Month: July 2018

What started as a simple desire to be able to provide for her children has turned into a multimillion-dollar business for Tammie Umbel of Dulles, Virginia. She not only runs a cosmetics company but home-schools her 14 children — and says she still finds time for herself. Leysa Bakalets has her story.
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Mexican President-elect Andres Manuel Lopez Obrador will seek to end the country’s massive fuel imports, nearly all from the United States, during

the first three years of his term while also boosting refining at home.

The landslide winner of last Sunday’s election told reporters Saturday morning before attending private meetings with members of his future cabinet that he would also prioritize increasing domestic production of crude oil, which has fallen sharply for years.

“The objective is that we stop buying foreign gasoline by the halfway point of my six-year term,” said Lopez Obrador, repeating a position he and his senior energy adviser staked out during the campaign.

“We are going to immediately revive our oil activity, exploration and the drilling of wells so we have crude oil,” he said.

On the campaign trail, the leftist former mayor of Mexico City pitched his plan to wean the country off foreign gasoline as a means to increasing domestic production of crude and value-added fuels, not as a trade issue with the United States.

Lopez Obrador also reiterated on Saturday his goal to build either one large or two medium-sized oil refineries during his term, which begins December 1.

While he said the facilities would be built in the Gulf coast states of Tabasco and possibly Campeche, he has been less clear about how the multibillion-dollar refineries would be paid for.

So far this year, Mexico has imported an average of about 590,000 barrels per day (bpd) of gasoline and another 232,000 bpd of diesel.

Foreign gasoline imports have grown by nearly two-thirds, while diesel imports have more than doubled since 2013, the first year of outgoing President Enrique Pena Nieto’s term, according to data from national oil company Pemex.

Far below capacity

Meanwhile, the six oil refineries in Mexico owned and operated by Pemex are producing at far below their capacity, or an average of 220,000 bpd of gasoline so far this year.

Gasoline production at the facilities is down 50 percent compared with 2013, and domestic gasoline output accounts for only slightly more than a quarter of national demand from the country’s motorists.

During the campaign, the two-time presidential runner-up also promised to strengthen Pemex. He also was sharply critical of a 2013 constitutional energy overhaul that ended the company’s monopoly and allowed international oil majors to operate fields on their own for the first time in decades.

The overhaul was designed to reverse a 14-year-long oil output slide and has already resulted in competitive auctions that have awarded more than 100 exploration and production contracts to the likes of Royal Dutch Shell and ExxonMobil.

“What’s most important is to resolve the problem of falling crude oil production. We’re extracting very little oil,” said Lopez Obrador.

During the first five months of this year, Mexican crude oil production averaged about 1.9 million bpd, a dramatic drop compared with peak output of nearly 3.4 million bpd in 2004, or 2.5 million bpd in 2013.
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One of the world’s biggest cargo shippers announced Saturday that it was

pulling out of Iran for fear of becoming entangled in U.S. sanctions, and President Hassan Rouhani demanded that European countries to do more to offset the U.S. measures.

The announcement by France’s CMA CGM that it was quitting Iran dealt a blow to Tehran’s efforts to persuade European countries to keep their companies operating in Iran despite the threat of new American sanctions.

Iran says it needs more help from Europe to keep alive an agreement with world powers to curb its nuclear program. U.S. President Donald Trump abandoned the agreement in May and has announced new sanctions on Tehran. Washington has ordered all countries to stop buying Iranian oil by November and foreign firms to stop doing business there or face U.S. blacklists.

European powers that still support the nuclear deal, officially called the Joint Comprehensive Plan of Action, say they will do more to encourage their businesses to remain engaged with Iran. But the prospect of being banned in the United States appears to be enough to persuade European companies to keep out.

Foreign ministers from the five remaining signatory countries to the nuclear deal — Britain, France, Germany, China and Russia — offered a package of economic measures to Iran on Friday, but Tehran said they did not go far enough.

“European countries have the political will to maintain economic ties with Iran based on the JCPOA, but they need to take practical measures within the time limit,” Rouhani said Saturday on his official website.

‘We apply the rules’

CMA CGM, which according to the United Nations operates the world’s third-largest container shipping fleet with more than 11 percent of global capacity, said it would halt service for Iran because it did not want to fall afoul of the rules, given its large presence in the United States.

“Due to the Trump administration, we have decided to end our service for Iran,” CMA CGM chief Rodolphe Saade said during an economic conference in the southern French city of Aix-en-Provence. “Our Chinese competitors are hesitating a little, so maybe they have a different relationship with Trump, but we apply the rules.”

The shipping market leader, A.P. Moller-Maersk of Denmark, already announced in May it was pulling out of Iran.

In June, French carmaker PSA Group suspended its joint ventures in Iran, and French oil major Total said it held little hope of receiving a U.S. waiver to

continue with a multibillion-dollar gas project in the country.

Total’s CEO Patrick Pouyanne said Saturday that the company had been left with little choice. “If we continued to work in Iran, Total would not be able to

access the U.S. financial world,” he told RTL radio. “Our duty

is to protect the company. So we have to leave Iran.”

Iranian Oil Minister Bijan Zanganeh called the tension between Tehran and Washington a “trade war.” He said it had not led to changes in Iranian oil production and exports.

He also echoed Rouhani’s remarks that the European package did not meet all economic demands of Iran.

“I have not seen the package personally, but our colleagues in the Foreign Ministry who have seen it were not happy with its details,” Zanganeh was quoted as saying by the Tasnim news agency.

Some Iranian officials have threatened to block oil exports from the Gulf in retaliation for U.S. efforts to reduce Iranian oil sales to zero. Rouhani himself made a veiled threat along those lines in recent days, saying there could be no oil exports from the region if Iran’s were shut.
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The opening shots have been fired in what some fear may be the start of a major trade war. China retaliating at midnight Friday with equivalent tariffs on U.S. goods after the U.S. followed through on its threat to raise tariffs on $34 billion worth of Chinese imports. All this as the U.S. job market posted solid gains last month. Mil Arcega has more.
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Amid the very real hardships Syrian refugees face, little has been said about another major health and humanitarian issue: What to do with the massive accumulations of trash and waste. But one refugee camp in Jordan is doing something about it. With the help of an international nonprofit group, the residents of the Zaatari Refugee Camp launched a recycling program to eliminate the trash left by the tens of thousands of refugees who live there … and provide jobs. Arash Arabasadi reports.
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The political squabbling between China and the United States over trade and other issues affect the world’s two largest economies through a variety of mechanisms with unpredictable results. 

For example, prices of stock in both nations have been hurt as some shareholders sold their shares and other investors were reluctant to buy shares of companies that might be hurt by rising tariffs. These actions cut demand for certain stocks, making prices fall. Shareholders are part-owners of companies who hope to profit when the company prospers and grows. Rising tariff costs make growth less likely, and that hurts investor confidence.

World Trade Organization spokesman Dan Pruzin told Reuters that worries about trade are already being felt.

“Companies are hesitating to invest, markets are getting jittery, and some prices are rising,” he said, adding that further escalation could hurt “jobs and growth,” sending “economic shock waves” around the world. 

Confidence

Trade squabbles can hurt business confidence, because managers are less willing to take the risk of buying new machines, building new factories or hiring new workers. Less expansion means less demand for equipment, and a smaller workforce means fewer people have the money to rent apartments, buy food or finance a new car. Less demand for goods and services ripples through the economy and sparks less economic activity and less growth.

​Agriculture

U.S. farmers are another group feeling the effects of this trade dispute, as Beijing raises tariffs on U.S. soybeans. Higher tariffs raise food costs for Chinese consumers, so demand falls for U.S. farm products, a key American export. Anticipating slackening demand for U.S. soybeans, market prices dropped even before the tariffs were imposed. That means U.S. farmers can no longer afford to buy as many tractors and hire as many workers. Fewer workers mean fewer people with the money to buy products, which slows economic growth in farm states. 

Consumers

Meantime, new U.S. tariffs hit Chinese-made vehicles, aircraft, boats, engines, heavy equipment and many other industrial products. China’s Xinhua news agency said new U.S. tariffs are an effort to “bully” Beijing. The agency says the new tariffs violate international trade rules, and will hurt many companies and “ordinary consumers.” 

Experts say Washington tried to avoid tariffs on China that would directly raise costs to U.S. consumers. Economists say increasing taxes on products that help create consumer goods will still raise costs to consumers, fuel inflation and hurt demand. 

​Currency

PNC Bank Senior Economist Bill Adams, an expert on China’s economy, says one step China could take, but has not, would be to let its currency value drop. A weaker currency would mean Chinese-made products are cheaper and more competitive on international markets. Adams says China has taken steps recently to prop up the value of its currency. While a weaker currency helps exports, it can fuel inflation by raising the costs of imported products like oil or other raw materials needed by Chinese companies.

In the meantime, uncertainty fueled by trade disputes puts upward pressure on the value of the U.S. dollar, because investors see the United States as a safe haven in times of economic strife. But a stronger, more expensive dollar means U.S. products are more expensive for foreign customers, which hurts American exports and economic growth. 

All of this means it is hard to predict how this trade dispute will play out. Experts say it will depend in large measure on how many times the two sides raise tariffs in response to each other, how high the tariffs go, and how long the bickering lasts.

William Zarit, the chairman of the American Chamber of Commerce in China, writes that this is the biggest trade dispute between China and the United States in 40 years.

The two sides must work something out, Zarit says, because a “strong bilateral trade and investment relationship is too important to both countries for it to be mired in verbal and trade remedy attacks and counterattacks.”

He says a new agreement would “significantly benefit both economies.”
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So is this what a trade war looks like?

The Trump administration and China’s leadership have imposed tens of billions of dollars in tariffs on each other’s goods. President Donald Trump has proposed slapping duties on, all told, up to $550 billion if China keeps retaliating and doesn’t cave in to U.S. demands to scale back its aggressive industrial policies.

Until the past couple of years, tariffs had been losing favor as a tool of national trade policy. They were largely a relic of 19th and early 20th centuries that most experts viewed as mutually harmful to all nations involved. But Trump has restored tariffs to a prominent place in his self-described America First approach.

Trump enraged such U.S. allies as Canada, Mexico and the European Union this spring by slapping tariffs on their steel and aluminum shipments to the United States. The tariffs have been in place on most other countries since March.

The president has also asked the U.S. Commerce Department to look into imposing tariffs on imported cars, trucks and auto parts, arguing that they pose a threat to U.S. national security.

Here is a look at what tariffs are, how they work, how they’ve been used in the past and what to expect now: 

Are we in a trade war?

Economists have no set definition of a trade war. But with the world’s two largest economies now slapping potentially punishing tariffs on each other, it looks as if a trade war has arrived. The value of goods that Trump has threatened to hit with tariffs exceeds the $506 billion in goods that China exported to the United States last year. 

It’s not uncommon for countries, even close allies, to fight over trade in specific products. The United States and Canada, for example, have squabbled for decades over softwood lumber. 

But the U.S. and China are fighting over much broader issues, like China’s requirements that American companies share advanced technology to access China’s market, and the overall U.S. trade deficit with China. So far, neither side has shown any sign of bending.

​So what are tariffs?

Tariffs are a tax on imports. They’re typically charged as a percentage of the transaction price that a buyer pays a foreign seller. Say an American retailer buys 100 garden umbrellas from China for $5 apiece, or $500. The U.S. tariff rate for the umbrellas is 6.5 percent. The retailer would have to pay a $32.50 tariff on the shipment, raising the total price from $500 to $532.50.

In the United States, tariffs — also called duties or levies — are collected by Customs and Border Protection agents at 328 ports of entry across the country. Proceeds go to the Treasury. The tariff rates are published by the U.S. International Trade Commission in the Harmonized Tariff Schedule, which lists U.S. tariffs on everything from dried plantains (1.4 percent) to parachutes (3 percent).

Sometimes, the U.S. will impose additional duties on foreign imports that it determines are being sold at unfairly low prices or are being supported by foreign government subsidies. 

Do other countries have higher tariffs than the United States?

Most key U.S. trading partners do not have significantly higher average tariffs. According to an analysis by Greg Daco at Oxford Economics, U.S. tariffs on imported goods, adjusted for trade volumes, average 2.4 percent, above Japan’s 2 percent and just below the 3 percent for the European Union and 3.1 percent for Canada.

The comparable figures for Mexico and China are higher. Both have higher duties that top 4 percent.

Trump has complained about the 270 percent duty that Canada imposes on dairy products. But the United States has its own ultra-high tariffs — 168 percent on peanuts and 350 percent on tobacco.

​What are tariffs supposed to accomplish?

Two things: Raise government revenue and protect domestic industries from foreign competition. Before the establishment of the federal income tax in 1913, tariffs were a big money-raiser for the U.S. government. From 1790 to 1860, for example, they produced 90 percent of federal revenue, according to Clashing Over Commerce: A History of US Trade Policy by Douglas Irwin, an economist at Dartmouth College. By contrast, last year tariffs accounted for only about 1 percent of federal revenue.

In the fiscal year that ended last September 30, the U.S. government collected $34.6 billion in customs duties and fees. The White House Office of Management and Budget expects tariffs to fetch $40.4 billion this year.

Tariffs also are meant to increase the price of imports or to punish foreign countries for committing unfair trade practices, like subsidizing their exporters and dumping their products at unfairly low prices. Tariffs discourage imports by making them more expensive. They also reduce competitive pressure on domestic competitors and can allow them to raise prices.

Tariffs fell out of favor as global trade expanded after World War II.

The formation of the World Trade Organization and the advent of trade deals like the North American Free Trade Agreement among the U.S., Mexico and Canada reduced or eliminated tariffs. 

​Why are tariffs making a comeback?

After years of trade agreements that bound the countries of the world more closely and erased restrictions on trade, a populist backlash has grown against globalization. This was evident in Trump’s 2016 election and the British vote that year to leave the European Union — both surprise setbacks for the free-trade establishment.

Critics note that big corporations in rich countries exploited looser rules to move factories to China and other low-wage countries, then shipped goods back to their wealthy home countries while paying low tariffs or none at all. Since China joined the WTO in 2001, the United States has shed 3.1 million factory jobs, though many economists attribute much of that loss not just to trade but to robots and other technologies that replace human workers.

Trump campaigned on a pledge to rewrite trade agreements and crack down on China, Mexico and other countries. He blames what he calls their abusive trade policies for America’s persistent trade deficits — $566 billion last year. Most economists, by contrast, say the deficit simply reflects the reality that the United States spends more than it saves. By imposing tariffs, he is beginning to turn his hard-line campaign rhetoric into action.

Are tariffs wise?

Most economists — Trump trade adviser Peter Navarro is a notable exception — say no. The tariffs drive up the cost of imports. And by reducing competitive pressure, they give U.S. producers leeway to raise their prices, too. That’s good for those producers, but bad for almost everyone else.

Rising costs especially hurt consumers and companies that rely on imported components. Some U.S. companies that buy steel are complaining that Trump’s tariffs put them at a competitive disadvantage. Their foreign rivals can buy steel more cheaply and offer their products at lower prices.

More broadly, economists say trade restrictions make the economy less efficient. Facing less competition from abroad, domestic companies lose the incentive to increase efficiency or to focus on what they do best. 
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U.S. employers kept up a brisk hiring pace in June by adding 213,000 jobs, a sign of confidence in the economy despite the start of a potentially punishing trade war with China.

The job growth wasn’t enough to keep the unemployment rate from rising from 3.8 percent to 4 percent, the government said Friday. But the jobless rate rose for an encouraging reason: More people felt it was a good time to begin looking for a job, though not all of them immediately found one.

The growing optimism that people can find work suggested that the 9-year old U.S. economic expansion — the second-longest on record — has the momentum to keep chugging along. Yet its path ahead is uncertain. Just hours before the monthly jobs report was released, the Trump administration imposed taxes on $34 billion in Chinese imports, and Beijing hit back with tariffs on the same amount of U.S. goods.

“The tariffs jumble things about what we should expect to see in the next few months,” said Cathy Barrera, chief economist at ZipRecruiter, the online jobs marketplace.

Some companies are likely to respond to the tariffs by putting their hiring plans on hold until the trade picture becomes clearer.

Major U.S. stock indexes were mostly higher in early trading Friday after the jobs report was issued, keeping the market on track for a weekly gain after two weeks of losses.

The June jobs data showed an economy that may be on the cusp of producing stronger pay growth, something that could be disrupted if additional tariffs are imposed. Trump has suggested that more than $500 billion worth of Chinese imports could be taxed in his drive to force Beijing to reform its trade policies, which he insists have unfairly victimized the United States.

Average hourly pay rose just 2.7 percent in June from 12 months earlier. That relatively modest increases means that, after adjusting for inflation, overall wages remain nearly flat. But the average was skewed downward in June because the influx of jobseekers was due mainly to those with only a high school education or less, who are generally paid lower wages,

The ranks of unemployed people seeking jobs jumped by 499,000 in June, which caused the unemployment rate to rise from its previous 18 year-low. With 93 straight months of job growth — a historical record — many employers have said they’re feeling pressure to raise wages. But significant pay gains have yet to emerge in the economic data.

Manufacturers added 36,000 jobs last month; the education and health sector added 54,000. But retailers shed 21,600 jobs, with the losses concentrated at general merchandise stores.

In its report Friday, the government revised up its estimate of job growth in May and April by a combined 37,000. Over the past three months, the economy has produced a robust average monthly job gain of 211,000.

The broader U.S. economy appears sturdy. Economists are forecasting that economic growth accelerated to an annual pace of roughly 4 percent during the April-June quarter, about double the previous quarter’s pace.

Signs of strength have helped bolster hiring despite the difficulty many employers say they’re having in finding enough qualified workers to fill jobs.

Manufacturers and services firms have said in recent surveys that their business is improving despite anxiety about the tariff showdown between the United States and China. Housing starts have climbed 11 percent so far this year. Retail sales jumped a strong 0.8 percent in May in a sign that consumers feel secure enough to spend.

Though economic growth appears to be solid, the gains have been spread unevenly. President Donald Trump’s tax cuts have provided a dose of stimulus this year, but the benefits have been tilted significantly toward wealthy individuals and corporations. Savings from the tax cuts enabled companies in the Standard & Poor’s 500 stock index to buy back a record number of shares in the first three months of 2018.

Yet the tax cuts have done little to generate substantial pay growth. Most economists say they still think the low unemployment rate will eventually force more employers to offer higher pay in order to fill jobs.

The economy also faces a substantial threat from the Trump administration’s trade war with China and from other, ongoing trade disputes with U.S. allies, including Canada and Europe. Any escalation in the conflict with China could disrupt hiring as companies grapple with higher import prices and diminished demand for their exports. On Thursday, Trump floated the prospect of imposing tariffs on more than $500 billion in Chinese imports.

The Trump administration has also applied tariffs on steel and aluminum from allies like Canada and Mexico and has threatened to abandon the North American Free Trade Agreement with those two countries. Trump has also spoken about slapping tariffs on imported cars, trucks and auto parts, which General Motors has warned could hurt the U.S. auto industry and drive up car prices.

Automakers added 12,000 jobs in June, but the tariffs could weigh on that industry’s job growth in the coming months.
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