Business

Tesla Inc Chief Executive Officer Elon Musk on Tuesday landed a deal with Chinese authorities to build a new auto plant in Shanghai, its first factory outside the United States, that would double the size of the electric car maker’s global manufacturing.

The deal was announced as Tesla raised prices on U.S.-made vehicles it sells in China to offset the cost of new tariffs imposed by the Chinese government in retaliation for U.S. President Donald Trump’s move to slap heavier duties on Chinese goods.

Musk was in Shanghai Tuesday, and the Shanghai government in a statement said it welcomed Tesla’s move to invest not only in a new factory in the city, a center of the Chinese auto industry, but in research and development, as well. China has long pushed to capture more of the talent and capital invested by global automakers in advanced electric vehicle technology.

Tesla plans to producing the first cars about two years after construction begins on its Shanghai factory, ramping up to as many as 500,000 vehicles a year about two to three years after that, the company said.

That would make Tesla’s Shanghai plant large by auto industry standards, where most factories are tooled to build 200,000 to 300,000 vehicles a year, and roughly equivalent to the planned annual production at Tesla’s plant in Fremont, California.

Tesla shares rose 1.5 percent in early U.S. trading, even as some analysts questioned where the money-losing company will get the capital required to build and staff such a large plant.

Musk has said Tesla will be cash-flow positive this year.

Analysts have predicted the company will raise capital to fund a list of new projects, including launching an electric semi truck, a pickup truck, a compact SUV and new battery and vehicle production facilities that Musk has proposed for China and Europe.

“I am sure that Tesla needs fresh money at the latest next year,” said Frank Schwope, an analyst with NORD/LB.

In its statement, the Shanghai government suggested it could help with some of the capital costs. “The Shanghai municipal government will fully support the construction of the Tesla factory,” the statement said.

Tuesday’s announcement will not impact U.S. manufacturing operations, which continue to grow, Tesla said.

Musk was talking about building a Chinese factory long before the Trump administration proposed punitive tariffs on Chinese goods. China until recently levied 25-percent tariffs on imported cars, and for decades automakers have been moving to build more vehicles in the markets where they will be sold to neutralize the risk of currency shifts and trade policy

reversals.

China is the largest market for electric vehicles, and most forecasters predict that electric vehicle sales in the country will accelerate rapidly as government regulation drives toward a goal of 100 percent electric vehicles by 2030.

China is the world’s largest auto market overall, with more than 28 million vehicles sold last year, and annual sales are forecast to top 35 million by 2025. That level would be more than double the current U.S. market, where new light vehicle sales run at about 17 million vehicles a year.

Still, the Chinese authorities’ decision to grant Tesla permission to move forward lands as President Trump is fighting to stop U.S. manufacturers from responding to his trade policy by shifting production overseas, as U.S. motorcycle maker Harley-Davidson said it would do last month.

Tesla did not immediately respond to requests for comment.

The signing was held at Shanghai’s Fairmont Peace Hotel but media attendance was limited, a Shanghai government official who declined to give his name told Reuters. Tesla’s Chief Executive Elon Musk attended the signing, according to a Reuters witness.

Bloomberg reported on Monday that Musk will visit Beijing on Wednesday and Thursday.

Tesla has been in protracted negotiations to open its own factory in China to help bolster its position in the country’s fast-growing market for electric cars and to avoid high import tariffs.

Tesla hiked prices in China over the weekend to a level more than 70 percent higher than in the United States amid mounting trade frictions between Washington and Beijing that have seen several U.S. imports, including cars, become subjected to retaliatory tariffs of 25 percent.

Musk had previously criticized China’s tough auto rules for foreign businesses, which would have required it to cede a 50-percent share in the factory. The company was keen to maintain control of its plant and protect its technology.

It registered a new electric car firm in Shanghai in May after China announced that it planned to scrap rules on capping foreign ownership of new-energy vehicle (NEV) ventures by 2022.
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The Cuban government will allow new restaurants, bed-and-breakfasts and transportation businesses by the end of the year, reopening the most vibrant sectors of the private economy after freezing growth for more than a year.

The government is unveiling a set of new regulations Tuesday meant to control the growth of tourism-related private businesses and collect more tax revenue from them. Private restaurants and bed-and-breakfasts boomed after U.S.-Cuba normalization in 2014 prompted rapid growth in tourism to Cuba.

 

Tax evasion and purchase of stolen state materials also boomed in the mostly cash-based private hospitality sector. Among other measures, the new regulations announced Tuesday require private businesses to move all their revenue through state-run bank accounts. Cuba froze new licenses for restaurants, bed-and-breakfasts and other key business in August 2017.
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The Cuban government will allow new restaurants, bed-and-breakfasts and transportation businesses by the end of the year, reopening the most vibrant sectors of the private economy after freezing growth for more than a year.

The government is unveiling a set of new regulations Tuesday meant to control the growth of tourism-related private businesses and collect more tax revenue from them. Private restaurants and bed-and-breakfasts boomed after U.S.-Cuba normalization in 2014 prompted rapid growth in tourism to Cuba.

 

Tax evasion and purchase of stolen state materials also boomed in the mostly cash-based private hospitality sector. Among other measures, the new regulations announced Tuesday require private businesses to move all their revenue through state-run bank accounts. Cuba froze new licenses for restaurants, bed-and-breakfasts and other key business in August 2017.
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BMW Group and the biggest Chinese SUV brand, Great Wall Motor, announced a partnership Tuesday to produce electric MINI vehicles in China as global automakers ramp up development under pressure from Beijing.

The companies said they signed an agreement Monday during an event in Berlin attended by Chinese Premier Li Keqiang and German Chancellor Angela Merkel.

BMW and Great Wall said their venture, Spotlight Automotive Ltd., also will make electrics for the Chinese partner’s brand. Great Wall put total investment in the venture at 5.1 billion yuan ($770 million) and said it is aiming for annual production of 160,000 vehicles.

Automakers are pouring billions of dollars into creating electric models for China, the biggest market for the technology.

Beijing is using access to its market as leverage to induce global automakers to help Chinese brands develop battery and other technology.

Auto brands in China are required to make electric vehicles at least 10 percent of their sales starting next year or buy credits from competitors that exceed their quotas. Later, they face pressure to raise those sales in order to satisfy fuel efficiency requirements that increase annually.

Sales of pure-electric passenger vehicles in China rose 82 percent last year to 468,000, according to an industry group, the China Association of Automobile Manufacturers. That was more than double the U.S. level of just under 200,000.

Other automakers including General Motors Co., Volkswagen AG and Nissan Motor Co. have announced similar plans with Chinese partners to produce dozens of electric models.

Great Wall, headquartered in Baoding, southwest of Beijing, sells more than 1 million SUVs a year.

“With our joint approach, we can quickly scale up production and increase efficiency,” said Klaus Frolich, a BMW board member, in a statement.

MINI’s first battery electric model is due to be produced at its main British factory in Oxford in 2019, according to BMW.

China is BMW’s biggest market. The Munich-based automaker said about 560,000 BMW brand vehicles were delivered to Chinese customers in 2017, more than its next two markets – the United States and Germany – combined.

China was MINI’s fourth-largest market in 2017, with 35,000 vehicles delivered, the company said.

The electrics venture with BMW is an important boost for Great Wall, which industry analysts warned would struggle to satisfy Beijing’s sales quotas due to its fuel-guzzling vehicle lineup and had yet to announce any significant electric plans.
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BMW Group and the biggest Chinese SUV brand, Great Wall Motor, announced a partnership Tuesday to produce electric MINI vehicles in China as global automakers ramp up development under pressure from Beijing.

The companies said they signed an agreement Monday during an event in Berlin attended by Chinese Premier Li Keqiang and German Chancellor Angela Merkel.

BMW and Great Wall said their venture, Spotlight Automotive Ltd., also will make electrics for the Chinese partner’s brand. Great Wall put total investment in the venture at 5.1 billion yuan ($770 million) and said it is aiming for annual production of 160,000 vehicles.

Automakers are pouring billions of dollars into creating electric models for China, the biggest market for the technology.

Beijing is using access to its market as leverage to induce global automakers to help Chinese brands develop battery and other technology.

Auto brands in China are required to make electric vehicles at least 10 percent of their sales starting next year or buy credits from competitors that exceed their quotas. Later, they face pressure to raise those sales in order to satisfy fuel efficiency requirements that increase annually.

Sales of pure-electric passenger vehicles in China rose 82 percent last year to 468,000, according to an industry group, the China Association of Automobile Manufacturers. That was more than double the U.S. level of just under 200,000.

Other automakers including General Motors Co., Volkswagen AG and Nissan Motor Co. have announced similar plans with Chinese partners to produce dozens of electric models.

Great Wall, headquartered in Baoding, southwest of Beijing, sells more than 1 million SUVs a year.

“With our joint approach, we can quickly scale up production and increase efficiency,” said Klaus Frolich, a BMW board member, in a statement.

MINI’s first battery electric model is due to be produced at its main British factory in Oxford in 2019, according to BMW.

China is BMW’s biggest market. The Munich-based automaker said about 560,000 BMW brand vehicles were delivered to Chinese customers in 2017, more than its next two markets – the United States and Germany – combined.

China was MINI’s fourth-largest market in 2017, with 35,000 vehicles delivered, the company said.

The electrics venture with BMW is an important boost for Great Wall, which industry analysts warned would struggle to satisfy Beijing’s sales quotas due to its fuel-guzzling vehicle lineup and had yet to announce any significant electric plans.
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Behind a row of sealed red incubator doors in a new facility in northern China, about 400,000 chicks are hatched every day, part of the rapidly modernizing supply chain in China’s $37 billion egg industry, the world’s biggest.

As China overhauls production of everything from pork to milk and vegetables, farmers raising hens for eggs are also shifting from backyards to factory farms, where modern standardized processes are expected to raise quality and safety.

That’s an important step in a country where melamine-tainted eggs and eggs with high antibiotic residues have featured in a series of food safety scandals in recent years. It is also spurring demand for higher priced branded eggs over those sold loose in fresh produce markets.

“These days if you’re a small farmer, your eggs won’t get into the supermarkets,” said Yuan Song, analyst with China-America Commodity Data Analytics.

Tough new regulations on treating manure and reducing the environmental impact from farms have also pushed many small farmers out.

Most egg producers now have between 20,000 and 50,000 hens, said Yuan, a significant change even from two years ago. The remainder with less than 10,000 birds are likely to be shut down soon as local governments favor larger producers that can be more easily scrutinized.

High-tech hatchery

Those rapid changes are driving investments like the 150 million yuan ($22.60 million) hatchery in Handan, about 400km (250 miles) southwest of Beijing.

The highly automated plant, owned by a joint venture between China’s Huayu Agricultural Science and Technology Co. Ltd. and EW Group’s genetics business Hy-Line International, is the world’s biggest hatchery of layer chicks, or birds raised to produce eggs rather than meat.

By producing 200,000 females a day, or around 60 million layers a year (one day a week is for cleaning), it can meet demand from larger farms who want to buy day-old-chicks in one batch, said Jonathan Cade, president of Hy-Line International, based in West Des Moines, Iowa.

“That’s the best way to start off with good biosecurity,” he said. When the birds on one farm are the same age, they are less likely to spread disease.

Imported, latest-generation equipment helps speed up the throughput of the hatchery. An automatic grading machine, which can handle 60,000 eggs an hour, sorts eggs into two acceptable sizes before they enter incubators — uniform eggs produce similar sized chicks that will have the same feeding ability.

Once hatched, female chicks go to automated beak-clipping machines that process around 3,500 an hour.

Only 20 staff will be needed in the new plant, compared with around 100 in Huayu’s older hatchery, said Huayu chairman Wang Lianzeng.

Fierce competition, disease

Efficiency is important in an industry which is not expected to see much volume growth. The Chinese already eat more eggs per capita than almost everyone else, about 280 a year or almost one billion a day across the country, so consumption is unlikely to rise much.

Breeders like Huayu are trying to grow by taking market share from others. In addition to the new Handan hatchery, it is building another in Chongqing, which will bring annual production to 180 million chicks.

Layer inventory last year was around 1.2 billion, according to the China Animal Agriculture Association.

Huayu is also looking into breeding layers and building hatcheries in South-East Asia and Africa, said Wang, the chairman.

Key to industrial-scale facilities will be managing the risks of disease. Prices and demand for eggs and poultry plunged last year, after hundreds of people died from contracting bird flu, even though the disease left flocks largely unscathed.

Although that has created new opportunities for large players to expand after others were forced to exit, the impact of a disease outbreak on intensive operations is significantly higher.

Huayu itself has recently suffered from outbreaks, with high rates of poultry disease Mycoplasma synoviae (MS) in China’s breeding flocks last year, said Wang. The disease can reduce egg production in layers.

Wang said biosecurity is the major advantage in the new hatchery, which uses advanced ventilation and environmental controls to keep new chicks healthy.

“When you enter the hatchery, you wouldn’t know you’re in a hatchery,” he said, referring to the smell typical in older facilities.

Disinfection is used at every step along the chain and workers follow strict procedures on hygiene, he added.

A safe environment with very high standards of biosecurity is important in raising chicks, said Wang.

With such pressures on production, improving animal welfare is unsurprisingly not a priority, said Jeff Zhou, China representative for Compassion in World Farming (CIWF), a nonprofit.

China has no animal welfare regulations, although some companies have begun voluntarily to phase out the painful beak-trimming practice, including Huayu rival Ningxia Xiaoming Farming and Animal Husbandry Co. Ltd.

Xiaoming is also supplying male chicks from its hatcheries to local farmers to rear for meat in free-range environments, according to CIWF. Huayu sells its male chicks as food for snakes, which are farmed in China for traditional medicine.
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The possibility of more Western sanctions against Moscow is the key risk for the Russian economy, as much as 21 percent of which has already felt the impact of existing sanctions, Russia’s Analytical Credit Ratings Agency said in a report Tuesday.

Western sanctions are expected to weigh on Russia’s oil-dependent economy in the longer run, having dented incomes of Russian households, the Kremlin-backed ACRA said.

The West first imposed economic and financial sanctions against Moscow in 2014 for its annexation of Crimea and its role in the Ukrainian conflict.

Russia has responded with counter-sanctions, banning imports of a wide range of food from countries that had targeted Moscow.

Later, sanctions against Russia were expanded, putting extra pressure on Russia’s economy and the ruble.

“The risk of widening of anti-Russian sanctions remains one of the key risks that the Russian economy could face this year,” ACRA said.

New sanctions listed by ACRA might target more companies, Russian state debt or even disconnect Russia from the international SWIFT payment system.

For now, Russia’s international reserves, which stood at nearly $456 billion as of late June, “fully cover external debt, which is vulnerable to wider sanctions,” ACRA said.

“Sanctions should not be named the key factor that limits economic growth in Russia in the mid-term … The impact of sanctions on growth rate could turn out to be more pronounced in the long term for both companies and the economy in general,” ACRA said.

Western sanctions have hit Russian companies that account for 95 percent of the country’s oil and gas industry revenues.

Restrictions imposed on Russian oil and gas companies in 2014 will affect their oil output in 2020s, ACRA said.

Sanctions have also hit Russia’s major state-owned banks, which account for 54 percent of banking assets. But the sanctions’ impact on the financial health of companies and banks has been less pronounced than that of the country’s economic policies, ACRA said.

Moscow’s response to the sanctions, which limited imports, has inflated prices for a number of goods.

“Counter-sanctions have resulted in price growth and a decline in households’ incomes by 2-3 percentage points in 2014-2018,” ACRA said.
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World fish production is expected to grow over the next 10 years despite a slowdown in both farmed and wild caught fish, the U.N.’s food agency said.

In a new report on global fisheries, the Food and Agricultural Agency predicts world fish production will grow to 201 million metric tons by 2030 — an 18 percent rise over current levels.

This is despite the amount of wild caught fish leveling off and the number of farmed fish slowing down after decades of rapid growth.

“The fisheries sector is crucial in meeting FAO’s goal of a world without hunger and malnutrition, and its contribution to economic growth and the fight against poverty is growing,” FAO Director-General Jose Graziano da Silva said.

But the report said future growth depends on sustainable and stronger fishing management, and successfully fighting such problems as pollution, global warming and illegal fishing.

The report said nearly 60 million people are employed in the world’s fishing industry, with China being the biggest producer and exporter of fish.

The European Union, United States and Japan are the world’s top three consumers of fish and users of fish products.
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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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U.S. tariffs against Chinese imports took effect early Friday and President Donald Trump made clear Thursday that he is prepared to sharply escalate a trade war between the world’s two biggest economies.

The administration started imposing tariffs at 12:01 a.m. Eastern time Friday on $34 billion worth of Chinese imports, a first step in what could become an accelerating series of tariffs. China has promised a swift retaliatory strike on an equal amount of U.S. goods. 

China responds

Shortly after the tariffs took effect, China said it is “forced to make a necessary counterattack” to a U.S. tariff hike on billions of dollars of Chinese goods but gave no immediate details of possible retaliation.

 

The Commerce Ministry on Friday criticized Washington for “trade bullying” following the tariff hike that took effect at noon Beijing time in a spiraling dispute over technology policy that companies worry could chill global economic growth.

 

A ministry statement said, “the Chinese side promised not to fire the first shot, but to defend the core interests of the country and people, it is forced to make a necessary counterattack.”

 

Beijing earlier released a list of American goods targeted for possible tariff hikes including soybeans, electric cars and whiskey.

Hostilities could grow

Trump discussed the trade war Thursday with journalists who flew with him to Montana for a campaign rally. The president said U.S. tariffs on an additional $16 billion in Chinese goods are set to take effect in two weeks. 

 

After that, the hostilities could intensify: Trump said the U.S. is ready to target an additional $200 billion in Chinese imports — and then $300 billion more — if Beijing refuses to yield to U.S. demands and continues to retaliate.

That would bring the total of targeted Chinese goods to potentially $550 billion, which is more than the $506 billion in goods that China actually shipped to the United States last year.

 

The Trump administration has argued that China has deployed predatory tactics in a push to overtake U.S. technological dominance. These tactics include cyber-theft as well as requiring American companies to hand over technology in exchange for access to China’s market.
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Drivers of Kenya’s digital taxis shut down operations Monday in protest of what they term as exploitative corporate practices. They say the firms are charging low rates to their clients, yet imposing high commissions on the drivers, leading them to work longer hours with little pay.

The Digital Taxi Association of Kenya, representing more than 2,000 digital taxi drivers, is in the fourth day of a protest that has seen drivers switch off their services, stalling transportation in the country.

The drivers say client charges have reduced over time as more digital taxi apps enter the market, but their commissions to the taxi firms have remained the same.

The drivers are demanding a review of their rates and working conditions. Through their association, they want the digital taxi services to double their client rates and reduce driver commissions to the companies so they can earn decent wages.

“The fare itself, it has been very low from the word go,” said Anthony Maina, an Uber driver in Kenya. “The percentage after they get their commission, we get very little returns.”

The main digital taxi services in Kenya are the American brand Uber and Estonian Taxify, as well as at least three others.

Uber charges a 25 percent commission on each ride, while apps like Taxify charge 15 percent. The drivers want rates at least doubled per kilometer, and commissions slashed to 10 percent.

Kenya Digital Taxi Services Director David Muteru is calling on Kenya’s Ministry of Transport to resolve the issue.

“All these things are happening where we have government agencies who can [take care of all these things] without having pressure from us,” Muteru said. “It is not our wish to come here and start demonstrating. Our demand is that we must have regulations. [The pricing] is very skewed in favor of the app companies to the detriment of drivers.”

Maina says Uber reduced the maximum working hours from 18 to 12 in an effort to better the working conditions, but drivers overwork to earn more to meet expenses.

“We cannot afford daily maintenance, he said. “An example, each and every day you have to fuel the vehicle, you have to wash the car, and if you happen to be in the city center, you have to pay the city council. All those expenses, when you put them together and maybe you do not own the vehicle yourself, you have to pay the partner and you know fuel has been going up every day and they are not adjusting their commission or fare. So that has been a big problem for us.”

Earlier in the week, Uber drivers in South Africa also went on strike to protest the 25 percent fee charged by Uber.

Digital Taxi Association representatives in Kenya are in negotiations with the taxi firms and Kenya’s Ministry of Transport as their strike continues.
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South Africa has become one of the biggest markets for illegal cigarette sales and is losing out on 7 billion rand ($514 million) a year in potential tax revenue, a report funded by a tobacco industry group said on Thursday.

The study carried out by Ipsos found illegal cigarette trade spiked between 2014 and 2017 after a probe into the underground industry was dropped by the South African Revenue Service (SARS) under suspended commissioner Tom Moyane.

Moyane, an ally of former President Jacob Zuma, is the main focus of an ongoing SARS commission of inquiry over allegations of widespread corruption at the tax agency under his watch. He denies any wrongdoing.

Former head of enforcement at SARS, Gene Ravele, told the inquiry last week the decision to drop the investigation into illegal tobacco trade was intended to let it continue.

“After I left [in 2015], there was no inspections at cigarette factories. It was planned,” said Ravele.

A packet of cigarettes should incur a minimum tax of 17.85 rand ($1.31), yet packs are sold on the black market for as little as 5 rand as manufacturers dodge official sales channels to avoid paying tax, the Ipsos study found.

Three-quarters of all South Africa’s informal vendors — totaling 100,000 — sell illegal cigarettes in an industry that was worth 15 billion rand ($1.10 billion) over the last three years, the report said.

“Independent superettes, corner cafes and general dealers are the key channels for ultra-cheap brands, with hawkers providing a key entry point, mainly through the loose cigarette sales,” Ipsos head of measurement Zibusiso Ngulube said. “These manufacturers are perfectly primed to continue to grow at a fast rate.”

The study was funded by The Tobacco Institute of Southern Africa, which includes arms of global manufacturers like Philip Morris International, Alliance One and British American Tobacco.
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U.S. car maker Ford Motor Co said on Thursday it has no plans currently to hike retail prices of its imported Ford and Lincoln models in China, despite steep additional tariffs on imported U.S. vehicles set to come into play on Friday.

The firm, which has been facing sluggish sales in the world’s largest auto market, said in a statement “it has no current plans to increase the manufacturer’s suggested retail price (MSRP) on its import line-up in China.”

Ford is the first foreign automaker to address pricing issues ahead of the new tariffs that will affect around $34 billion of U.S. imports from soybeans and cars to lobsters.

China, which just days ago cut tariffs on all imported automobiles, has said that it will slap an additional 25 percent levy on 545 American products, including U.S.-made cars, should the Trump administration go ahead with plans to implement tariffs on $34 billion of Chinese imports from July 6.

Ford added it encouraged Washington and Beijing to resolve their issues over trade and that it would “continue to monitor the situation as it evolves.”

 
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