Newsletter: Global Economic Tensions Are Here to Stay

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Under Pressure

Economic pressure remains President Trump’s weapon of choice in international disputes. Mr. Trump on Tuesday threatened another trade fight with Europe—just days after reaching an initial trade deal with China, Andrew Restuccia and Greg Ip report.

• Mr. Trump said he would impose new tariffs on European car imports if the European Union didn’t agree to a new trade agreement.
• Treasury Secretary Steven Mnuchin warned that Italy and Britain would face U.S. levies if they proceeded with a tax on American digital giants such as Facebook.
• The latest threats could herald months or years of economic tensions. Indeed, even with a phase-one trade deal with China in place, Mr. Mnuchin said a second phase wouldn’t necessarily be a “big bang” that removed all tariffs.
• “We dealt with a lot of important issues in phase one,” said Mr. Mnuchin. “If we get [phase two] done before the election, good. If not, fine. There’s no deadline.”

WHAT TO WATCH TODAY

The World Economic Forum in Davos, Switzerland, runs from Jan. 21-24. You can follow the WSJ’s coverage here.

U.S. existing-home sales for December are expected to rise to an annual pace of 5.43 million from 5.35 million a month earlier. (10 a.m. ET)

The Bank of Canada releases a policy statement at 10 a.m. ET.

Japan’s trade balance for December is out at 6:50 p.m. ET.

TOP STORIES

Don’t Dream It’s Over

President Trump touted what he described as a “blue-collar boom” transforming the American economy in a speech to global business and government leaders. Over 30 minutes on Tuesday, Mr. Trump ticked off a list of accomplishments from low unemployment to increases in foreign investment. The campaign-style address appeared aimed as much at a U.S. re-election audience and the 100 senators who will act as jurors in his impeachment trial as at the other heads of state and business executives attending the World Economic Forum in Davos, Andrew Restuccia reports. “The American dream is back, bigger, better and stronger than ever before,” Mr. Trump said.

The Magic Formula

Want more workers? Offer better wages and benefits than your competitors. New York’s Metropolitan Transportation Authority has recently lured away at least 125 officers from the New York Police Department with offers of higher pay and more days off. The state-controlled MTA announced in September that it was hiring 500 officers in large part to tackle homelessness, assaults on transit workers and fare evasion on the subway. Base salaries for MTA officer jobs top out at about $100,000 after seven years, according to the agency. Base salaries for the NYPD top out at roughly $85,000 after 5½ years on the job. MTA officers typically work longer shifts, but have more days off than NYPD officers, Ben Chapman and Paul Berger report.

Countdown: The 2020 census started Tuesday in a remote Alaskan village where the Census Bureau’s director personally enumerated one of the town’s oldest residents. It’s the kickoff of a crucial exercise that will determine how the country shares political power, where federal funds land and where many businesses set up shop. One big question: Are there enough people to count the people? The Census Bureau plans to hire half-a-million workers in one of the tightest labor markets on record. Already, the agency has raised pay and boosted advertising. Who is likely to fill the jobs? “We will likely see a spike in those moving from outside the labor market into the labor market,” Morgan Stanley economist Ellen Zentner writes. The knock-on effects? More competition for low-wage workers, further accelerating wage growth for low-income earners, a short-lived jump in labor-force participation, and a small increase in the personal-saving rate, which could shore up some household balance sheets, Ms. Zentner says.

Cold Comfort

The frackers have broken the natural-gas market. The price of natural gas typically rises this time of year as temperatures plunge and homeowners dial up their thermostats. Instead, the price of the heating and electricity-generating fuel has dropped to multiyear lows, highlighting how a persistent glut has buffeted energy investors and producers. The shale boom, spurred by horizontal drilling and hydraulic fracturing techniques, transformed the U.S. energy industry and flooded the market with oil and natural gas in recent years. The decline in prices has hit shares of energy companies, raising calls for them to curtail production. But few analysts see signs of the glut abating soon: The U.S. Energy Information Administration predicts dry natural-gas production in the U.S. will rise in 2020, Sarah Toy reports.

Wuhan Virus Rattles Markets

A newly identified virus originating in central China is spreading. Nine people have died in China from the coronavirus, which causes pneumonia, and the number of confirmed cases now exceeds 400. In the U.S., a man in Washington state has been diagnosed with the country’s first confirmed case. Economists are likening the virus to 2003’s outbreak of SARS, or severe acute respiratory syndrome, which killed hundreds of people in southern China in 2002-03.

Impact on China: “We think the economic impact from the virus is likely to be transitory, with the effects felt more in transportation and retail sales.” —Jian Chang, Barclays

Impact on U.S.: “Even if this first isolated case of the Wuhan virus in the U.S. develops into a full-scale epidemic, which is unlikely, we wouldn’t expect it to have a significant negative impact on economic activity.” —Paul Ashworth, Capital Economics

The latest: Global stocks edged up on Wednesday as investors cheered Chinese authorities’ measures to contain the outbreak.

WHAT ELSE WE’RE READING

A higher minimum wage does more than boost incomes. “Minimum wage increases appear to reduce the suicide rate among those with a high school education or less, and may reduce disparities between socioeconomic groups. Effects appear greatest during periods of high unemployment,” Emory University’s John Kaufman and co-authors write in the Journal of Epidemiology & Community Health.

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