Newsletter: ‘I’ll Just Raise the Tariffs Even Higher’

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Good morning. Jeff Sparshott here to take you through the latest developments on trade, housing, monetary policy, how much it costs to retire, and the intersection of politics and consumer spending. Please send us any comments or questions by replying to this email.

Higher and Higher

Trade talks between the U.S. and China are in danger of hitting an impasse, threatening to derail the Trump administration’s plan for a limited “phase-one” pact this year. Both sides remain divided over core issues—including Beijing’s demand for removing tariffs and the U.S.’s insistence on China buying farm products, William Mauldin and Josh Zumbrun report.

• “China is going to have to make a deal that I like,” President Trump said Tuesday at a cabinet meeting. “If we don’t make a deal with China, I’ll just raise the tariffs even higher.”
• Mr. Trump is facing pressure from people within and close to the administration who blame the lack of progress on Beijing’s refusal to follow through on commitments.
• The White House announced an “agreement in principle” on Oct. 11 that included large agricultural purchases, tighter intellectual-property rules and a currency pact in exchange for tariff relief. Since then, there have been few signs of progress.
• Next up: The Trump administration is due to impose 15% tariffs on smartphones, toys and other products from China on Dec. 15.

WHAT TO WATCH TODAY

The Federal Reserve releases minutes from its Oct. 29-30 meeting at 2 p.m. ET.

President Trump tours Apple’s Austin, Texas, manufacturing plant at about 2:20 p.m. ET.

TOP STORIES

Through the Roof

Lower interest rates and steady job creation appear to be boosting the housing market. Last month, the number of new homes built jumped and the number of new-construction permits issued hit the highest level of the expansion. The data are jumpy and prone to big revisions, but still a sign the housing sector will help lift the economy as the year comes to a close—a significant turnaround after a weak 2018 and a slow start to 2019.

If you were in the market for a new home, would you move someplace with no cars? A $140 million Arizona development is banning residents from bringing their own cars in favor of scooters, bikes and ride-sharing, testing demand for a new type of walkable neighborhood. The 1,000-person rental community, which broke ground this month in Tempe, won’t allow residents to park cars on site or in the surrounding area as a term of their leases. In place of parking spaces, the development will feature significantly more retail and open spaces than are typical for its size, Laura Kusisto reports.

Fed Watch

The Federal Reserve releases the minutes of its Oct. 29-30 meeting at 2 p.m. ET, shedding light on its decision to cut interest rates and signal a wait-and-see policy stance going forward. The WSJ’s Nick Timiraos says to look for hints about what conditions would open the door wider to more cuts, and how broadly shared these views were last month. Also keep an eye on comments about the Fed’s balance sheet: The central bank in October started buying $60 billion per month in very short-term Treasury debt to rebuild the level of reserves in the system, a response to strains in money markets.

New York Fed President John Williams said the central bank is comfortable holding rates steady for now, though that wait-and-see stance doesn’t mean the Fed is permanently on hold. What could change? Weaker-than-expected global growth or out-of-whack inflation. “Are these global factors or other things causing the economy to slow more than expected, and slow below trend growth on an ongoing basis? That would be an argument for somewhat more accommodation. Similarly, if inflation were to move in the wrong direction on a sustained basis, then that would be an argument to consider more accommodation.”

Economic Insecurity

Making ends meet is a daily challenge for many older Americans, especially those who live alone in high-cost states. Researchers tracking the economic security of older adults estimate that half of seniors living alone and nearly a quarter of two-person households are unable to afford basic necessities including food, housing and healthcare without extra assistance. The new report was unveiled Tuesday by the Gerontology Institute at the University Of Massacusetts Boston, using its “Elder Index” which measures the cost of living for adults age 65 and older in every county in the U.S. Massachusetts, New York and Vermont were among the states with the highest ratios of people falling below their respective states’ index levels. Nationwide, the index calculated a realistic cost of living of $25,416 for older singles who are renting their homes and $36,204 for couples. —Yuka Hayashi

Cowboy Hat from Gucci, Wrangler on my Booty

Levi Strauss and Wrangler both got their start as the go-to jeans for cowboys, railroad workers and others who pioneered the American West. Today, they are on opposite sides of a political divide that is affecting not only how people vote but what they buy. Consumer research data show Democrats have become more likely to wear Levi’s than their Republican counterparts. The opposite is true with Wrangler. There is no simple explanation behind those consumer moves. Some of it is due to social and political stances companies are taking. Some is tied to larger geographic shifts in the political parties. Together those factors are combining to create a new, more partisan American consumer culture, one where the red/blue divisions that have come to define national politics have drifted into the world of shopping malls and online stores, Suzanne Kapner and Dante Chinni report.

WHAT ELSE WE’RE READING

Artificial Intelligence is coming for the good jobs. “Unlike robotics (associated with the factory floor) and computers (associated with routine office activities), AI has a distinctly white-collar bent. While earlier waves of automation have led to disruption across the lower half of the wage distribution, AI appears likely to have different impacts, with its own windfalls and challenges. White-collar, well-paid America—radiologists, legal professionals, optometrists, and many more—will likely get no free pass on this flavor of digital disruption,” Mark Muro, Robert Maxim and Jacob Whiton write in a Brookings Institution report.

More opioid prescriptions lead to fewer people in the labor force. “We find that a 10% higher local prescription rate is associated with a decrease in the prime-age labor force participation rate of between 0.15 and 0.47 percentage points for men and between 0.15 and 0.19 percentage points for women…. We also estimate effects for narrower demographic groups and find substantially larger estimates for some groups, notably for white and minority men with less than a BA,” Cleveland Fed economists Dionissi Aliprantis, Kyle Fee and Mark Schweitzer write in a working paper.

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