U.S. trade deficit surges to five-month high as imports soar

July 3, 2019 / 8:39 PM / Updated 10 hours ago

WASHINGTON (Reuters) – The U.S. trade deficit jumped to a five-month high in May as imports of goods increased, likely as businesses restocked ahead of an increase in tariffs on Chinese merchandise, eclipsing a broad rise in exports.

The Commerce Department said on Wednesday the trade deficit surged 8.4% to $55.5 billion. Data for April was revised higher to show the trade gap widening to $51.2 billion instead of the previously reported $50.8 billion. Economists polled by Reuters had forecast the trade gap widening to $54.0 billion in May.

The goods trade deficit with China, a focus of President Donald Trump’s “America First” agenda, increased 12.2% to $30.2 billion, with imports rising 12.8%. Trump recently raised additional import tariffs on Chinese goods, prompting Beijing to retaliate.
Trump and Chinese President Xi Jinping last week agreed to a trade truce and a return to talks. White House trade adviser Peter Navarro said on Tuesday talks were heading in the right direction, but it would take time to get the right deal made.

The U.S.-China trade tensions have caused wild swings in the trade deficit, with exporters and importers trying to stay ahead of the tariff fight between the two economic giants.

In May, goods imports increased 4.0% to $217.0 billion. Imports of consumer goods rose $1.4 billion, while those of motor vehicle and parts soared $2.3 billion to a record high. There were also big increases in imports of capital goods and industrial supplies and materials.

Goods exports rose 2.8% to $140.8 billion. Exports of consumer goods increased $0.8 billion and soybean exports advanced $0.7 billion. Civilian aircraft exports rose $0.5 billion. Gains are, however, likely to be capped after Boeing in March suspended deliveries of its fastest-selling MAX 737 jetliner. The aircraft was grounded indefinitely following two deadly crashes in five months. Production of the troubled plane has been cut.

When adjusted for inflation, the goods trade deficit increased $4.8 billion to $87.0 billion in May. The increase in the so-called real goods trade deficit suggests that trade could be a drag on second-quarter gross domestic product.

Trade contributed 0.94 percentage point to the economy’s 3.1% annualized growth pace in the first quarter. The Atlanta Fed is forecasting gross domestic product rising at a 1.5% rate in the April-June quarter.

The wider trade deficit added to weak housing, manufacturing, business investment and moderate consumer spending in offering a downbeat assessment of the economy.

Reporting By Lucia Mutikani; Editing by Andrea Ricci Lucia.Mutikani@thomsonreuters.com; 1 202 898 8315; Reuters Messaging: lucia.mutikani.thomsonreuters.com@reuters.net

Source: Reuters “U.S. trade deficit surges to five-month high as imports soar”

Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.


Apple moves Mac Pro production to China from U.S.: Wall Street Journal

June 28, 2019 / 10:09 PM / Updated 4 hours ago

(Reuters) – Apple Inc (AAPL.O) is shifting manufacturing of its new Mac Pro desktop computer to China from the United States, the Wall Street Journal reported on Friday, citing people familiar with the matter.

The move comes at a time when the Trump administration has threatened to impose new levies to cover nearly all imports from China and pressured Apple and other manufacturers to make their products in the United States if they want to avoid tariffs.

Last week, Apple asked its major suppliers to assess the cost implications of moving 15% to 30% of their production capacity from China to Southeast Asia, according to a Nikkei report.

“If true, suggests to me that Apple has tremendous confidence that the U.S. and China will be able to solve their trade dispute and do so in the near-future,” D.A. Davidson analyst Tom Forte said in an email.

China is a key market for Apple as well as a major production center for its devices. The company got nearly 18% of its total revenue from Greater China in the quarter ended March.

Apple’s Mac Pro, a $6,000 machine used by creative professionals, has been facing waning demand, the Journal said here

The company does not break out sales numbers for its Mac Pro machines. The desktop is part of the company’s Mac line of products, which accounted for less than 10% of Apple’s total sales in 2018. In 2018, Apple sold about 18 million Mac products, compared with about 218 million iPhones.

“Like all of our products, the new Mac Pro is designed and engineered in California and includes components from several countries including the United States,” an Apple spokesman said. “Final assembly is only one part of the manufacturing process.”

Apple’s decision coincides with the end of tax subsidies that it got for making the desktop in a plant in Texas run by contract manufacturer Flex Ltd, according to the Journal.

“(This) serves as a reminder that, relative to the U.S., manufacturing in China remains a lower-cost alternative and benefits from an existing infrastructure, versus having to, potentially, rebuild one in the U.S”, Forte said.

The tech giant has tapped contractor Quanta Computer Inc (2382.TW) to manufacture the computer and is ramping up production at a factory near Shanghai, the report said here

Quanta did not respond to a request for comment.

Apple’s shares were down marginally at $198.69.

Reporting by Akanksha Rana in Bengaluru; Editing by Saumyadeb Chakrabarty and Anil D’Silva

Source: Reuters “Apple moves Mac Pro production to China from U.S.: Wall Street Journal”

Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.

Lawmaker: Human Problem at Pentagon Worse than Tech Problem

Rep. Jim Cooper says Congress shouldn’t accept a government topped by acting political appointees.

Marcus Weisgerber,
Defense One
June 27, 2019
Defense Management

“For all of our love of technology, we could have a greater human problem than we do a tech problem, because you need Senate-confirmed people of ability, competence and vision,” Rep. Jim Cooper, D-Tenn., chairman of the House Armed Services Strategic Forces Subcommittee, said Thursday at the Defense One Tech Summit.

The position of Defense Secretary has been vacant since December, when Jim Mattis abruptly resigned. Then-Deputy Defense Secretary Patrick Shanahan served in an acting capacity for nearly six months, the longest time that the Pentagon has gone without a Senate-confirmed leader. President Trump said he would nominate Shanahan for the position, but Shanahan withdrew his name from consideration and resigned as deputy defense secretary last week after details of a messy divorce became public.

Army Secretary Mark Esper is now the acting defense secretary. David Norquist, the Pentagon comptroller and chief financial officer has been performing the duties of the deputy defense secretary since Mattis’ departure. Ryan McCarthy, the Army undersecretary is now the acting Army secretary.

“You can’t have a government with ‘actings’…and that’s sadly what we increasingly have,” Cooper said. “Our tolerance for that should be zero.”

On June 21, President Trump said that he would nominate Esper, Norquist, and McCarthy to serve permanently. The White House has yet to send those nominations to Congress.

Heather Wilson stepped down as Air Force secretary last month to become president of the University of Texas at El Paso. Trump has said he would nominate Barbara Barrett for the top Air Force job, but the White House has yet to send a formal nomination to Congress.

Moving further down the chain, the vacancies and lack of political appointees has created a dominos effect where deputies are serving as principals. Below that, many underlings have essentially moved up one rung on the org chat. The Pentagon has an acting chief management officer since last year when Mattis dismissed John Gibson.

The lack of key leaders even extends beyond Senate-confirmable positions. Fred Kennedy, head the brand new Space Development Agency, abruptly resigned over reported disagreements with his boss Mike Griffin, the undersecretary of defense for research and engineering. InsideDefense reports that Derek Tournear, who works for Griffin, has been named acting director of the organization tasked with making satellite buying more commercial.

Chris Shank, director of the Strategic Capabilities Office, the office known for modifying existing weapons with new capabilities, resigned on June 14, Breaking Defense reports. David Honey, a senior Defense Advanced Research Projects Agency official, has been tapped as his replacement, Inside Defense reports.

Source: Government Executive “Lawmaker: Human Problem at Pentagon Worse than Tech Problem”

Note: This is Government Executive’s article I post here for readers’ information. It does not mean that I agree or disagree with the article’s views.

US might be the biggest loser in the tech war

Ko Tin-yau
Jun 28, 2019 10:01am

US Treasury Secretary Steven Mnuchin said on Wednesday that the United States and China were close to a trade deal, and that he believes the weekend talks between the two sides will help take the process forward.

“We were about 90 percent of the way there (with a deal) and I think there’s a path to complete this,” Mnuchin told CNBC.

He said he’s confident that US President Donald Trump and Chinese leader Xi Jinping, who will meet during the G20 summit in Japan, can make progress in the stalled trade talks.

“President Trump and President Xi have a very close working relationship. We had a productive meeting at the last G-20,” Mnuchin said, adding that there could be a win-win situation for both nations.

“I think there is a good outcome for their economy and the US economy to get balanced trade and to continue to build on this relationship,” he added.

Mnuchin’s words and tone suggest that Trump may focus more on improving the trade deficit situation and put less emphasis on urging China to reform on matters such as cutting government subsidies, ending forced technology transfers, etc.

Some might question why Washington seems to have suddenly softened its stance.

The answer may lie in a New York Times report that outlined how some big tech firms have found a way to bypass the US government ban on selling products to Huawei.

By manufacturing outside the US, industry leaders including Intel and Micron can avoid labeling goods as American-made, New York Times reported, citing unnamed sources. Sales through this channel ares already said to amount to hundreds of millions of dollars.

If the US-derived content of a product is below 25 percent, they are not subject to the ban.

This underscores how difficult it is for the Trump administration to contain companies like Huawei.

More seriously, if this becomes a trend, Trump’s intention to contain China’s tech industry could backfire and the US may end up the biggest loser.

This article appeared in the Hong Kong Economic Journal on June 27

Source: ejinsight.com “US might be the biggest loser in the tech war”

Note: This is ejinsight.com’s report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.

US Stupid Plan on 6th Generation Fighter

Know oneself and know your enemy, one will never in peril in war
–Sun Tze

National Interest says in its article “F-22, F-35, Stealth, 6th Generation Fighter, Stealth Fighters” that US Center for Strategic and Budgetary Assessment (CSBA) suggests the US to develop a sixth-generation fighter jet with penetrating counter-Air/penetrating electronic attack (PCA/PC-E) capabilities to attack both Russia and China at the same time.

The warplane shall be long-range and stealth with both the fighting power of F-22 and the electronic attack capability of an EA-18G Growler jamming aircraft to penetrate Russian and Chinese air defense.

Does the US know what capabilities Chinese air force has been developing? Chinese Central Military Commission Chairman Xi Jinping urged Chinese air force to develop integrated space and air capabilities for both attack and defense soon after he was elected. For that purpose, China has been developing supersonic warplanes that need not be stealth as it is too fast to detect in time or intercept when detected.

With such fighters US PCA/PC-E fighters simply cannot go near China even if the US is able to develop. Moreover US homeland will be attacked if the US attacks China.

The delay and excessive costs in developing F-35 make people doubt whether the US is capable of developing the 6th-generation fighter within 20 years. Test flight of China’s space planes, however, are scheduled for 2035.

Comment by Chan Kai Yee on National Interests’ article, full text of which can be viewed at https://nationalinterest.org/blog/buzz/f-22s-and-f-35-are-getting-old-how-make-sure-6th-generation-fighter-dominates-64181

Chinese Economy Suffers Little by US Trade War Attacks

SCMP says in its article “Not every economist thinks the trade war is a huge deal; ‘look at the numbers’, says CME executive director” that US tariff hikes has only reduced China’s growth rate by 0.01 percent and its further tariff hikes to 25% on $200 billion of Chinese exports will only reduce China’s growth rate by 0.033% so that IMF predicts only 0.1% drop to 6.2% in China’s growth rate well within China’s planned range between 6 and 6.5 percent.

That being the case, It will be Trump instead of Xi Jinping to make substantial concessions in their talks on the sideline of G20 summit. Will Trump do so? I doubt that; therefore, I am not optimistic about the outcome of their meeting.

Comment by Chan Kai Yee on SCMP’s article, full text of which can be viewed at https://www.scmp.com/business/banking-finance/article/3015887/not-every-economist-thinks-trade-war-huge-deal-look

Asia Pacific trade pact can go on without India ‘for the time being:’ Malaysian PM Mahathir

Published Sun, Jun 23 2019 • 6:00 PM EDT Updated 4 hours ago

Yen Nee Lee@YenNee_Lee
Key Points

  • Mahathir Mohamad, prime minister of Malaysia, said he’s willing to conclude the Regional Comprehensive Economic Partnership (RCEP) without India “for the time being.”
  • A recent report by Nikkei Asian Review said China has grown impatient with the slow progress on the RCEP talks, and proposed going ahead with just 13 countries — without India, Australia and New Zealand.
  • Mahathir said Malaysia has gained from the U.S.-China trade war, but cautioned that those benefits may only be temporary.

Malaysian Prime Minister Mahathir Mohamad said on Saturday that he’s willing to conclude a mega Asia-Pacific trade agreement without India “for the time being.”

Mahathir was referring to the Regional Comprehensive Economic Partnership, or RCEP, which involves 16 countries in Asia Pacific. Negotiations have been going on since 2013, with one of the major sticking points being India’s reluctance to open up its markets.

A recent report by Nikkei Asian Review said China, growing impatient with the slow progress on RCEP talks, proposed going ahead with just 13 countries — removing India, Australia and New Zealand from the deal.

The 16 countries involved in RCEP are the 10 Southeast Asian nations and six of their large trading partners: China, Japan, South Korea, India, Australia and New Zealand. If the agreement is finalized, the 16 countries will form a major trading bloc that covers around one-third of the world’s gross domestic product.

In an interview with CNBC’s Tanvir Gill, Mahathir acknowledged the hurdles in reaching a deal among the 16 countries.

“I think we will work towards it. It’s quite difficult because we are competing economies … we’re competing with each other and from there, to go on to work together requires some radical change in our mindset. That will take time,” he said in Bangkok, Thailand, where he’s attending a summit for the Association of Southeast Asian Nations.

In the end, we have to stop this trade war and certainly not to escalate (it).
—Mahathir Mohamad Malaysian Prime Minister

The Malaysian leader added that RCEP participants will have to consider which framework works best: China’s proposed 13-nation deal or the original one involving all 16 countries.

“But I think I would prefer 13 … for the time being,” he said, suggesting he’s open to having India, Australia and New Zealand joining the pact in the future.

Trade war escalation

Several participating countries of RCEP have expressed hopes of coming to an agreement by the end of this year, as they say the U.S.-China tariff fight has brought fresh urgency to wrap up talks in Asia Pacific.

U.S. President Donald Trump and Chinese President Xi Jinping are expected to meet later this month at the G-20 summit in Japan. But Mahathir — like many who follow the developments closely — said he doesn’t expect much to come out of that meeting.

Taking sides in the trade war will be a ‘disaster for the world:’ Mahathir

Malaysia has often been cited as one of the beneficiaries of the trade war as companies move production out of China to circumvent elevated U.S. tariffs. Muhammed Abdul Khalid, an economic advisor to Mahathir, told CNBC in May that the Southeast Asian nation’s growth is set to gain an additional 0.1 percentage points due to the trade diversions to his country.

While that’s good for Malaysia, Mahathir on Saturday cautioned that such benefits may only be temporary. He explained that if there’s a change in government in the U.S., the new administration may have a new set of policies that could once again prompt companies to rethink where they want to locate their production and supply chains.

“In the short term, I think it is good news. But in the end, we have to stop this trade war and certainly not to escalate (it),” he said.

Source: CNBC “Asia Pacific trade pact can go on without India ‘for the time being:’ Malaysian PM Mahathir”

Note: This is CNBC’s report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.