The world's top financial policymakers admitted Sunday that <a href="https://www.wionews.com/world/in-historic-first-g20-weighs-ageing-as-global-risk-225592">trade tensions had worsened</a>, posing a risk for the global economy, after a G20 meeting that laid bare differences between the United States and other nations.

Following 30 hours of wrangling in what one official described as a "tense" atmosphere, the G20 finance minister and central bank chiefs produced a final statement acknowledging that "growth remains low and risks remain tilted to the downside".

"Most importantly, trade and geopolitical tensions have intensified," <a href="https://www.wionews.com/world/trade-war-tariff-threats-to-challenge-g20-finance-leaders-solidarity-225361">the G20</a> said, adding they "stood ready to take further action" if required.

As a compromise pushed by Washington, the statement omitted language from a previous draft that mentioned a "pressing need to resolve trade tensions".

The statement capped two days of talks in the western Japanese city of Fukuoka that also tackled the thorny issue of taxing internet giants and, for the first time, the economic challenges posed by ageing.

But trade battles were front and centre of policymakers' minds as the US and China continue to threaten each other with tariffs that economists fear could slam the brakes on global growth.

The IMF has said US-China tariffs could shave global GDP by 0.5 per cent in 2020 or about US$455 billion, stressing the need to resolve the differences to avoid plunging the world economy into another crisis.

IMF chief Christine Lagarde said that trade conflicts pose the "principal threat" to the global economic outlook.

Tariffs imposed by the world's top two economies could make a "significant dent" in the global recovery, added Lagarde.

The G20 ministers heaved a sigh of relief just hours before the meeting when the US and Mexico clinched a deal over immigration that stopped Washington imposing five-per cent tariffs on Mexican goods.

But US Treasury Secretary Steven Mnuchin told reporters that Washington stood ready to impose more tariffs on China if President Donald Trump and China's Xi Jinping fail to strike a deal at the G20 summit later this month in Osaka.

"If China wants to come back to the table and negotiate on the basis that we were negotiating, we can get a great historic deal. If they don't, we'll proceed with our tariffs," Mnuchin told reporters on Saturday.

He tweeted on Sunday he had had a "constructive" meeting with China's central bank governor Yi Gang, during which there was a "candid discussion on trade issues".

Taking a different line from the other policymakers, Mnuchin said the slowdown in some parts of the world was not due to trade difficulties and even said the friction could benefit some countries if companies relocated from China to avoid tariffs. "There will be winners and losers," said the treasury secretary.

&nbsp;'I don't like them'&nbsp;

The quandary of reforming the global tax system to take into account the rise of internet giants such as Google and Facebook was another issue exercising the minds of policymakers in the coastal city.

In the final statement, the G20 agreed to "redouble our efforts for a consensus-based solution with a final report by 2020".

However, here again, the Fukuoka meeting exposed a difference of opinion over what form this reform should take.

Frustrated by a lack of global action on the issue, some countries such as Britain and France have already introduced a so-called digital tax, but Mnuchin was blunt in his assessment of these policies.

"I would say the US has significant concerns with the two current taxes that are being proposed by France and the UK but let me give them some good credit for proposing them in the sense (that) they have created an urgency to deal with this issue," Mnuchin said at a public meeting before the formal G20 started.

"Although I don't like them, I do appreciate the impetus for these issues," added the top US finance official.

Appropriately for a meeting held in Japan -- which is on track to become the world's first "super-aged" society in which more than 28 per cent of the population is over 65 -- the G20 ministers discussed for the first time the "challenges and opportunities" posed by ageing.

They suggested getting more women and elderly people into the workforce and "promoting elderly-friendly industries", as well as reforming the fiscal and banking systems to take into account ageing populations.

"You basically have a very large portion of mankind that is ageing and then the workforce is shrinking," OECD Secretary-General Angel Gurria told AFP in an interview.

Solving the issue will require wholesale changes to the way society is organised, added Gurria.&nbsp;

The world's top financial policymakers admitted Sunday that trade tensions had worsened, posing a risk for the global economy, after a G20 meeting that laid bare differences between the United States and other nations.

The world's top financial policymakers admitted Sunday that trade tensions had worsened, posing a risk for the global economy, after a G20 meeting that laid bare differences between the United States and other nations. Following 30 hours of wrangling in what one official described as a "tense" atmosphere, the G20 finance minister and central bank chiefs produced a final statement acknowledging that "growth remains low and risks remain tilted to the downside". "Most importantly, trade and geopolitical tensions have intensified," the G20 said, adding they "stood ready to take further action" if required. As a compromise pushed by Washington, the statement omitted language from a previous draft that mentioned a "pressing need to resolve trade tensions". The statement capped two days of talks in the western Japanese city of Fukuoka that also tackled the thorny issue of taxing internet giants and, for the first time, the economic challenges posed by ageing. But trade battles were front and centre of policymakers' minds as the US and China continue to threaten each other with tariffs that economists fear could slam the brakes on global growth. The IMF has said US-China tariffs could shave global GDP by 0.5 per cent in 2020 or about US$455 billion, stressing the need to resolve the differences to avoid plunging the world economy into another crisis. IMF chief Christine Lagarde said that trade conflicts pose the "principal threat" to the global economic outlook. Tariffs imposed by the world's top two economies could make a "significant dent" in the global recovery, added Lagarde. The G20 ministers heaved a sigh of relief just hours before the meeting when the US and Mexico clinched a deal over immigration that stopped Washington imposing five-per cent tariffs on Mexican goods. But US Treasury Secretary Steven Mnuchin told reporters that Washington stood ready to impose more tariffs on China if President Donald Trump and China's Xi Jinping fail to strike a deal at the G20 summit later this month in Osaka. "If China wants to come back to the table and negotiate on the basis that we were negotiating, we can get a great historic deal. If they don't, we'll proceed with our tariffs," Mnuchin told reporters on Saturday. He tweeted on Sunday he had had a "constructive" meeting with China's central bank governor Yi Gang, during which there was a "candid discussion on trade issues". Taking a different line from the other policymakers, Mnuchin said the slowdown in some parts of the world was not due to trade difficulties and even said the friction could benefit some countries if companies relocated from China to avoid tariffs. "There will be winners and losers," said the treasury secretary. 'I don't like them' The quandary of reforming the global tax system to take into account the rise of internet giants such as Google and Facebook was another issue exercising the minds of policymakers in the coastal city. In the final statement, the G20 agreed to "redouble our efforts for a consensus-based solution with a final report by 2020". However, here again, the Fukuoka meeting exposed a difference of opinion over what form this reform should take. Frustrated by a lack of global action on the issue, some countries such as Britain and France have already introduced a so-called digital tax, but Mnuchin was blunt in his assessment of these policies. "I would say the US has significant concerns with the two current taxes that are being proposed by France and the UK but let me give them some good credit for proposing them in the sense (that) they have created an urgency to deal with this issue," Mnuchin said at a public meeting before the formal G20 started. "Although I don't like them, I do appreciate the impetus for these issues," added the top US finance official. Appropriately for a meeting held in Japan -- which is on track to become the world's first "super-aged" society in which more than 28 per cent of the population is over 65 -- the G20 ministers discussed for the first time the "challenges and opportunities" posed by ageing. They suggested getting more women and elderly people into the workforce and "promoting elderly-friendly industries", as well as reforming the fiscal and banking systems to take into account ageing populations. "You basically have a very large portion of mankind that is ageing and then the workforce is shrinking," OECD Secretary-General Angel Gurria told AFP in an interview. Solving the issue will require wholesale changes to the way society is organised, added Gurria.

G20 says worsening trade wars pose risk to world economy

<h1></h1>

*By-&nbsp;Tom Harper

Nearly 30 years ago, Donald Trump complained on a US chat show about the trade practices of Japan. This was during Japan’s boom of the 1980s, which propelled it to become the world’s second-largest economy. Now, China has taken that spot – and Trump is using the same rhetoric to attack it.&nbsp;

China is the bugbear of Trumpian foreign policy. According to one Wall Street Journal commentator, the US president is seeking to unify the world against China just as Reagan sought to isolate the Soviet Union.

Today’s China, as America’s primary economic challenger, can be seen as the latest incarnation of the East Asian model of authoritarian state capitalism. This was pioneered by Japan with its industrialisation and development during the 19th century.

China’s current communist rulers see industrialisation as the “magic key” to Great Power status – made clear from the message behind the Made in China 2025 scheme which asserts:

Since the beginning of industrial civilisation in the middle of the 18th century, it has been proven repeatedly by the rise and fall of world powers that without strong manufacturing, there is no national prosperity. Building internationally competitive manufacturing is the only way China can enhance its strength, protect state security and become a world power.

Ironically, a variant of this approach has been praised by some British MPs, in their suggestion of the Singaporean model as an example for post-Brexit Britain to follow. But they overlook how such a model is one of state capitalism, rather than the free-market nirvana they perceive it to be.

For it is state capitalism which enabled Japan and China to become manufacturing powerhouses. They both started with cheap, poor quality goods, and then created more sophisticated innovations – see, for example, the recent moon landing of a Chinese probe, the Chang’e 4.&nbsp;

The particular nature of China’s challenge is that its authoritarian system&nbsp;undermines the assumption that capitalism and democracy go hand in hand. A capitalist China is not necessarily a democratic China.&nbsp;

The war that never came&nbsp;

The most notable parallel between the rise of Japan in the 1980s, and China today, is the rhetoric used to describe them. While this includes references to seemingly unfair practices alluded to by Trump, it is more drastically articulated in predictions that conflict lies ahead.

This was expressed by Trump’s economic advisor, Peter Navarro, in The Coming China Wars, and followed George Friedman’s 1989 bestseller The Coming War with Japan, which predicted a shooting war between the US and Japan by the turn of the century.

In addition, both today’s China – and Japan three decades ago – have been held up as a cause of economic malaise in the Western world, with politicians promising to “get tough” with these nations. Yet this repeated rhetoric also demonstrates the perils of following such a simplistic vision.

For a start, the predicted Japanese-American conflict was based on the assumption that the end of the Cold War would see a divergence between Japanese and American interests and a dissolution of their alliance. However, rather than falling as the former Soviet communist states did, China went from strength to strength. This served to reaffirm the necessity of America’s alliance with Japan as a counter-balance in Asia.

It was the alliance that granted the US a degree of leverage over Japan, as illustrated by the 1985 Plaza Accord, which, in strengthening the yen, has often been held up as one of the causes of Japan’s subsequent economic slump. Repeating this with China is a far more challenging proposition for Washington.

The similarities in the rhetoric between these periods also illustrate the flaws in placing the blame of current Western economic malaise solely on Japan or China. The former’s economic rise of the 1980s came in the period of deindustrialisation throughout much of the Western world, bringing social dislocation which has not been fully resolved.

Problems and populism&nbsp;

The West’s failure to resolve the transition from manufacturing was amplified by poor global infrastructure and the failure to resolve the causes of the 2008 crisis, which played a significant role in the rise of populism. The impact was palpable in the “Rust Belt” states of the US, and the old factory towns of northern England, focal points for Trump and Brexit respectively.&nbsp;

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These had also been among the perceived losers from the rise of Japan and China, with the belief that success in those countries came at the expense of the old industrial heartlands of the West. This is a sentiment which populist movements have been keen to exploit. Yet while the ascendant economic powers may change, the problems remain unsolved.

So while the rhetoric of the Japanese-American economic rivalry has compelling parallels with the current Sino-US trade conflict, it would be a mistake to follow these too closely. The underlying domestic structural factors behind current problems should not be overlooked in favour of externalising the causes.

Even if Trump achieves a perceived “win” over China, as his predecessors did with Japan, it does little to remedy these problems. Instead, it merely furthers temptation to blame an external “other” when the next wave of problems emerges.&nbsp;

*(Tom Harper joined the University of Surrey as a doctoral researcher after completing a masters in international relations at the University of Sussex. He is currently researching the role imperialism plays in Chinese foreign policy.)

(This article was originally published on The Conversation. Read the <a href="https://theconversation.com/trumps-trade-war-with-china-is-a-blame-game-that-has-been-played-before-against-japan-109923">original article</a>)

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

*By- Tom Harper Nearly 30 years ago, Donald Trump complained on a US chat show about the trade practices of Japan. This was during Japan’s boom of the 1980s, which propelled it to become the world’s second-largest economy.

*By- Tom Harper Nearly 30 years ago, Donald Trump complained on a US chat show about the trade practices of Japan. This was during Japan’s boom of the 1980s, which propelled it to become the world’s second-largest economy. Now, China has taken that spot – and Trump is using the same rhetoric to attack it. China is the bugbear of Trumpian foreign policy. According to one Wall Street Journal commentator, the US president is seeking to unify the world against China just as Reagan sought to isolate the Soviet Union. Today’s China, as America’s primary economic challenger, can be seen as the latest incarnation of the East Asian model of authoritarian state capitalism. This was pioneered by Japan with its industrialisation and development during the 19th century. China’s current communist rulers see industrialisation as the “magic key” to Great Power status – made clear from the message behind the Made in China 2025 scheme which asserts: Since the beginning of industrial civilisation in the middle of the 18th century, it has been proven repeatedly by the rise and fall of world powers that without strong manufacturing, there is no national prosperity. Building internationally competitive manufacturing is the only way China can enhance its strength, protect state security and become a world power. Ironically, a variant of this approach has been praised by some British MPs, in their suggestion of the Singaporean model as an example for post-Brexit Britain to follow. But they overlook how such a model is one of state capitalism, rather than the free-market nirvana they perceive it to be. For it is state capitalism which enabled Japan and China to become manufacturing powerhouses. They both started with cheap, poor quality goods, and then created more sophisticated innovations – see, for example, the recent moon landing of a Chinese probe, the Chang’e 4. The particular nature of China’s challenge is that its authoritarian system undermines the assumption that capitalism and democracy go hand in hand. A capitalist China is not necessarily a democratic China. The war that never came The most notable parallel between the rise of Japan in the 1980s, and China today, is the rhetoric used to describe them. While this includes references to seemingly unfair practices alluded to by Trump, it is more drastically articulated in predictions that conflict lies ahead. This was expressed by Trump’s economic advisor, Peter Navarro, in The Coming China Wars, and followed George Friedman’s 1989 bestseller The Coming War with Japan, which predicted a shooting war between the US and Japan by the turn of the century. In addition, both today’s China – and Japan three decades ago – have been held up as a cause of economic malaise in the Western world, with politicians promising to “get tough” with these nations. Yet this repeated rhetoric also demonstrates the perils of following such a simplistic vision. For a start, the predicted Japanese-American conflict was based on the assumption that the end of the Cold War would see a divergence between Japanese and American interests and a dissolution of their alliance. However, rather than falling as the former Soviet communist states did, China went from strength to strength. This served to reaffirm the necessity of America’s alliance with Japan as a counter-balance in Asia. It was the alliance that granted the US a degree of leverage over Japan, as illustrated by the 1985 Plaza Accord, which, in strengthening the yen, has often been held up as one of the causes of Japan’s subsequent economic slump. Repeating this with China is a far more challenging proposition for Washington. The similarities in the rhetoric between these periods also illustrate the flaws in placing the blame of current Western economic malaise solely on Japan or China. The former’s economic rise of the 1980s came in the period of deindustrialisation throughout much of the Western world, bringing social dislocation which has not been fully resolved. Problems and populism The West’s failure to resolve the transition from manufacturing was amplified by poor global infrastructure and the failure to resolve the causes of the 2008 crisis, which played a significant role in the rise of populism. The impact was palpable in the “Rust Belt” states of the US, and the old factory towns of northern England, focal points for Trump and Brexit respectively. × These had also been among the perceived losers from the rise of Japan and China, with the belief that success in those countries came at the expense of the old industrial heartlands of the West. This is a sentiment which populist movements have been keen to exploit. Yet while the ascendant economic powers may change, the problems remain unsolved. So while the rhetoric of the Japanese-American economic rivalry has compelling parallels with the current Sino-US trade conflict, it would be a mistake to follow these too closely. The underlying domestic structural factors behind current problems should not be overlooked in favour of externalising the causes. Even if Trump achieves a perceived “win” over China, as his predecessors did with Japan, it does little to remedy these problems. Instead, it merely furthers temptation to blame an external “other” when the next wave of problems emerges. *(Tom Harper joined the University of Surrey as a doctoral researcher after completing a masters in international relations at the University of Sussex. He is currently researching the role imperialism plays in Chinese foreign policy.) (This article was originally published on The Conversation. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

Trump's trade war with China is a blame game that has been played before – against Japan

The summit between President Xi Jinping and his US counterpart Donald Trump in Argentina was "<a href="http://www.wionews.com/world/china-envoy-warns-of-dire-consequences-if-us-hardliners-hold-sway-179861">friendly and candid</a>" and would help to avoid further trade tensions, a senior Chinese diplomat said on Thursday, but offered no new details on the talks.

The two leaders held high stakes discussions on the sidelines of the G20 meeting in Buenos Aires last week and agreed to a ceasefire in their trade war.

State Councillor Wang Yi, the <a href="http://www.wionews.com/world/china-pumps-109-billion-into-economy-as-trade-war-bites-on-growth-170027">Chinese government</a>'s top diplomat, said the talks about trade frictions had been extremely positive and constructive, helping reach a consensus that worked for both China and the United States.

Xi and Trump had "deep exchanges in a friendly and candid atmosphere", setting the direction for an appropriate resolution to the problems between the two countries, Wang said, in a statement carried on the foreign ministry's website.

"The two sides agreed to jointly promote Sino-US relations based on coordination, cooperation and stability, and promote exchanges and cooperation in various fields in the two countries to achieve even more results," he added.

"The discussions on economic and trade issues between the two sides were very positive and constructive, and reached a principled consensus."

That consensus included preventing trade frictions from spreading, returning to dialogue to resolve issues, and a joint goal of cooperation to benefit the global economy, Wang said.

"All of these help to safeguard China's legitimate interests, and are also in the interests of the United States, and even more are in line with the expectations of the international community," he added.

The two countries have hit each other with tit-for-tariffs on goods worth hundreds of billions of dollars in sectors from automobiles to agriculture and energy, stymying trade and redrawing global supply chains.

The United States has levied additional duties of between 10 per cent and 25 per cent on $250 billion of Chinese goods this year as punishment for what it calls China's unfair trade practices. China has responded with its own tariffs.

But as part of the truce agreed to by Xi and Trump, the United States will not raise tariffs further on Jan. 1, so further talks can take place.

Wang said the facts will prove that the common interests between China and the United States are greater than our differences, and cooperation needs to be greater than friction.

However, he offered no new details on what China had agreed to with the United States.

The summit between President Xi Jinping and his US counterpart Donald Trump in Argentina was "friendly and candid" and would help to avoid further trade tensions, a senior Chinese diplomat said on Thursday, but offered no new details on the talks.

The summit between President Xi Jinping and his US counterpart Donald Trump in Argentina was "friendly and candid" and would help to avoid further trade tensions, a senior Chinese diplomat said on Thursday, but offered no new details on the talks. The two leaders held high stakes discussions on the sidelines of the G20 meeting in Buenos Aires last week and agreed to a ceasefire in their trade war. State Councillor Wang Yi, the Chinese government's top diplomat, said the talks about trade frictions had been extremely positive and constructive, helping reach a consensus that worked for both China and the United States. Xi and Trump had "deep exchanges in a friendly and candid atmosphere", setting the direction for an appropriate resolution to the problems between the two countries, Wang said, in a statement carried on the foreign ministry's website. "The two sides agreed to jointly promote Sino-US relations based on coordination, cooperation and stability, and promote exchanges and cooperation in various fields in the two countries to achieve even more results," he added. "The discussions on economic and trade issues between the two sides were very positive and constructive, and reached a principled consensus." That consensus included preventing trade frictions from spreading, returning to dialogue to resolve issues, and a joint goal of cooperation to benefit the global economy, Wang said. "All of these help to safeguard China's legitimate interests, and are also in the interests of the United States, and even more are in line with the expectations of the international community," he added. The two countries have hit each other with tit-for-tariffs on goods worth hundreds of billions of dollars in sectors from automobiles to agriculture and energy, stymying trade and redrawing global supply chains. The United States has levied additional duties of between 10 per cent and 25 per cent on $250 billion of Chinese goods this year as punishment for what it calls China's unfair trade practices. China has responded with its own tariffs. But as part of the truce agreed to by Xi and Trump, the United States will not raise tariffs further on Jan. 1, so further talks can take place. Wang said the facts will prove that the common interests between China and the United States are greater than our differences, and cooperation needs to be greater than friction. However, he offered no new details on what China had agreed to with the United States.

China hails Trump-Xi summit, but offers no new details

*By:&nbspRichard Holden

It’s not all that often that the semi-annual report titled “US Treasury Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States” is a hotly anticipated document. But against the backdrop of the Trump administration’s views on trade, it was this week.

The report was prepared by seasoned folks at Treasury, yet it has the fingerprints of the administration and its mercantilist views all over it.

Early on the report states: “The global economy accelerated in 2017 to its fastest pace of growth since the post-crisis rebound in 2011. The broad-based strengthening of growth was led by the United States, where domestic demand growth averaged 3 percent over the last three quarters of the year, and by a synchronized expansion in Europe…Notwithstanding the pick-up in global growth, the U.S. trade deficit widened in 2017…

The Administration remains deeply concerned by the significant trade imbalances in the global economy, and is working actively across a broad range of areas to help ensure that trade expands in a way that is fair and reciprocal.”

“Fair and reciprocal”. Well that sounds nice. But US trade is fair and reciprocal. Imports from China allow the US to allocate its resources to what it does relatively more efficiently – make fewer t-shirts, produce more iMacs, iPhones and Apple watches, for example.

President Trump has long thought – mistakenly, mind you – that trade is a zero-sum game and that bilateral trade deficits are evidence of a “bad deal”. That’s flat-out wrong. But given the president’s famously short attention span, there was some hope those views wouldn’t affect policy too much.

Unfortunately, he appointed Peter Navarro as Director of the White House National Trade Council. Navarro thinks if trade deficits go down, economic output must rise – a conclusion that is false as a matter of logic. It’s distressing that Navarro doesn’t understand the principle of comparative advantage, or even how the national accounts work in that exports add to GDP, but imports leave it unchanged.

As a brief aside, Navarro is a self-described “heterodox economist”. Those folks in Australia who wear that moniker with pride would do well to reflect on how one of their intellectual fellow travellers is complicit in attacking the living standards of not only the poorest people in the US but also in China.

Speaking of China, figures released this week showed that China’s GDP grew a little faster than expected, expanding 6.8 per cent in the first quarter of 2018. This was largely due to strong consumer demand (which accounted for roughly 80 per cent of that growth), but also strong exports and a healthy construction sector. Indeed, Chinese retail sales rose 10.1 per cent for the 12 months to March, exceeding both their recent pace and market expectations.

Given time lags and implementation issues, the recent tit-for-tat tariffs between the US and China have yet to take effect – so next quarter’s numbers will be the really interesting ones to focus on. In fact, Chinese exports to the US were up 14.8 per cent on an annualised basis, suggesting that exporters may have shipped goods early in a bid to beat the tariffs. That “pipeline filling” could result in a significant drop next quarter.

In the US, retail sales figures for March showed positive signs. Commerce Department data showed retail sales up 0.6 per cent in March, a bounce back from previous disappointing monthly figures in 2018. Importantly, bellwether categories like cars and appliances were up strongly – a sign of consumer confidence.

Residential construction in the US was also strong, with housing starts up 1.9 per cent to 1.32 million at an annualised rate, compared to market expectations of 1.27 million. This was driven, however, by so-called “multifamily” construction, which is essentially apartments. As in Australia, that is a volatile category month to month. It was up strongly but had been down 10.2 per cent in February. Single-family construction fell 5.5 per cent, the largest decline in seven years. All in all, a mixed bag.

In Australia, fewer jobs were created in March than expected, with unemployment steady at 5.5 per cent, seasonally adjusted. This is still far too high, and with the participation rate picking up it could head higher, rather than lower.

The RBA released minutes of its most recent board meeting.

The most interesting part was the discussion of the financial stability of Australian households. The minutes noted: “Risks remained from the high level of household debt and the growth of riskier lending in earlier years, but regulatory measures had helped to contain the build-up of risks.”

They added that while household debt had outpaced income in recent years, net household wealth was also growing, with housing and financial assets of Australian households exceeding borrowing.

“Members noted, however, that this was not reflective of the financial positions of all individual households. Nevertheless, measures of household financial stress did not indicate a high level of financial stress at present.” (emphasis added).

It’s that italicised part that is important. Just because on average households might have their noses above water doesn’t mean significant problems don’t loom.

It’s the marginal household or borrower that matters and can drive financial problems. Think sub-prime in the US. Average borrowers in California or Massachusetts or New York were fine. But the marginal borrowers were not, and it was their borrowing behaviour (and the behaviour of those who lent to them) that triggered the financial crisis. Surely the RBA understands that, using this to inform its approach to macroprudential regulation?

*Richard Holden, Professor of Economics and PLuS Alliance Fellow, UNSW

(This article was originally published on <a href="http://theconversation.com">The Conversation</a>. Read the <a href="https://theconversation.com/vital-signs-the-calm-before-the-storm-in-us-china-trade-95149">original article</a>.)

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

Given time lags and implementation issues, the recent tit-for-tat tariffs between the US and China have yet to take effect – so next quarter’s numbers will be the really interesting ones to focus on

*By: Richard Holden It’s not all that often that the semi-annual report titled “US Treasury Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States” is a hotly anticipated document. But against the backdrop of the Trump administration’s views on trade, it was this week. The report was prepared by seasoned folks at Treasury, yet it has the fingerprints of the administration and its mercantilist views all over it. Early on the report states: “The global economy accelerated in 2017 to its fastest pace of growth since the post-crisis rebound in 2011. The broad-based strengthening of growth was led by the United States, where domestic demand growth averaged 3 percent over the last three quarters of the year, and by a synchronized expansion in Europe…Notwithstanding the pick-up in global growth, the U.S. trade deficit widened in 2017… The Administration remains deeply concerned by the significant trade imbalances in the global economy, and is working actively across a broad range of areas to help ensure that trade expands in a way that is fair and reciprocal.” “Fair and reciprocal”. Well that sounds nice. But US trade is fair and reciprocal. Imports from China allow the US to allocate its resources to what it does relatively more efficiently – make fewer t-shirts, produce more iMacs, iPhones and Apple watches, for example. President Trump has long thought – mistakenly, mind you – that trade is a zero-sum game and that bilateral trade deficits are evidence of a “bad deal”. That’s flat-out wrong. But given the president’s famously short attention span, there was some hope those views wouldn’t affect policy too much. Unfortunately, he appointed Peter Navarro as Director of the White House National Trade Council. Navarro thinks if trade deficits go down, economic output must rise – a conclusion that is false as a matter of logic. It’s distressing that Navarro doesn’t understand the principle of comparative advantage, or even how the national accounts work in that exports add to GDP, but imports leave it unchanged. As a brief aside, Navarro is a self-described “heterodox economist”. Those folks in Australia who wear that moniker with pride would do well to reflect on how one of their intellectual fellow travellers is complicit in attacking the living standards of not only the poorest people in the US but also in China. Speaking of China, figures released this week showed that China’s GDP grew a little faster than expected, expanding 6.8 per cent in the first quarter of 2018. This was largely due to strong consumer demand (which accounted for roughly 80 per cent of that growth), but also strong exports and a healthy construction sector. Indeed, Chinese retail sales rose 10.1 per cent for the 12 months to March, exceeding both their recent pace and market expectations. Given time lags and implementation issues, the recent tit-for-tat tariffs between the US and China have yet to take effect – so next quarter’s numbers will be the really interesting ones to focus on. In fact, Chinese exports to the US were up 14.8 per cent on an annualised basis, suggesting that exporters may have shipped goods early in a bid to beat the tariffs. That “pipeline filling” could result in a significant drop next quarter. In the US, retail sales figures for March showed positive signs. Commerce Department data showed retail sales up 0.6 per cent in March, a bounce back from previous disappointing monthly figures in 2018. Importantly, bellwether categories like cars and appliances were up strongly – a sign of consumer confidence. Residential construction in the US was also strong, with housing starts up 1.9 per cent to 1.32 million at an annualised rate, compared to market expectations of 1.27 million. This was driven, however, by so-called “multifamily” construction, which is essentially apartments. As in Australia, that is a volatile category month to month. It was up strongly but had been down 10.2 per cent in February. Single-family construction fell 5.5 per cent, the largest decline in seven years. All in all, a mixed bag. In Australia, fewer jobs were created in March than expected, with unemployment steady at 5.5 per cent, seasonally adjusted. This is still far too high, and with the participation rate picking up it could head higher, rather than lower. The RBA released minutes of its most recent board meeting. The most interesting part was the discussion of the financial stability of Australian households. The minutes noted: “Risks remained from the high level of household debt and the growth of riskier lending in earlier years, but regulatory measures had helped to contain the build-up of risks.” They added that while household debt had outpaced income in recent years, net household wealth was also growing, with housing and financial assets of Australian households exceeding borrowing. “Members noted, however, that this was not reflective of the financial positions of all individual households. Nevertheless, measures of household financial stress did not indicate a high level of financial stress at present.” (emphasis added). It’s that italicised part that is important. Just because on average households might have their noses above water doesn’t mean significant problems don’t loom. It’s the marginal household or borrower that matters and can drive financial problems. Think sub-prime in the US. Average borrowers in California or Massachusetts or New York were fine. But the marginal borrowers were not, and it was their borrowing behaviour (and the behaviour of those who lent to them) that triggered the financial crisis. Surely the RBA understands that, using this to inform its approach to macroprudential regulation? *Richard Holden, Professor of Economics and PLuS Alliance Fellow, UNSW (This article was originally published on The Conversation. Read the original article.) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

Opinion: The calm before the storm in US-China trade

President Donald Trump on Wednesday said the United States is not in a trade war with China, as both sides shake global markets with tit-for-tat actions.

"We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the US," Trump said in a morning tweet.&nbsp;

"Now we have a Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion. We cannot let this continue!"

Trump said the US&nbsp;cannot let its trade deficit with China continue.&nbsp;

The comments come after China unveiled plans to <a href="http://www.wionews.com/world/china-retaliates-with-tariff-hike-on-50-billion-of-us-goods-including-soybeans-aircraft-autos-128279">slap major US exports</a> worth $50 billion -- including soybeans, cars and small airplanes -- with retaliatory tariffs.&nbsp;

The Chinese action was, in turn, in response to the Trump administration's own $50-billion list of Chinese products that face US tariffs over Beijing's alleged theft of intellectual property and technology.

The effective start date for China's new tariffs will be revealed later, although China's Ministry of Commerce said the charges are designed to target up to $50 billion in US&nbsp;products annually. The 25 percent levy on US&nbsp;imports includes products such as soybeans, cars and whiskey, Beijing said.

The last month has seen the mercurial Republican leader rattle markets in announcing punishing new tariffs on exports from major trading partners, against warnings from industry groups and members of his own party.

The comments come after China unveiled plans to slap major US exports worth $50 billion -- including soybeans, cars and small airplanes -- with retaliatory tariffs

President Donald Trump on Wednesday said the United States is not in a trade war with China, as both sides shake global markets with tit-for-tat actions. "We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the US," Trump said in a morning tweet. "Now we have a Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion. We cannot let this continue!" Trump said the US cannot let its trade deficit with China continue. The comments come after China unveiled plans to slap major US exports worth $50 billion -- including soybeans, cars and small airplanes -- with retaliatory tariffs. The Chinese action was, in turn, in response to the Trump administration's own $50-billion list of Chinese products that face US tariffs over Beijing's alleged theft of intellectual property and technology. The effective start date for China's new tariffs will be revealed later, although China's Ministry of Commerce said the charges are designed to target up to $50 billion in US products annually. The 25 percent levy on US imports includes products such as soybeans, cars and whiskey, Beijing said. The last month has seen the mercurial Republican leader rattle markets in announcing punishing new tariffs on exports from major trading partners, against warnings from industry groups and members of his own party.

'Not in a trade war with China,' says Trump

China will take counter-measures of the "same proportion" and scale if the United States imposes further tariffs on Chinese goods, China's ambassador to Washington said, amid growing fears of an impending trade war.

Cui Tiankai made the comments ahead of what is expected to be the announcement this week of US&nbsptariffs on $50 billion to $60 billion in Chinese imports following an investigation under Section 301 of the 1974 US&nbspTrade Act.

"If they do, we will certainly take countermeasures of the same proportion, and the same scale, same intensity," Cui said in an interview posted on the website of China Global Television Network (CGTN) and broadcast on state television on Tuesday.

The US&nbsptariffs are expected to target products benefiting from Beijing's "Made in China 2025" industrial development programme, although it may be more than two months before the import curbs take effect, US&nbspofficials have said.

China on Sunday announced tariffs on $3 billion in imports of US&nbspfood and other goods in response to US&nbsptariffs on imports of aluminium and steel, a skirmish that investors fear is a prelude to a broader trade war.

The Section 301 investigation initiated by US&nbspPresident Donald Trump is focused on accusations of theft of intellectual property and forced technology transfer by China, charges Beijing denies.

Cui said China has been bolstering its protection of intellectual property rights.

"China has been strengthening its efforts and strengthening our legal system on this particular issue, and we are making good progress," he said.

Cui said China has been bolstering its protection of intellectual property rights.

China will take counter-measures of the "same proportion" and scale if the United States imposes further tariffs on Chinese goods, China's ambassador to Washington said, amid growing fears of an impending trade war. Cui Tiankai made the comments ahead of what is expected to be the announcement this week of US&nbsptariffs on $50 billion to $60 billion in Chinese imports following an investigation under Section 301 of the 1974 US&nbspTrade Act. "If they do, we will certainly take countermeasures of the same proportion, and the same scale, same intensity," Cui said in an interview posted on the website of China Global Television Network (CGTN) and broadcast on state television on Tuesday. The US&nbsptariffs are expected to target products benefiting from Beijing's "Made in China 2025" industrial development programme, although it may be more than two months before the import curbs take effect, US&nbspofficials have said. China on Sunday announced tariffs on $3 billion in imports of US&nbspfood and other goods in response to US&nbsptariffs on imports of aluminium and steel, a skirmish that investors fear is a prelude to a broader trade war. The Section 301 investigation initiated by US&nbspPresident Donald Trump is focused on accusations of theft of intellectual property and forced technology transfer by China, charges Beijing denies. Cui said China has been bolstering its protection of intellectual property rights. "China has been strengthening its efforts and strengthening our legal system on this particular issue, and we are making good progress," he said.

Will take counter-measures of same proportion if US imposes further tariffs: China

The benchmark BSE Sensex fell by 130 points today due to profit booking in realty, capital goods, teck, auto and banking stocks due to renewed global trade war fears and losses in European markets.

The 30-share Sensex opened higher at 33,206.99 and advanced to hit a high of 33,281.77 in early trade.

However, it slipped into the negative zone to touch a low of 32,963.31 in afternoon trade as fresh worries appeared after reports that the US President is mulling new sanctions on China.

The barometer finally ended lower by 129.91 points or 0.39 per cent at 33,006.27, ending its two-day gaining streak.

The NSE Nifty closed down by 40.50 points or 0.39 per cent at 10,114.75 as banking stocks dropped. It shuttled between 10,207.85 and 10,105.40 during the day.

&quot;Market started on a positive note on account of less hawkish Fed commentary on CY18 rate hike trajectory and in turn US 10-year yield declined. However, the gains were only short lived due to negative trend in European and other Asian market owing to re-emergence of trade war,&quot; Vinod Nair, Head of Research, Geojit Financial Services Ltd, said.

&quot;Investors are utilising every rally as an opportunity to sell,&quot; he added.

The US Trade Representative (USTR) said America has strong evidence of Beijing violating its commitments on intellectual property and technology transfers, fanning speculation that the White House may announce sanctions against China tomorrow.

China also promised to reply with &quot;necessary measures&quot; to defend its &quot;legitimate rights and interests&quot;.

Equity benchmarks erased early gains after realty, capital goods, teck, auto, PSU, IT, power and bankex counters came under selling pressure, falling up to 1.28 per cent.

Banking stocks again faced the heat largely due to weekly derivatives expiry in the NSE Bank Nifty. SBI, ICICI Bank, PNB, Canara Bank, Axis Bank, Yes Bank, and Bank of Baroda ended with losses up to 2.62 per cent.

Other losers included Wipro, M&amp;M, Maruti Suzuki, Dr Reddy&#39;s, Adani Ports, Infosys, Bajaj Auto, L&amp;T, TCS, Coal India, Bharti Airtel, HDFC, Power Grid, Hero MotoCorp, ITC, Tata Steel and HUL, falling up to 2.32 per cent.

However, ONGC, IndusInd Bank, Tata Motors, RIL, Sun Pharma, Asian Paint and NTPC ended in the positive zone, rising up to 2.45 per cent.

Selling pressure also emerged in the broader markets the BSE small-cap index down by 1.05 per cent and mid-caps fell 0.75 per cent.

Among the BSE sectoral indices, realty fell the most at 1.28 per cent, followed by capital goods (1.07 per cent), teck (0.99 per cent), auto (0.94 per cent), PSU (0.93 per cent), IT (0.91 per cent), infrastructure (0.69 per cent), power (0.66 per cent), bankex (0.66 per cent), healthcare (0.60 per cent), FMCG (0.36 per cent) and oil &amp; gas (0.29 per cent).

However, consumer durables rose by 0.79 per cent and metal 0.37 per cent.

Globally, Asian share markets ended mixed and European bourses opened lower following overnight losses on Wall Street after the US Federal Reserve raised interest rates for the first time this year. The Federal Reserve delivered its sixth interest-rate increase since the end of 2015 and signalled it still expects to deliver two more before the end of the year.

Hong Kong&#39;s Hang Seng fell 1.09 per cent, Shanghai Composite Index shed 0.53 per cent and Singapore down 0.65 per cent, while Japan&#39;s Nikkei was up by 0.99 per cent.

In the Eurozone, Paris CAC 40 fell 1.06 per cent and Frankfurt moved down 1.01 per cent in their early deals. The UK&#39;s FTSE also traded lower 0.53 per cent.

The 30-share Sensex opened higher at 33,206.99 and advanced to hit a high of 33,281.77 in early trade.

The benchmark BSE Sensex fell by 130 points today due to profit booking in realty, capital goods, teck, auto and banking stocks due to renewed global trade war fears and losses in European markets. The 30-share Sensex opened higher at 33,206.99 and advanced to hit a high of 33,281.77 in early trade. However, it slipped into the negative zone to touch a low of 32,963.31 in afternoon trade as fresh worries appeared after reports that the US President is mulling new sanctions on China. The barometer finally ended lower by 129.91 points or 0.39 per cent at 33,006.27, ending its two-day gaining streak. The NSE Nifty closed down by 40.50 points or 0.39 per cent at 10,114.75 as banking stocks dropped. It shuttled between 10,207.85 and 10,105.40 during the day. "Market started on a positive note on account of less hawkish Fed commentary on CY18 rate hike trajectory and in turn US 10-year yield declined. However, the gains were only short lived due to negative trend in European and other Asian market owing to re-emergence of trade war," Vinod Nair, Head of Research, Geojit Financial Services Ltd, said. "Investors are utilising every rally as an opportunity to sell," he added. The US Trade Representative (USTR) said America has strong evidence of Beijing violating its commitments on intellectual property and technology transfers, fanning speculation that the White House may announce sanctions against China tomorrow. China also promised to reply with "necessary measures" to defend its "legitimate rights and interests". Equity benchmarks erased early gains after realty, capital goods, teck, auto, PSU, IT, power and bankex counters came under selling pressure, falling up to 1.28 per cent. Banking stocks again faced the heat largely due to weekly derivatives expiry in the NSE Bank Nifty. SBI, ICICI Bank, PNB, Canara Bank, Axis Bank, Yes Bank, and Bank of Baroda ended with losses up to 2.62 per cent. Other losers included Wipro, M&M, Maruti Suzuki, Dr Reddy's, Adani Ports, Infosys, Bajaj Auto, L&T, TCS, Coal India, Bharti Airtel, HDFC, Power Grid, Hero MotoCorp, ITC, Tata Steel and HUL, falling up to 2.32 per cent. However, ONGC, IndusInd Bank, Tata Motors, RIL, Sun Pharma, Asian Paint and NTPC ended in the positive zone, rising up to 2.45 per cent. Selling pressure also emerged in the broader markets the BSE small-cap index down by 1.05 per cent and mid-caps fell 0.75 per cent. Among the BSE sectoral indices, realty fell the most at 1.28 per cent, followed by capital goods (1.07 per cent), teck (0.99 per cent), auto (0.94 per cent), PSU (0.93 per cent), IT (0.91 per cent), infrastructure (0.69 per cent), power (0.66 per cent), bankex (0.66 per cent), healthcare (0.60 per cent), FMCG (0.36 per cent) and oil & gas (0.29 per cent). However, consumer durables rose by 0.79 per cent and metal 0.37 per cent. Globally, Asian share markets ended mixed and European bourses opened lower following overnight losses on Wall Street after the US Federal Reserve raised interest rates for the first time this year. The Federal Reserve delivered its sixth interest-rate increase since the end of 2015 and signalled it still expects to deliver two more before the end of the year. Hong Kong's Hang Seng fell 1.09 per cent, Shanghai Composite Index shed 0.53 per cent and Singapore down 0.65 per cent, while Japan's Nikkei was up by 0.99 per cent. In the Eurozone, Paris CAC 40 fell 1.06 per cent and Frankfurt moved down 1.01 per cent in their early deals. The UK's FTSE also traded lower 0.53 per cent.

Sensex falls 130 points at close on profit booking, trade war fears

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