to Osaka
President Trump meets with Indian Prime Minister Narendra Modi Friday. The two have a lot to talk about: India this month imposed tariffs on dozens of U.S. products including apples, walnuts, almonds and pulses. The move followed a recent decision by the Trump administration to revoke India’s favored trading status. Late Wednesday Mr. Trump said he was going to pressure India to roll back trade barriers when he meets Mr. Modi.
- Mr. Trump’s G-20 schedule Friday includes meetings with: Japanese Prime Minister Abe (8:30 a.m.), Messrs. Abe and Modi (9:15 a.m.), Mr. Modi (9:35 a.m.), German Chancellor Merkel (10:15 a.m.), Russian President Putin (2 p.m.), and Brazilian President Bolsonaro (3:30 p.m.).
- All eyes, of course, are on Saturday: Saudi Crown Prince Mohammed bin Salman (working breakfast at 8:15 a.m.), the much-anticipated bilateral with Chinese President Xi (11:30 a.m.), and Turkish President Erdogan (1 p.m.). [Via White House press pool; all times are local.]
WHAT ELSE WE’RE READING
The economy is growing faster than we think. That’s because current GDP measures don’t capture innovations in IT and consumer content delivery. “All told, our more complete accounting of innovations is (conservatively) estimated to have moderated the post-2007 GDP growth slowdown by nearly .3 percentage points per year,” Fed economists David Byrne and Carol Corrado write in a working paper.
The global economy runs on parties. Most of us aren’t invited. “Even though we have all given ourselves over to data, human relationships lubricated by human pleasures still matter to every industry. Indeed, they matter more, because the few humans not replaced by machines have more power now than ever before. As went the ad business, so will go the rest of the economy: The robots may take over—but for a certain class of moneyed titan, the beaches will always remain topless, the drinks bottomless and high-end schmoozing will never die,” Farhad Manjoo writes in the New York Times.
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