Newsletter: Trump Pushes Back Against China Hard-Liners
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Taking Care of Business
A broad push by Trump administration hard-liners to stem the flow of high-tech exports to China hit a hurdle Tuesday: President Trump himself. In a series of tweets, Mr. Trump denounced efforts promoted by some within the White House and Commerce Department to halt the export of controlled technologies—including jet engines and semiconductors—to China, out of concern the products could be pirated and used to undermine U.S. commercial advantage in those sectors. “We don’t want to make it impossible to do business with us,” Mr. Trump tweeted. “That will only mean that orders will go to someplace else.” The tweets followed a Wall Street Journal report over the weekend that officials within the administration were pushing to halt shipments of jet engines co-produced by General Electric to China. Until Tuesday, Mr. Trump hadn’t weighed in on the matter, Ted Mann reports.
WHAT TO WATCH TODAY
The U.S. producer-price index for January is expected to rise 0.1% from the prior month. (8:30 a.m. ET)
U.S. housing starts for January are expected to fall to an annual pace of 1.42 million from 1.608 million a month earlier. (8:30 a.m. ET)
The Federal Reserve releases minutes from its Jan. 28-29 meeting at 2 p.m. ET. Here’s what to watch.
Fed speakers: Atlanta’s Raphael Bostic on the economic outlook at 8:10 a.m. ET, Minneapolis’s Neel Kashkari in Mankato, Minn., at 11:45 a.m. ET, Dallas’s Robert Kaplan at an Urban Land Institute of North Texas event at 1:20 p.m. ET, and Richmond’s Thomas Barkin on monetary policy frameworks at 4:30 p.m. ET.
TOP STORIES
The Sun’ll Come Out Tomorrow
The U.S. transportation industry is in a tailspin. The Cass Freight Index, a measure of freight volumes and expenditures, posted its biggest year-over-year decline since 2009 in January. Shipment volumes dropped 9.4% from a year earlier and expenditures sank 8%. “Even before the coronavirus issues have any impact on the U.S. transportation market, the freight market is weak,” Stifel analyst David Ross said of the latest numbers. The good news: The second quarter of the year could see a modest rebound if the coronavirus situation is contained and U.S. companies start to rebuild inventories.
Blue-collar blues. The transportation industry’s rough patch is reflected in recent hiring data: Trucking employment has just about flatlined. Manufacturers have also been struggling, and factories shed jobs last month.
Recipe for Growth
Even with recent hiring stumbles, the Conference Board warns that the blue-collar labor force is running dry and productivity growth in blue-collar industries is languishing. That’s not a recipe for strong economic growth. “We find that it would take a virtual miracle to maintain the growth rate in standard of living we have historically enjoyed, measured by GDP per capita, in the coming decade. Even to achieve a humble goal of raising GDP per capita by 1.5% annually over the next decade, the U.S. would need to either significantly improve its labor productivity growth and labor force participation or introduce more immigrants into the country’s labor supply,” Conference Board economist Gad Levanon and colleagues write in a new report.
What’s happening? Production industries have added workers over the past couple of years but aren’t getting more out of them. Meanwhile, baby boomers are retiring, the working-age population of non-college graduates is shrinking and an elevated share of potential workers is sitting on the sidelines: “The decline in the need to support a family and the greater ability to draw income support from relatives significantly reduces the incentives for young men to participate in the labor force.”
It’s not all bad. Wages are rising and employers are expanding recruitment efforts to once-neglected groups. “U.S. blue-collar and manual services workers will continue to experience improved job satisfaction, as wages rise and wage inequality continues to shrink,” the research group said in its report.
Coronavirus Update
Just as the U.S.-China trade war was starting to fade, the coronavirus crisis is exposing how heavily dependent foreign companies are on China for their production and business. Apple became the first major American company to say it won’t meet its revenue projections for the current quarter because of the coronavirus outbreak. Bernstein analyst Toni Sacconaghi said said HP, Dell Technologies and Hewlett Packard are among tech hardware companies to watch considering their exposure to China based on their supply chain and how much business they do in the country, Yoko Kubota reports.
The world is closing its doors to China. Chinese people take 150 million international trips a year, whether to cut business deals or study abroad. But canceled flights and quarantines are thwarting China’s ambitions to put the country at the center of commerce and culture, James T. Areddy reports.
Japan’s Exports Tumble
Japan’s exports fell in January from a year earlier for the 14th consecutive month. Exports “are expected to remain weak as the supply chain has been interrupted by the novel coronavirus and growing uncertainty over the global economy,” said Masato Koike, an economist at Dai-ichi Life Research Institute.
WHAT ELSE WE’RE READING
Where does foreign aid end up? “We document that aid disbursements to the most aid-dependent countries coincide with significant increases in deposits held in offshore financial centers known for bank secrecy and private wealth management. Aid capture by ruling politicians, bureaucrats and their cronies is consistent with the totality of observed patterns: it can explain why aid does not trigger flows to non-havens, why the capital outflows occur precisely in the same quarter as the aid inflows and why the estimated effects are larger for more corrupt countries. … Our estimates suggest a leakage rate of around 7.5% for the average highly aid-dependent country,” Jørgen Juel Andersen, Niels Johannesen and Bob Rijkers write in a World Bank working paper.
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