Newsletter: How the U.S.-China Trade War is Rippling Through the Global Economy

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The U.S.-China trade fight is affecting more and more of the world economy, the yuan and the pound hit fresh lows, and U.S. companies are offering a new benefit: payroll advances and loans. 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.

Cannonball

The U.S.-China trade war is rippling through the global economy, hurting confidence among U.S. small businesses, crimping trade among industrial giants in Asia and hitting export-oriented factories in Europe, Ruth Simon, Megumi Fujikawa and Paul Hannon report.

• Economic confidence among small U.S. companies fell in August to the lowest level since November 2012. In a survey for the WSJ, the portion of respondents that expect the economy to worsen over the next 12 months rose to 40%, compared with 23% a year ago.
• U.S. consumer sentiment in August fell by the most since 2012 amid concerns over trade. Consumer spending has been the main driver of economic growth so far this year. 
• Japan said capital spending by the country’s manufacturers fell for the first time in two years as companies grappled with a drop in exports to China. South Korea’s exports to China plummeted in August.
• The U.S. and China on Sunday imposed fresh tariffs on each other’s goods. The levies are increasing costs for some companies, while uncertainty about trade talks is making it difficult for managers to plan.
• What to watch: U.S. surveys of manufacturing purchasing managers out today will shed further light on how much the trade conflict is affecting the U.S. industrial sector.

WHAT TO WATCH 

IHS Markit’s U.S. manufacturing index for August is out at 9:45 a.m. ET.

The Institute for Supply Management’s manufacturing index for August is expected to tick down to 51.0 from 51.2 a month earlier. (10 a.m. ET)

U.S. construction spending for July is expected to rise 0.3% from a month earlier. (10 a.m. ET)

The Boston Fed’s Eric Rosengren speaks on the economy at 5:00 p.m. ET.

Bank of Japan Governor Haruhiko Kuroda speaks in Tokyo at 8:50 p.m. ET.

The Caixin China composite index for August is out at 9:45 p.m. ET.

TOP STORIES

Drop it Like It’s Hot

China’s currency dropped to its weakest level in more than a decade. The yuan fell below 7 per dollar on Aug. 5, days after President Trump announced tariffs on a wider range of Chinese goods, and has since slid further as both sides have detailed fresh tariff plans, Shen Hong reports. Chinese authorities are seeking to offset the impact of higher charges on exports to the U.S. without sparking a stampede of money abroad, or depleting foreign-exchange reserves, analysts and investors say. A weaker yuan makes Chinese goods cheaper to buy in the U.S.

Not to be outdone, the British pound hit its lowest level in 3 years after Prime Minister Boris Johnson warned rebel lawmakers not to postpone Britain’s scheduled exit from the European Union on Oct. 31. Officials said a general election will be called for Oct. 14 if lawmakers force a delay.

Keep on Truckin’

Truck makers are logging sharply lower orders, adding another stress point for a decelerating U.S. manufacturing sector. The U.S. trucking industry had one of its strongest years ever in 2018, as high demand for freight encouraged transportation companies to expand their fleets. Now, trade tensions and slower global growth are depressing freight volumes. Trucking companies, in turn, are ordering fewer trucks, Bob Tita and Austen Hufford report.

Back to Bangladesh

The U.S.-China trade war is pushing fashion brands to Bangladesh, where safety issues persist years after two workplace accidents killed more than 1,000 workers. Many American firms cut back on sourcing from Bangladesh, and others abandoned the country entirely, after the 2012 and 2013 accidents. Over the past two years, however, companies have bulked up sourcing amid efforts to improve safety conditions. That shift has accelerated as the trade dispute has heated up, Jon Emont reports.

The renewed interest in Bangladesh poses a test for the country’s safety and labor standards. Low wages and a large labor supply had turned Bangladesh into a garment-manufacturing powerhouse. But a November 2012 fire in a Dhaka garment factory killed some 120 workers and, five months later, more than 1,100 people were killed in the collapse of Rana Plaza, which was home to five garment factories.

Or Maybe a Raise?

A growing number of companies are helping workers gain access to payroll advances and loans, reflecting concern over the impact money problems are having on productivity levels and worker retention. Employers including Walmart and Pima County, Ariz., have recently added these services. The aim is to help cash-strapped employees, many with damaged credit, cover unexpected expenses without resorting to high-cost debt, Anne Tergesen reports.

Storm Watch

Hurricane Dorian hovered over the northwestern Bahamas, killing at least five people, wiping out thousands of homes, forcing many into a makeshift shelter and leaving an entire island without power. The storm is forecast to approach dangerously close to Florida late Tuesday through Wednesday, and then turn north, skirting the coast near Georgia and South Carolina Wednesday night and Thursday.

• Oxford Economics estimates the storm could knock 0.1 percentage point off of third-quarter gross domestic product and will make it more difficult to get a read on underlying economic activity for a short spell: “We expect to see disruptions to high-frequency economic data in September, including employment, industrial production, housing, and retail sales data.”

 

WHAT ELSE WE’RE READING

Home health care is the fastest growing major job category in the country. It’s also one of the most emotionally and personally demanding, and one of the worst paid. “It is a vicious circle. Because these have always been poor-paying jobs, they are seen as lousy, low-skill jobs. And because they are seen as lousy, low-skill jobs, they pay poorly. … Nationwide, home care workers—a category that includes home health aides as well as home care aides and personal care aides, who have less specialized training—average $11.52 an hour, and 45% of them who work full time are on public assistance” Andy Newman writes in the New York Times.

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