Beijing backs Hong Kong over amendments to extradition laws – Al Jazeera English

Beijing backs Hong Kong over amendments to extradition laws – Al Jazeera English

Beijing has backed Hong Kong’s government over its controversial plan to allow extraditions to the Chinese mainland, saying it opposes “any outside interference” in the semi-autonomous territory.

Chinese foreign ministry spokesman Geng Shuang said on Monday that Beijing would “continue to firmly support” Hong Kong leader Carrie Lam, who earlier vowed to push ahead with the new laws despite massive protests against them.

“Second, we firmly oppose any outside interference in the legislative affairs [of Hong Kong],” Shuang told a regular press briefing, adding “some countries have made some irresponsible remarks about the amendment”.

Chinese state-run media on Monday slammed the territory’s protest organisers for “collusion with the West” and pointed to meetings between Hong Kong opposition figures and senior US officials, including Secretary of State Mike Pompeo and House Speaker Nancy Pelosi.

“It is very noteworthy that some international forces have significantly strengthened their interaction with the Hong Kong opposition in recent months,” an editorial in the Chinese-language edition of the Global Times said.

Lam earlier on Monday defended the proposed amendments – which would allow for case-by-case extraditions to jurisdictions, including mainland China, beyond the 20 states with which Hong Kong already has treaties – as necessary to ensure the territory meets its “international obligations in terms of cross-boundary and transnational crimes”.

‘Clear conscience’

Critics fear the changes could make Hong Kong residents vulnerable to politically motivated charges in China’s notoriously opaque court system, however, and are part of a wider move by Beijing to scale back the city’s freedoms enshrined under the so-called “one country, two systems” principle.

But Lam, who was elected chief executive in 2017 by a committee of mostly pro-Beijing Hong Kong elites, denied taking orders from the Chinese government.

“I have not received any instruction or mandate from Beijing to do this bill,” she told reporters. “We were doing it – and we are still doing it – out of our clear conscience and our commitment to Hong Kong.”

‘Freedom will disappear’

On Sunday, more than one million people took to the financial hub’s streets to demonstrate against the bill and call for it to be scrapped, according to protest organisers. Police put the figure at 240,000 at the march’s peak.

Al Jazeera’s Sarah Clarke, reporting from Hong Kong, said the rally marked the city’s largest protest since 1997, when it was handed over to China by the British amid guarantees that its autonomy and freedoms, including an independent justice system, would be protected.

The law’s opponents have called for another demonstration on Wednesday when a second reading of the bill is scheduled to take place in Hong Kong’s pro-Beijing majority 70-seat Legislative Council.

Emily Lau, a political activist and former Democratic Party Legislative Council member, said critics of the proposal were “all united by their fear of the Chinese Communist Party”.

“There are many who are terrified of the Chinese legal system coming into Hong Kong,” Lau told Al Jazeera.

“It will be like a truck driving through and making a big hole in one country, two systems. We will be crushed, we will have one country, one system, and Hong Kong’s freedom and the rule of law will disappear,” she added.

“We are a lovely, vibrant, free city and nobody wants to see us crushed by evil forces, so I hope the international community will continue to keep an eye on Hong Kong.”

US and European officials have issued formal warnings over the proposed changes, matching international business and human rights groups who fear the amendments will dent Hong Kong’s rule of law.

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Massive Crowds Take to Streets in ‘Last Fight’ for Hong Kong – The Wall Street Journal

Massive Crowds Take to Streets in ‘Last Fight’ for Hong Kong – The Wall Street Journal

HONG KONG—Huge crowds of demonstrators packed the city’s streets Sunday to protest a proposed law that would allow Beijing to take people from Hong Kong to stand trial in mainland China.

The mass turnout—which organizers estimated at more than one million, or almost one for every seven residents in the city—represented the biggest challenge to Beijing’s authority over Hong Kong in years, rejecting the government’s attempts to push through legislation that critics say could be abused to target dissidents.

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Trump is ‘perfectly happy’ to hit China with new tariffs if Xi meeting doesn’t go well, Mnuchin says – CNBC

Trump is ‘perfectly happy’ to hit China with new tariffs if Xi meeting doesn’t go well, Mnuchin says – CNBC

U.S. President Donald Trump walks with Treasury Secretary Steven Mnuchin in Washington, U.S., April 21, 2017.

Kevin Lamarque | Reuters

U.S. President Donald Trump will make a decision about whether to slap China with more tariffs after meeting with his Chinese counterpart later this month in Japan.

That’s according to U.S. Treasury Secretary Steven Mnuchin, who told CNBC on Sunday that the American leader will be trying to determine if Chinese President Xi Jinping is willing to head “in the right direction” on a deal to reshape the trade and commercial relationships between the world’s top two economies.

“We’re going to need to see action, and President Trump is going to need to make sure he’s clear that we’re moving in the right direction to a deal,” Mnuchin told CNBC’s Nancy Hungerford. “The president will make a decision after the meeting.”

Trump has previously indicated he expects to plan his next trade war moves after that G-20 meeting.

“If China wants to move forward with the deal, we’re prepared to move forward on the terms we’ve done. If China doesn’t want to move forward, then President Trump is perfectly happy to move forward with tariffs to re-balance the relationship,” he said.

The two presidents last met in December 2018 in Buenos Aires — already several months into their escalating trade war. At that time, Xi and Trump agreed to suspend planned increases in tariffs while both sides redoubled negotiating efforts. The subsequent few months saw no further escalations amid repeated rounds of talks in both Washington and Beijing, but that pause ended in May when Trump unexpectedly said on Twitter that his administration would be levying new taxes on $200 billion worth of Chinese goods — and he threatened even more to come.

‘We’ve stopped negotiating’

American officials have repeatedly claimed that action was in response to China attempting to renegotiate parts of a deal it had previously agreed to — which Beijing has denied —  and the prospect of additional tariffs on that $325 billion worth of Chinese products has hung over the bilateral relationship for the last month.

“We made enormous progress, I think we had a deal that was almost 90% done. China wanted to go backwards on certain things,” Mnuchin said. “We’ve stopped negotiating.”

Where the countries go from here, according to the Treasury secretary, is up to Trump to decide when he and Xi meet in Osaka, Japan at the end of June. 

“In the case of Buenos Aires, we came out of that, we had direction from the two presidents, (Trump) put the increases on hold. The president will make a decision after the meeting,” Mnuchin said.

“I believe if China is willing to move forward on the terms that we were discussing, we’ll have an agreement. If they’re not, we will proceed with tariffs,” he added.

The thorny issues

Mnuchin weighed in on several of the thorniest subjects thought to be separating the American and Chinese sides from a deal.

For one, he said that the issue of removing China’s so-called non-tariff barriers to foreign companies succeeding within its borders remains central to the U.S. position on the talks.

“In negotiating our agreement, one of the big parts of the agreement has always been about non-tariff barriers, is about forced technology transfer. These are very important issues to us, and critical to any agreement,” Mnuchin said. “These are issues where we’ve made a lot of progress, and any agreement we have, we’ll need to be certain that that’s included.”

American officials and businesses have long argued that China’s official and unofficial rules put non-Chinese firms at a disadvantage in the country. One of the most frequently cited examples is a “forced tech transfer” regime — in which companies are coerced into sharing their advanced technology and know-how with Chinese organizations in exchange for market access.

Trump has also suggested that he may want his negotiating teams to pick up the issue of China’s currency, but Mnuchin on Sunday dismissed the notion that Beijing is actively keeping the yuan low in an effort to win a trade advantage over the likes of the U.S.

Instead, he said, any weakness now seen in the Chinese currency is the result of downward economic pressures — in part due to Trump’s tariffs on the country.

“I do think their currency has been under pressure,” the Treasury secretary said. “There’s no question that, as we put on tariffs, people will move their manufacturing outside of China, into other areas, and that’s going to have a very negative impact on their economy. And I think you see that reflected in the currency.”

Another topic that has raised tensions between Beijing and Washington is Chinese telecommunications giant Huawei. The U.S. government has cracked down on the tech firm, effectively blacklisting it from doing business with American businesses, on the basis of claims it is a security risk. The rationale, according to the Trump administration is that the firm’s involvement in sensitive networking technology could potentially be leveraged by Beijing for spying or other malicious actions. Both China and the company have denied such a risk exists.

Mnuchin emphasized that the Huawei blacklisting is solely a national security issue, and isn’t a non-tariff front of the trade war — even though Trump has suggested that the telecom company could get wrapped into a wider deal.

“They’re separate from trade: Both we and China have acknowledged that in our discussions,” he said. “Now, of course, President Trump, when he has the meeting, to the extent he gets certain comfort on Huawei or other issues, obviously we can talk about national security issues, but these are separate issues, they’re not being linked to trade.”

He emphasized the U.S. claim — central to recruiting allies in its effort to control the spread of Huawei tech — that Trump’s prior comments do not reveal an effort to gain trade leverage over Beijing: “I think what the president is saying is, if we move forward on trade, that perhaps he’ll be willing to do certain things on Huawei if he gets comfort from China on that, and certain guarantees.”

The next meeting

The American official told CNBC he had recently met with Yi Gang, the governor of China’s central bank, to discuss preparations for the upcoming meeting between the two presidents.

Mnuchin declined to go into details of that interaction, but said he and Yi “had a private conversation and it was very candid and constructive” on the subject of Trump and Xi meeting.

The Treasury chief said he did not foresee any further trade talks between Washington and Beijing diplomats before the presidents meet, and, for his part, Mnuchin declined to project what he expected to happen in Osaka.

“What I would say is we look forward to them meeting, they had a very productive discussion in Buenos Aires — that’s what led to these rounds of negotiation,” he said of Trump and Xi. “I know they have a very close relationship, and if there’s a desire on China’s part to reach a real agreement with us, we will negotiate in good faith.”

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Exclusive: SEC probes Siemens, GE, Philips in alleged China medical equipment scheme

Exclusive: SEC probes Siemens, GE, Philips in alleged China medical equipment scheme

SAO PAULO (Reuters) – The U.S. Securities and Exchange Commission is investigating Siemens AG, Philips NV and General Electric Co for allegedly using local middlemen to negotiate bribes with Chinese government and hospital officials to sell medical equipment, two U.S. sources with knowledge of the matter told Reuters.

FILE PHOTO: The logo of U.S. conglomerate General Electric is pictured at the company’s site of its energy branch in Belfort, France, February 5, 2019. REUTERS/Vincent Kessler/File Photo

The investigations into the companies’ business in China, along with an existing SEC probe into their sales in Brazil, are part of a new effort by U.S. regulators to crack down on alleged corruption in sales of costly medical equipment worldwide, said the sources, who spoke on condition of anonymity because they were not authorized to discuss the investigation publicly.

The SEC declined to comment.

Siemens, GE and Philips all denied wrongdoing and said they were unaware of any SEC investigation concerning their operations in China.

Reuters reported in May that the SEC, along with the U.S. Justice Department and FBI, were investigating Siemens, GE and Philips – as well as Johnson & Johnson – for allegedly paying bribes to win contracts in Brazil. The four companies all denied any wrongdoing in Brazil.

Under a U.S. federal law called the Foreign Corrupt Practices Act of 1977 (FCPA), it is illegal for Americans, U.S. companies or foreign companies whose securities are listed in the United States to pay foreign officials to win business. If found guilty of violating the act, firms could face fines from the SEC.

China’s medical device market stood at $58.63 billion in 2017 – compared to $10.8 billion for Brazil – according to the most recent data available from the U.S. Commerce Department.

In both markets, the companies benefited not only from the sale of the equipment but also from the bigger profit margins to be made on servicing it during its 10-to-15 year lifespan as well as selling software updates, spare parts and the materials used in operating the machines, the sources said.

China’s National Health and Family Planning Commission and the China Food and Drug Administration, which regulate the healthcare system, did not immediately respond to requests for comment.

Brazilian federal prosecutors declined to comment.


Some details of the alleged scheme in China were included in a shareholder lawsuit against current and former members of GE’s board in New York state court, which the company disclosed in its 2018 annual report.

The GE shareholder lawsuit, filed in New York state Supreme Court last December, alleges that since at least 2011 GE employees in China or workers at its subsidiaries “have bribed hospital administrators, engaged in collusive bidding, and given kickbacks to government officials.”

The lawsuit includes translations of Chinese criminal court rulings finding middlemen who sold GE equipment guilty of bribing Chinese government and hospital officials. Some hospital administrators confessed in open court and received prison sentences, according to rulings cited in the lawsuit. GE was not charged in the Chinese court rulings included as evidence.

The lawsuit accuses GE of colluding with Philips, Siemens and Toshiba Corp’s medical unit – which was bought by Canon Inc in 2016 – to fix prices and rig tenders for expensive medical equipment, such as MRI machines and CT scanners, through Chinese middlemen. The lawsuit included public data on how much Chinese hospitals paid for the equipment, which it said was routinely at least 40 percent above the price the middlemen paid to the companies. The difference was then distributed as bribes to health officials, the lawsuit alleges, with some money being pocketed by the middlemen and flowing back to the other companies, who allegedly put in “cover” bids to make the public tender appear competitive.

Lawyers for GE in February filed a motion to dismiss the lawsuit, saying the complaint failed to link alleged wrongdoing in China to any of the defendants. The judge in the case has not yet ruled on the motion.

Lawyers for the plaintiffs did not respond to emailed requests for comment.

Boston-based GE said in an emailed statement that it believes the lawsuit lacks merit, adding that “we are committed to integrity, compliance and the rule of law in every country in which we do business.”

Amsterdam-based Philips said in an emailed statement it is “fully complying with local and international anti-bribery and anti-corruption laws.” Philips said it was “not involved” in any of the transactions in the criminal cases in China and that it makes extensive efforts to ensure its third-party agents act lawfully.

FILE PHOTO: The logo of German industrial group Siemens is seen in Zurich, Switzerland, January 30, 2019. REUTERS/Arnd Wiegmann/File Photo

Siemens said in an emailed statement that it had just become aware of the New York lawsuit and it would “investigate any new allegation of misconduct that directly or indirectly involves Siemens” that may arise from the litigation. Siemens, based in Munich, said that its policy is “to cooperate with law enforcement investigations when they occur.”

Canon said in an emailed statement that “Canon Medical Systems Group are committed to conducting business activities with the highest priority on compliance with laws” and that the company has a zero tolerance toward bribery.

Toshiba said in an emailed statement that it was not aware of the New York state lawsuit. It said company policies “prohibit illegal or improper payments against lawful business practices.”

Reporting by Brad Brooks; Additional reporting by Brenda Goh in Shanghai and Makiko Yamazaki in Tokyo; Editing by Daniel Flynn and Will Dunham

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Google Cloud is down – Business News –

Google Cloud is down – Business News –

Google Cloud is down

| Story:

Photo: File

If you are wondering why your Gmail was burping and belching while trying to load today, it’s not just your computer.

Google Cloud servers are experiencing “high levels of network congestion in the eastern USA, affecting multiple services in Google Cloud, G Suite and YouTube,” Google announced on their server uptime site.

“Users may see slow performance or intermittent errors. Our engineering teams have completed the first phase of their mitigation work and are currently implementing the second phase, after which we expect to return to normal service,” Google said.

They are expected to provide another update at 4 p.m.

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Trump’s Love for Tariffs Began in Japan’s ’80s Boom

Trump’s Love for Tariffs Began in Japan’s ’80s Boom


Donald J. Trump in 1987. Allies and historians say that his admiration of tariffs is one of his longest and most deeply held policy positions.CreditCreditJoe McNally/Getty Images

WASHINGTON — Donald J. Trump lost an auction in 1988 for a 58-key piano used in the classic film “Casablanca” to a Japanese trading company representing a collector. While he brushed off being outbid, it was a firsthand reminder of Japan’s growing wealth, and the following year, Mr. Trump went on television to call for a 15 percent to 20 percent tax on imports from Japan.

“I believe very strongly in tariffs,” Mr. Trump, at the time a Manhattan real estate developer with fledgling political instincts, told the journalist Diane Sawyer, before criticizing Japan, West Germany, Saudi Arabia and South Korea for their trade practices. “America is being ripped off,” he said. “We’re a debtor nation, and we have to tax, we have to tariff, we have to protect this country.”

Thirty years later, few issues have defined Mr. Trump’s presidency more than his love for tariffs — and on few issues has he been more unswerving. Allies and historians say that love is rooted in Mr. Trump’s experience as a businessman in the 1980s with the people and money of Japan, then perceived as a mortal threat to America’s economic pre-eminence.

“This is something that has been stuck in his craw since the ’80s,” said Dan DiMicco, a former steel executive who helped draft Mr. Trump’s trade policy on the 2016 campaign trail and in his presidential transition. “It came from his very own core belief.”

The affection has grown in recent years, as tariffs have emerged as perhaps the most potent unilateral tool that Mr. Trump can wield to advance his economic agenda — and perhaps the purest policy expression of the campaign themes that lifted him to the White House.

“Tariffs tie so much of Trump together, ” said Jennifer M. Miller, an assistant history professor at Dartmouth College who last year published a study of how Japan’s rise has affected the president’s worldview. “His obsession with winning, which he thinks tariffs will allow him to do. His obsession with appearing tough. His obsession with making certain parts of national border fixed. And his obsession with executive power.”

Mr. Trump has imposed tariffs on washing machines, solar panels, steel, aluminum and $250 billion worth of imported goods from China. He is considering additional tariffs on $300 billion worth of Chinese imports and on cars, trucks and auto parts from Europe and Japan.

He has defied pressure to remove those tariffs from business groups, Republican and Democratic lawmakers and some of his own domestic policy advisers. And he has grown more insistent in his claims that it is the nation’s trading partners, not American consumers, that bear the brunt of the costs from what amounts to a tax increase on imports. No evidence supports that.

In conversations with lawmakers and advisers, Mr. Trump is fond of using “tariff” as a verb and waving off concerns that they raise consumer prices and depress economic activity.

“Where are my tariffs? Bring me my tariffs,” the president declared at meetings early in his presidency, when his advisers were not providing him options quickly enough.

Mr. Trump was a vocal critic of Japan as its economy and international influence boomed in the ’80s, a period of high anxiety over Japanese economic ascension, though he himself had a complicated relationship with the country. He competed with Japanese developers for properties in New York City, then bragged of selling condominiums and office space for a premium to Japanese buyers. He borrowed money from Japanese financial institutions, but complained about the difficulty of doing deals with large groups of Japanese businessmen.

His critiques of Japan — and to a lesser extent, other trading partners — won him publicity as he briefly explored a presidential campaign before the 1988 election.

He took out a newspaper advertisement in 1987 to warn that “for decades, Japan and others have been taking advantage of the United States” by not paying America for its assistance in their national defense. He complained about Japanese trading practices in an interview that year with Larry King, and in 1988 with Oprah Winfrey.

“If you ever go to Japan right now, and try and sell something, forget about it, Oprah. Just forget about it,” Mr. Trump said, adding, “They come over here, they sell their cars, their VCRs, they knock the hell out of our companies.”


Dongbei Special Steel in Dalian, China. Mr. Trump has imposed tariffs on washing machines, solar panels, steel, aluminum and $250 billion worth of imported goods from China.CreditChina Daily/Reuters

One of his first public statements on the subject came in October 1987, a few days after the stock market crashed, when Mr. Trump spoke to 500 people at a Rotary Club in Portsmouth, N.H. Mr. Trump was 41, the newly minted author of “The Art of the Deal” and hearing the first words of encouragement that he should run for president.

Mr. Trump railed against Japan, as well as Saudi Arabia and Kuwait, saying these allies were cheating the United States. Rather than raise taxes on Americans to close the federal deficit, he said, “We should have these countries that are ripping us off pay off the $200 billion deficit.”

Mike Dunbar, a local Republican official who organized the speech, said, “Obviously, there’s more meat on the bone today. But he’s completely the Trump I met and knew in the ’80s.”

Mr. Trump’s interest in leveling the playing field in trade dates back even further than that — to Lee Iacocca, the swashbuckling chairman of Chrysler, who brought the carmaker back from ruin under an onslaught of Japanese imports.

“He imagined himself Iacocca’s equal as an icon of American business,” said Michael D’Antonio, one of Mr. Trump’s biographers. “Beyond that, there is the personalization he does about everything. He always thinks that if something bad is happening to him, there must be, by definition, something evil afoot.”

Ms. Miller said support for tariffs allowed Mr. Trump to decouple his personal experience with foreign financiers and buyers and his longstanding belief that foreign competition has decimated American factories — because they would restrict the flow of goods, but not investment capital, between countries.

“Trump needs a way to reconcile, on some level, the ways he’s benefited from globalization while globalization has left America in carnage,” Ms. Miller said.

As president, Mr. Trump has clashed with some aides over their efficacy, particularly early in the administration. Regular Tuesday morning meetings on trade would often devolve into rancorous debates between the economic nationalists and more mainstream advisers, like Gary D. Cohn, the president’s former chief economic adviser. After one heated exchange, Mr. Trump derided Mr. Cohn as a “globalist.”


Listen to ‘The Daily’: The President Takes On China, Alone

As President Trump escalates his trade war with Beijing, we look at what each side stands to gain or lose.



Hosted by Natalie Kitroeff, produced by Michael Simon Johnson and Luke Vander Ploeg, and edited by Lisa Tobin

As President Trump escalates his trade war with Beijing, we look at what each side stands to gain or lose.

michael barbaro

From the New York Times, I’m Michael Barbaro. This is “The Daily.” Today, years of multi-national efforts have failed to get China to play by the international rules of trade. Now, Donald Trump has launched an all-out trade war in which the U.S. is taking on China alone. It’s Wednesday, May 15th.

natalie kitroeff

Hi, Peter.

peter s. goodman

How are you?

natalie kitroeff

I’m good. How are you?

natalie kitroeff

So, we’re talking trade.

peter s. goodman

Wait, this is Natalie calling?

natalie kitroeff

It sure is.

peter s. goodman

The thing about “The Daily” is you never know who’s calling. All right, Natalie, it’s great to hear from you.

natalie kitroeff

I’m glad that you’re glad to hear from me. [MUSIC]

michael barbaro

My colleague, business reporter Natalie Kitroeff, spoke to economics correspondent Peter Goodman about the story behind the trade war.

natalie kitroeff

So, Peter.

peter s. goodman

So, Natalie.

natalie kitroeff

When does this idea take hold that trade with China is a problem for the United States?

peter s. goodman

Well, the story really starts at a time when trade with China is seen as part of a solution. I mean, the U.S. is still fighting the Cold War with its allies, China is run by the Chinese Communist Party. The Communist Party has emerged from decades of isolation. Out of this comes Deng Xiaoping, who opens China to the world — at first very tentatively — and China becomes capable of producing more and more goods, but it doesn’t have access to world markets. It needs access to world markets. It’s running up against tariffs in much of the world. And the theory, at least the theory that’s advanced by the people who are pushing this, is, listen, if we let China into our club and China gets more and more integrated into the global economy, bit by bit through this engagement, China will become more like us. It will eventually become a free market-governed, liberal democracy. That was the sort of ultimate selling point. Of course, you know, the clear reality was that, at minimum, American companies wanted a crack at the Chinese market, which is, you know, in theory, the largest consumer market on earth. There’s a billion-plus people there. A billion-plus people is a couple billion feet needing to wear socks. I mean, that’s how the market is viewed. And China is, at that point, willing to trade — or at least this was the theory — some access to its market in exchange for the right to gain access to world markets.

natalie kitroeff

Right. So, this kind of grand idea that global trade will transform China into a liberal democracy doesn’t totally pan out. What about just the fact of China as a trading partner? How does that go for the United States?

peter s. goodman

Well, a lot of good things did happen for American economic life. We got access to an awful lot of low cost goods. A lot of American manufacturers got access to components they could use in their own factory productions. And, along the way, American companies get out from under having to deal with labor unions in their home country, minimum wage laws, environmental and workplace safety regulations. They can just go set about making stuff as cheaply and easily as possible in China. And, bit by bit, China becomes the factory to the world. We also saw hundreds of millions of people lifted out of poverty in China, which is no small thing. Those people entered the global marketplace, and they went out and bought a lot of goods, including some made or least designed in the United States. But we also missed a lot of stuff.

natalie kitroeff

And what do you think that was?

peter s. goodman

We missed something that had been understood since the beginning of modern economics, which is when you liberalize trade, there are winners and there are losers. I mean, you have whole towns in China that are organized to dominate making paint, making neckties, making shoelaces for shoes. Entire towns are organized in this fashion. And, so, if you are living in the industrial Midwest and you’re working at the same factory where you’ve been showing up for work for 20 years thinking that the fact that you’re good at your job and you work hard is going to be enough to get you to your pension, well, China has set up a system designed to undercut that. And American policymakers failed to prepare for that. So, they didn’t take the many benefits — and there were many benefits — of China integrating into the world economy — benefits for American companies — and distribute them so that the people who were hurt got something for their pain, or at least got help with their transition to the next thing. So, a lot of people were just left stranded and left to suffer what we now call deindustrialization. And downward mobility became the reality for tens of millions of people in the center of the United States.

natalie kitroeff

Right. So, we understood how American consumers and American companies would win. It was pretty much the American worker who we didn’t really think about.

peter s. goodman

That’s right. I mean, American workers in key industries were the ones who paid the price. And the failure was not, as I think many economists still view it, allowing China into the global trading system. It was the failure to cushion the blow for the communities that paid that price.

natalie kitroeff

In terms of all of this conversation that we’re hearing now about China being an unfair trading partner, does that depend on who you are?

peter s. goodman

There’s now a fairly universal view regardless of who you are that China has taken some very serious liberties with the global trading system and has not lived up to the spirit of what it agreed to when it entered the W.T.O. A lot of Western companies — American companies — have not gotten the access to the Chinese market that they were promised. China has cracked down on the internet, has not allowed major internet companies to set up in China. China has continued to force many Western companies to engage in these joint ventures where they are required to transfer in technology, which leads to their intellectual property getting stolen from them. China has, by and large, used the W.T.O. for its own benefit and has not delivered on the market-opening elements of what it promised.

natalie kitroeff

And are those issues you raised, are those violations of the terms of being a W.T.O. member?

peter s. goodman

Sometimes yes and sometimes no. I mean, let’s remember what the W.T.O. is — a bunch of countries that were more like each other than not — you know, they had the same level of education and innovation in their workforces — they all agreed that they were going to lower tariffs to one another, and trade expanded dramatically, and so did living standards. And it just wasn’t built for an enormous economy like China, which is not at all like the wealthy, developed countries that started the global trading system. It’s a poor country that has hundreds of millions of people who are desperate who will take jobs at very low wages, who are so eager to elevate their living standards that they’re not initially all that concerned about labor standards, workplace safety standards. There’s no democracy. There’s no free press to bring to light abuses. And, so, the W.T.O. finds itself dealing with a whole range of cases. But the W.T.O. process is very slow. It can take years to get a result. And, in the meantime, your company or your industry can be wiped out.

natalie kitroeff

Right. So, give me an example of how China has been able to take advantage of this setup.

peter s. goodman

Well, take steel, for example. China needs to employ large numbers of people — not only in industrial areas, it needs to create a lot of jobs for farmers who are falling behind the people living in Chinese cities who are increasingly wealthy. And one key way of creating those jobs is to invest in steel plants. And, by the middle of the 2000s, China is making a whole lot of steel — a lot more steel than it can possibly use at home. And, so, what does it do? It doesn’t want to fire a bunch of people working at steel mills. It says, well, we’re going to have to go find a place to sell all this steel. And that place is the rest of the world. So, China starts selling steel at low prices — much lower prices than steel is being manufactured in places like the United States and Canada and Italy and Germany and Japan. And steel, Chinese-made steel, becomes very attractive to much of the industrial world, because it’s increasingly high quality, and it’s cheap. So, that’s great if you’re buying steel. It’s not so great if you work at a plant that makes steel. And, for workers, it looks like their paychecks are under fire from somebody who’s not playing fair. And they’re angry about it.

natalie kitroeff

How exactly did China not play fair?

peter s. goodman

From China’s perspective, it’s simply taking advantage of what’s available. But, when you get people to speak candidly in China about this — it’s important to remember that for China, history doesn’t start in 2001 when it enters the W.T.O. History doesn’t start when Deng Xiaoping opens up to the world. History starts centuries ago. And, for a lot of those centuries, China is the victim of colonialism. In the dominant narrative amongst party officials, is this not wrong notion that for centuries Westerners have been coming and pillaging. They’ve been taking advantage of a weak China. So now, China’s in the W.T.O. in 2001, and it’s going to take advantage of what’s available to catch up.

natalie kitroeff

It’s like payback.

peter s. goodman

I don’t know that it’s seen as payback. It’s seen as we’re not suckers. We’re not defenseless. We’ve now got a plan. We’ve lived through decades of chaos, but we figured it out now. And we’ve carefully studied how the rest of the world works. We understand how Britain and the United States and France and Japan have turned themselves into these very wealthy societies. And now that’s what we’re going to do. And the way we do it is we exploit our advantages. And our advantages are that we’re a huge country with an awful lot of hardworking people and a central bureaucracy that has got a formula for how to rapidly industrialize. So, I mean, China’s view is we made this deal under the W.T.O. The rules were what they were. The process of adjudication was what it was. I mean, that’s the Chinese view. Now, clearly, there are ways in which China is not complying, and that poses a serious problem, and over the last decade, what’s happened is those unhappy about China have expanded from the workers in select industries finding themselves in direct competition with Chinese companies and often vulnerable to losing their jobs — that’s expanded to the corporate ranks. I mean, banks are angry that they don’t have access to the Chinese market — even auto companies. Technology companies are angry that they’ve had to hand over technology that Chinese companies have then used to undercut them making their own products. So, the sense has taken hold, broadly, in American life that the U.S. has been victimized by China, and that the consumer benefits are simply not enough. [MUSIC]

natalie kitroeff

You said China didn’t see itself as a bunch of suckers. The U.S. obviously doesn’t like to see itself as a bunch of suckers either. Is that how we find ourselves in this raging trade war?

peter s. goodman

Well, in part. While there is now pretty close to unanimity that China’s a problem, there is a very significant divide over what to do about that. So, in the Trump view, the idea is you work out everything in a bilateral arrangement between two countries. Because, in any bilateral arrangement, the U.S. should have the upper hand, because the U.S. is the richest, most powerful country, and every other country has a greater interest in getting access to the American market than the U.S. has getting access to the other market. That’s not how most of the American power structure has historically viewed things. So, multilateral solutions and international institutions have been at the center of economic policy. And the counter view is, O.K., if the W.T.O. is not working properly, we don’t scrap the W.T.O. because if we scrap the W.T.O., then we’re just living in the law of the jungle. And, at the moment, the U.S. might be the biggest, toughest animal in the jungle, but that’s not forever by any means. I mean, China may very well become a larger economy than the United States sooner than we think, and then we’ll be at a disadvantage. So, better to have institutions that focus on creating rules and norms with enforcement mechanisms that actually deal with the sorts of problems that we deal with in modern society. So, if the W.T.O. is not set up to deal with intellectual property and technology, well, then let’s sit down and write some rules that actually govern the problems that we’ve got now.

natalie kitroeff

Peter, I take your point. On the other hand, don’t you think we got to a point in American society where there was just this backlash against these free trade deals?

peter s. goodman


natalie kitroeff

And there was a kind of feeling among those workers that you talked about that the multilateral approach hasn’t worked.

peter s. goodman

Yeah. Well, first of all, as a matter of political reality, there’s no question that that argument didn’t win the favor of people in a lot of key parts of the industrial Midwest. And there’s no question that there’s no simple solution when it comes to dealing with China. So, China represents an economic problem that we’ve just never seen before. And if there were an obvious solution to this problem, we’d have found it already. [MUSIC]

natalie kitroeff

So, Peter, the bilateral approach that we’ve seen President Trump take, which has resulted in a year-plus of trade war, is it working?

peter s. goodman

Well, it’s certainly not working by the president’s own scorecard, because the trade deficit has gone up, not down. There is some evidence that some jobs that might have gone outside of the United States are now staying in the United States, but there’s very little evidence that that has turned into more American jobs. So, if you’re an American company and you now fear building a new factory in China, it’s not that now you’re going to build in the United States, it’s now maybe you’ll build in Vietnam. Maybe you’ll explore a venture in India or some other low-wage country in the world.

natalie kitroeff

So, it’s not as if these jobs are going to be flooding back to the U.S. — that American workers are going to benefit from this approach.

peter s. goodman

Well, some of these jobs are even jeopardized by this approach. I mean, I was in western Michigan last December, and I was visiting a factory that makes the electronics that go into auto lights. And this is a company that’s been in Michigan for decades. They resisted going to Mexico after the U.S. entered Nafta in the mid-90s. These are Republicans who think tribally about their American identity and they really don’t want to look abroad. And, suddenly, they’re finding that the components that they’re importing — electronics from China, some steel products — are going up in price because of Trump’s tariffs. And they were telling me very sheepishly, we’re having to explore the possibility that we’re going to have to shut down this factory or at least move some of the production to Mexico, because the economics just don’t make sense with these tariffs in place.

natalie kitroeff

So, if this is not in accordance with mainstream economic thought, if this approach could actually hurt American workers, hurt those people in Michigan you talked to rather than give them their jobs back, who would be most likely to support the president’s approach?

peter s. goodman

Precisely those people I talked to in Michigan, and people in general who have found themselves in recent decades competing against Chinese industry. I had dinner in western Michigan with a guy whose family business had really been ravaged by cheap Chinese imports more than 15 years ago. This guy’s got his own company, and he’s discovering that he is having a hard time getting his hands on low-priced steel because Trump has put tariffs on steel. He talked about cutting people’s bonuses at Christmas and holding off on hiring and really being concerned about the future of the company. And, yet, he was effusively praising Trump for taking on this fight. I mean, in his telling, no one has had the guts to challenge China. And when I pressed for a coherent explanation about how this trade war was ultimately going to better him, I didn’t get very satisfying answers. But what I got was a deep, emotional sense — a sentiment that Americans have been systematically cheated in the global economy. I mean, the United States is certainly the greatest beneficiary of globalization of any country in history. How it distributes the winnings of globalization is another question, and a lot of people have not gotten their slice of the pie. But there is this deep sense that the U.S. has been fleeced. And this guy I had dinner with was just so happy that his country was now represented by somebody who was willing to take the gloves off. And if he got caught in the midst of this conflict and it cost him some money, that was O.K. by him. He looked at it as, eventually, some good will come out of this, because, if nothing else, Trump is restoring our pride.

natalie kitroeff

I’ve had so many conversations exactly like the one you described with workers and business owners all across the country. It’s almost as if that guy and the people that I’ve talked to see the fight between the U.S. and China as bigger and more important than the personal cost that it might have to them in the short term. And they value the fact that President Trump is willing to fight that fight, it’s — patriotic.

peter s. goodman

Oh, no, that’s right, and I think this is part of why we should get our minds around the distinct possibility that this trade war could go on a long time and a deal might either be very hard to strike, or it could be that this administration doesn’t really want to strike a deal because this is but one element in what has become a kind of holy war. And, so, on the American side, we’re having this battle over whether we’re simply trying to readjust the terms of engagement with a China that we’re going to have to deal with one way or another versus those who view us as now being in almost a new kind of Cold War where our own security and our own prosperity is dependent upon isolating and containing China.

natalie kitroeff

And what about on the Chinese side? If this is a big, bilateral war — bigger, in our minds, than just a trade war — how is this war playing in China?

peter s. goodman

Well, let’s imagine how the world looks to a Chinese business owner who’s now dealing with declining sales and higher costs because of the tariffs that China’s imposed on American goods as part of this trade war. That Chinese business owner isn’t any happier than the guy I had dinner with in Michigan. But Trump has now elevated this trade war to an issue of sovereignty, and allowed the Chinese propaganda machine to present this as an attack on China’s dignity, on China’s destiny, on China’s national integrity by an American president who’s trying to keep China down. So, the Chinese business owner, much like the Michigan business owner, has a reason to think, well, I may have to hurt for a little while in exchange for the longer-term goal of boosting China’s place in the world and China’s security. [MUSIC]

natalie kitroeff

And it seems to me like that dynamic might make this more intractable.

peter s. goodman

There’s no question that on both sides what began as a trade issue has escalated into something that’s tapping deeply into nationalist sentiments, into long grievances and narratives of getting cheated. This is on both sides. And, for significant numbers of people, national pride and dignity is on the line. That does not lend itself to one side backing down.

natalie kitroeff

Thank you Peter.

peter s. goodman

Thank you, Natalie.

michael barbaro

On Tuesday, the president continued to promote his trade war with China.

archived recording (donald trump)

I think it’s going to be — I think it’s going to turn out extremely well. We’re in a very strong position.

michael barbaro

Saying that the 25 percent tariffs he has imposed on $250 billion worth of Chinese goods would benefit the United States, and that he was considering imposing additional tariffs on nearly every Chinese import.

archived recording (donald trump)

Our economy is fantastic. Theirs is not so good. We’ve gone up trillions and trillions of dollars since the election. They’ve gone way down since my election.

michael barbaro

The president suggested he was in no rush to end the fight, but held out the possibility that an agreement could be reached.

archived recording (donald trump)

If they want to make a deal, it could absolutely happen. But in the meantime a lot of money is being made by the United States and a lot of strength is being shown.

michael barbaro

We’ll be right back. [MUSIC] Here’s what else you need to know today.

archived recording (donald trump)

My son spent, I guess, over 20 hours testifying about something that Mueller said was 100 percent O.K., and now they want him to testify again. I don’t know why. I have no idea why, but it seems very unfair to me.

michael barbaro

On Tuesday, the president’s oldest son, Donald Trump Jr., agreed to testify before the Senate Intelligence Committee as it investigates whether he was honest in his previous testimony about a 2016 meeting with a Russian lawyer who allegedly promised incriminating information about Hillary Clinton. Donald Trump Jr. had resisted testifying for weeks, prompting a subpoena from the committee’s Republican chairman, Richard Burr, followed by calls from several other Republicans, including Senator Lindsey Graham, that Donald Trump Jr. ignore the subpoena.

archived recording (lindsey graham)

If I were Donald Trump Jr.‘s lawyer, I would tell him, you don’t need to go back into this environment anymore. You’ve been there for hours and hours and hours, and nothing being alleged here changes the outcome of the Mueller investigation. I would call it a day.

michael barbaro

In a carefully negotiated deal, Donald Trump Jr. will testify privately for just a few hours on a limited range of subjects. That’s it for “The Daily.” I’m Michael Barbaro, see you tomorrow.

Those tensions have not entirely subsided. On Sunday, Mr. Cohn’s successor, Larry Kudlow, irked Mr. Trump when he told a television interviewer that American consumers would pay some of the costs of tariffs.

Mr. DiMicco, the campaign trade adviser, said Mr. Trump was living up to his promises and becoming the first American president to say “enough’s enough” to China. Mr. Trump’s message to Beijing, he said, was that “there’s only one way for us to obviously get your attention because you haven’t lived up to any agreement you’ve made with the global trading community, and that’s to hit you between the eyes with tariffs.”

Mr. Trump relies on his trade adviser, Peter Navarro, to provide the economic rationale for his devotion to tariffs. When a delegation of Republican senators warned Mr. Trump in a recent White House meeting about their cost to consumers, the president turned to Mr. Navarro, who showed the senators a slide presentation that documented how the tariffs had helped lift first-quarter economic growth to 3.2 percent.

A former professor at the University of California, Irvine, Mr. Navarro has long argued, in books and speeches, that tariffs — far from being a burden on consumers and a drag on growth — can fuel growth and productivity. Those views place him outside the mainstream of his profession. But he argues that the standard economic scholarship about tariffs does not take into account market distortions between trading partners.

In the case of China, Mr. Navarro has said, those distortions include huge Chinese subsidies of exports, the forced transfer of technology from American firms that want to do business in China and the theft of American intellectual property. He argues that tariffs, which might otherwise raise the prices of Chinese goods, serve merely to level the playing field. They also encourage production in the United States.

Arthur Laffer, the conservative economist who has advised Mr. Trump, said he has told the president what he tells everyone about trade policy: “When you look at tariffs, they are very, very bad for the economy.” But he believes Mr. Trump is using tariffs to pressure other countries to open their markets more freely.

“I have no reason to second-guess the president on negotiation strategy,” Mr. Laffer said.

Increasingly, though, Mr. Trump appears to view tariffs as not just a negotiating ploy, but an end in themselves. He declared last week on Twitter that Chinese leaders seemed to think they could get a better trade deal if they waited for a new president to be elected.

“Would be wise for them to act now,” Mr. Trump wrote, “but love collecting BIG TARIFFS!”

Ana Swanson contributed reporting.

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Fastly pops in public offering showing that there’s still money for tech IPOs

Fastly pops in public offering showing that there’s still money for tech IPOs

Shares of Fastly, the service that’s used by websites to ensure that they can load faster, have popped in its first hours of trading on the New York Stock Exchange.

The company, which priced its public offering at around $16 — the top of the estimated range for its public offering — have risen more than 50% since their debut on public markets to trade at $25.01.

It’s a sharp contrast to the public offering last week from Uber, which is only just now scratching back to its initial offering price after a week of trading underwater, and an indicator that there’s still some open space in the IPO window for companies to raise money on public markets, despite ongoing uncertainties stemming from the trade war with China.

Compared with other recent public offerings, Fastly’s balance sheet looks pretty okay. Its losses are narrowing (both on an absolute and per-share basis according to its public filing), but the company is paying more for its revenue.

San Francisco-based Fastly competes with companies that include Akamai, Amazon, Cisco and Verizon, providing data centers and a content-distribution service to deliver videos from companies like The New York Times, Ticketmaster, New Relic and Spotify.

Last year, the company reported revenues of $144.6 million and a net loss of $30.9 million, up from $104.9 million in revenue and $32.5 million in losses in the year ago period. Revenue was up more than 38% and losses narrowed by 5% over the course of the year.

The outcome is a nice win for Fastly investors, including August Capital, Iconiq Strategic Partners, O’Reilly AlphaTech Ventures and Amplify Partners, which backed the company with $219 million in funding over the eight years since Artur Bergman founded the business in 2011.

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Senior China official says trade war with U.S. could cut growth by 1% point: SCMP

Senior China official says trade war with U.S. could cut growth by 1% point: SCMP

BEIJING (Reuters) – A senior official of China’s ruling Communist Party said the trade dispute with the U.S. could reduce China’s growth pace this year by as much as 1 percentage point, the South China Morning Post reported on Friday, citing an unnamed source.

The paper said Wang Yang, a member of the Communist Party’s seven-person Standing Committee, told a delegation of Taiwanese business people whose firms are based in China that the worst-case scenario from the trade war was a 1 percentage point drop in GDP growth this year.

Beijing has set a growth target of between 6% and 6.5% for 2019.

Reporting by Beijing Monitoring Desk

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No end in sight for corrosive trade war as China retaliates to U.S. tariffs – The Globe and Mail

No end in sight for corrosive trade war as China retaliates to U.S. tariffs – The Globe and Mail

Beijing will raise tariffs on US$60-billion in goods imported from the United States, China’s Finance Ministry said Monday.

Justin Sullivan/Getty Images

China hit back at the United States in a new round of escalating tariffs, triggering a sharp fall in stock markets as hope fades for a quick resolution to the trade war between the world’s two largest economies.

Beijing will raise tariffs on US$60-billion in goods imported from the United States, China’s Finance Ministry said Monday, in retaliation for U.S. President Donald Trump jacking up American tariffs on US$200-billion of Chinese goods last week.

The expanding confrontation now threatens to extend into summer, visiting higher prices on consumers and businesses, volatility on the markets and economic damage to both countries.

The Chinese government said it did not want to impose new levies but would not be pushed around by Mr. Trump.

“China will never yield to external pressure,” Foreign Ministry spokesman Geng Shuang said. “We have said many times that increasing tariffs will not solve any problem.”

Under China’s stiffer customs penalties, 2,493 U.S. products will face a 25-per-cent tariff rate; 1,078 goods a 20-per-cent rate; and 974 goods a 10-per-cent rate. The new tariffs will take effect June 1.

Beijing’s tariffs hit a long list of agricultural and edible products – sugar, coffee, vegetables, meat, gin and tequila – as well as ores and concentrates, chemicals, fertilizers, household appliances, mechanical components, lumber and sporting goods.

In the Oval Office Monday, Mr. Trump responded by falsely crediting his tariffs for the United States’ recent economic growth and cheering the “tremendous amount of money” that is flowing into the treasury as a result. He reiterated his threat to extend tariffs even further, to cover all US$558-billion Chinese imports to his country.

“I love the position we’re in,” Mr. Trump said. “I think it’s working out really well.”

In fact, the United States’ tariffs will actually push economic growth down. One Goldman Sachs estimate found Mr. Trump’s tariffs could reduce U.S. GDP growth by as much as 0.4 per cent.

The cost of tariffs is paid by importers in the country imposing the tariffs and typically passed on to customers. This means that imposing the levies hurts both foreign exporters, who will see a drop in business, and domestic consumers, who must pay more for imported products.

The U.S. President said he would see his Chinese counterpart, Xi Jinping, at next month’s Group of 20 summit in Japan and that it would “probably [be] a very fruitful meeting.” Otherwise, the United States and China have announced no further plans to negotiate, leaving an end to the trade war uncertain.

Mr. Trump said he would pay out compensation of about US$15-billion to American farmers, a usually solidly Republican voting block that has been hit particularly hard by the trade war. The President is likely to face increasing pressure from farm groups and other businesses to end the trade war, but his approval rating among GOP voters has remained solid, giving him little political incentive to change course.

Any resolution feels uncertain and distant.

“We’re back to the exact situation we were in 10 months ago,” said Andrew Polk, founding partner of Trivium, a Beijing-based business advisory firm. “This is the kind of response we should expect from China going forward. They have never wanted to turn up the heat. But they have to react.”

Also Monday, the U.S. Commerce Department slapped stricter licensing requirements on six companies in China and Hong Kong; four for allegedly breaking U.S. sanctions on Iran and two for selling technology to the Chinese army. The move, while theoretically a separate process from the trade talks, could further ratchet up tensions.

Fighting China on trade was a key part of Mr. Trump’s election campaign. He blames Beijing for hollowing out the U.S. manufacturing sector by producing goods at a fraction of the price of their American counterparts.

Trade experts largely agree that China has engaged in unfair trading practices – such as dumping heavily subsidized products on international markets and forcing U.S. companies to turn over their trade secrets – but they generally contend a tariff war is the wrong way to go about holding the country accountable.

Mr. Trump launched his trade offensive against China last year, hitting US$50-billion of goods with 25-per-cent tariffs and US$200-billion with 10-per-cent rates. China fired back with levies on American products, most notably soy beans, a major crop in Trump-supporting states across the U.S. heartland.

The two sides appeared to be making progress in negotiations until earlier this month, when Washington accused Beijing of reneging on promises to change its laws to stop handing out subsidies to Chinese firms and obliging U.S. companies to hand over intellectual property. The breakdown in talks prompted Mr. Trump to hike the 10-per-cent levies to 25 per cent.

Mei Xinyu, a researcher with the Chinese Academy of International Trade and Economic Co-operation, a research body under the Ministry of Commerce, said China carefully calibrated the goods it chose to minimize pain to Chinese consumers.

“Trade retaliation is never our goal. It’s just a way to show them that we are capable of taking countermeasures to respond to their behaviour, and in turn to help them sober up and regain their rationality. We hope to go back to the normal trajectory,” he said.

Ryan Young, a senior fellow at the free-market think tank, Competitive Enterprise Institute, said Mr. Trump’s negotiating strategy has “backfired badly” and he will have to change course to reach a resolution. Mr. Young said Congress should try to take away Mr. Trump’s authority to impose levies.

Mr. Young said better options for dealing with China’s behaviour would be suing Beijing through the World Trade Organization and joining the Trans-Pacific Partnership, a Pacific Rim trade pact meant to contain China’s influence.

“The President has the order wrong – he says ‘ready, fire, aim,’” Mr. Young said. “Trump can’t be trusted with tariff authority.”

Editor’s note: An earlier version of this story misstated the amount of compensation Donald Trump said he would pay out to American farmers.

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‘Pay attention’: Bank of Canada’s Wilkins warns rare yield-curve inversion could signal recession – The Globe and Mail

‘Pay attention’: Bank of Canada’s Wilkins warns rare yield-curve inversion could signal recession – The Globe and Mail

The Bank of Canada has joined the chorus of experts worrying that a rare reversal of short and long-term interest rates may point to darker days ahead for the global economy, and even a recession.

These unusual financial-market conditions “reflect concern about the prospects for growth,” Carolyn Wilkins, the bank’s senior deputy governor, told a business audience in Calgary Thursday.

Rates on longer-term bonds are typically higher than on short-term ones because of the greater risk for lenders of not getting paid over a longer time period.

In recent weeks, however, there has been an inversion of the yield curve in Canada and elsewhere, with some longer-term rates falling below shorter ones. Some economists say the pattern has been a harbinger of recessions in the past.

“When yield curves flatten and they invert, we need to pay attention,” Ms. Wilkins, the No. 2 official at the bank behind Governor Stephen Poloz, told reporters after her speech. “Historically, that has been one signal among others that, if nothing else, growth will be slower. And if it inverts quite a bit and is there for a long time, maybe it could signal a recession.”

But she cautioned that with interest rates lower around the world, these kinds of yield inversions may become more frequent.

Ms. Wilkins said she and the five other members of the bank’s governing council spent “some time talking about prices in financial markets” as they prepared for this week’s interest-rate decision. On Wednesday, the Bank of Canada held its key rate steady at 1.75 per cent.

Ms. Wilkins said there are other relatively innocent reasons for the inversion of the yield curve, including a move by many of the world’s central banks to abruptly halt recent rate hikes. As well, she said, there may be more demand in financial markets for “long-term, fixed assets.”

A recession is not in the Bank of Canada’s most recent official forecast, released in April. The bank says the Canadian economy will grow 1.2 per cent this year, which would be the slowest pace since 2016, and 2.1 per cent next year.

Ms. Wilkins said the central bank is grappling with “conflicting” economic signals. The labour market has been strong in recent months, with solid job and wage growth. And yet companies are reluctant to invest.

The divergence is due mainly to the behaviour of companies in the construction and oil and gas industries, according to Ms. Wilkins. She said these companies have been keeping their employment levels steady, while cutting the hours their people work.

The bank interprets this behaviour as a sign that companies believe the economy is going though “a temporary soft patch,” rather than something more lasting, she said.

Ms. Wilkins also blamed the “brutal winter,” as well as floods and wildfires, for “choppiness” in recent economic data.

The central bank is also preoccupied about the “long-term implications” of rising global trade tensions, she said.

The removal of U.S. duties on Canadian steel and aluminum is good news for Canada, and it “should improve the chances” that the renegotiated North American free-trade agreement will get ratified, she said.

But Ms. Wilkins said the bank is concerned by the escalation in the U.S.-China trade dispute, the “potential for more friction” between the United States and Europe, and Chinese restrictions on some farm exports, including canola.

Resolution of these disputes would give a lift to the Canadian and global economies, she said.

But the opposite is also true.

“If the disputes were to worsen and become long lasting, the outlook would be quite different,” Ms. Wilkins explained. “Not only would we see weaker economic demand, but the supply side of the economy would also take a hit as companies deal with disruptions to their supply chains.”

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