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.”
Even the normally conservative business community has objected. The International Chamber of Commerce in Hong Kong said the bill has “gross inadequacies” which could mean people risk “losing freedom, property and even their life”.
And Chris Patten, the last British governor of Hong Kong, told the government-funded broadcaster RTHK last month the proposal was “an assault on Hong Kong’s values, stability and security”.
The Trump administration’s trade disputes with critical trade partners are eating away at business sentiment and shaping decisions spanning states, sectors, and industries.
That’s according to commentary from businesses included in the Federal Reserve’s latest Beige Book report, which monitors economic conditions across the 12 US Fed districts, published Wednesday.
“Trade uncertainty has delayed business investment, and tight labor markets have constrained expansion and spurred wage hikes,” the Federal Reserve Bank of Philadelphia said. “Still, inflation remained modest, and the firms remained positive about the six-month outlook.”
The central bank branches showcased local businesses’ broad concerns about the way President Donald Trump’s trade disputes with China and Mexico — and the uncertainty that comes with them — are injecting uncertainty into everyday operations.
Despite threatening massive tariffs on Mexico for over a week, Trump announced Friday evening that the tariffs would be “indefinitely” suspended following negotiations with the country.” Despite the declaration, Trump’s economic threats seem to have spooked some.
“Outlooks were generally less positive than during the prior reporting period, with tariff and trade negotiations driving up uncertainty,” the Federal Reserve Bank of Dallas said.
Meanwhile, the three “negative” themes noted most often from businesses in the Federal Reserve Bank of Boston’s district were “China, tariffs, and the semiconductor cycle; the three are related but distinct issues according to contacts.”
“For example, Chinese cellphone manufacturers are big consumers of semiconductors so trade actions against them (as with Huawei, for example) are a big negative for semiconductor-related firms,” the Boston Fed said.
The central bank’s Boston branch also highlighted issues within the automobile industry. Economists and market strategists up and down Wall Street have warned investors in the past week that Trump’s threatened tariffs on Mexico could have had a disastrous impact on the industry.
“Another area of weakness is autos; a firm supplying capital equipment to the auto industry said investment was depressed because uncertainty about trade policy has delayed new model launches,” the Boston Fed said.
Businesses in the New York and Cleveland manufacturing and distribution sectors are also grappling with the trade war’s implications, the Beige Book showed.
“Some businesses expressed ongoing concern about trade uncertainty, tariffs, and the increase in New York State’s minimum wage,” the New York Fed said.
Meanwhile, its Cleveland counterparts said, “Many contacts are concerned that the increased tariffs on goods traded with China will further exacerbate softening manufacturing activity in China, leading to less demand for American products from Chinese manufacturers.”
And the Federal Reserve Bank of Atlanta said businesses in its district’s transportation industry have begun taking precautionary measures to cut back on capital expenditure as a direct result of Trump’s tariffs.
“Regarding trade policy uncertainty, some transportation contacts developed contingency plans to reduce capital expenditures and headcount to offset tariff-related revenue shortfalls,” the Atlanta Fed said.
Another major theme evident in the Beige Book was the issue of reported labor shortages amid ultra-low unemployment. The US unemployment rate held steady at 3.6% in May, the Bureau of Labor Statistics said Friday.
Despite Trump’s threatened tariffs on US imports from Mexico, stock-market investors this week took the development in stride, as the Dow and the S&P 500 logged their best weeks of the year.
Still, the trade war remains a significant wildcard for the market.
“Financial market participants noted increased volatility and generally attributed it to investor concerns about the outcome of international trade negotiations,” the Federal Reserve Bank of New York said.
Now read more markets and economics coverage from Markets Insider:
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SHANGHAI/HONG KONG (Reuters) – China granted 5G licenses to the country’s three major telecom operators and China Broadcasting Network Corp on Thursday, giving the go-ahead for full commercial deployment of the next-generation cellular network technology.
The approvals will trigger investment in the telecommunications sector which will benefit top vendors such as Huawei Technologies, just as the Chinese network equipment provider struggles to overcome a U.S. blacklisting that has hurt its global business.
State-owned carriers China Mobile, China Unicom and China Telecom , as well as state-owned broadcaster China Broadcasting Network Corporation Ltd, are the four licensees named by the government.
The three carriers had been granted trial 5G licenses at the end of 2018 and Thursday’s announcement gives the go ahead to begin commercial deployment ahead of the original timeline that was targeting that for 2020.
The accelerated 5G rollout could help Huawei as Washington pushes its allies around the world to drop the firm from their 5G networks due to fears it could be used as a tool of Chinese state espionage, a claim that Huawei has repeatedly denied.
Huawei said in response to the license grant that it was prepared to support China’s 5G build-out. It said it had signed 46 5G commercial contracts in 30 countries to date, shipping more than 100,000 5G base stations.
China is racing against other countries to deploy 5G on a large scale, paving the way for advances in technologies like artificial intelligence and autonomous driving.
Some analysts however believe China’s 5G rollout will face difficulties due to the U.S. ban on Huawei buying parts and components from American firms without Washington’s approval.
“We remain concerned that if the U.S. export ban on Huawei remains in place for some time, and is even extended to other Chinese tech companies, it will be very difficult for China to build 5G in scale,” Jefferies said in a note.
“The action by China to accelerate 5G licensing does not remove or alleviate this risk.”
Telecom operators in Britain, the United States and South Korea have already started offering 5G services in limited areas.
China welcomed foreign enterprises to participate in China’s 5G market, an official from the Ministry of Industry and Information Technology, which issued the licenses, said in a statement. Foreign firms likely to be interested in the rollout include Nokia and Ericsson.
China Mobile, the largest Chinese telecom operator, said it planned to offer 5G services in more than 40 Chinese cities before the end of September.
Shares in Chinese 5G-related firms such as ZTE slumped after the news, as investors pocketed gains.
(This story corrects spelling of China Telecom in the third paragraph)
(Reporting by David Stanway and Josh Horwitz in Shanghai, and Sijia Jiang in Hong Kong; Editing by Stephen Coates)
Reports emerged that America’s federal government is preparing to investigate the country’s biggest tech firms for anti-competitive practices. The Department of Justice will oversee any potential investigations of Google and Apple, while the Federal Trade Commission will have jurisdiction over Facebook and Amazon. Not to be outdone, lawmakers in the House Judiciary Committee said they were planning their own antitrust probe of digital platforms, including the four tech giants. See article.
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America continued to fight trade wars on several fronts. President Donald Trump indicated that he would move forward with threats to impose 5% tariffs on imports from Mexico in an attempt to pressure the country to stem the flow of migrants crossing America’s southern border. While there is little support for the president’s proposed tariffs in Congress, even among members of his own party, Mr Trump insisted that attempts to stop him would be “foolish”. See article.
Jerome Powell, the chairman of the Federal Reserve, reassured financial markets rattled by growing trade tensions. Speaking at a conference in Chicago, Mr Powell said the central bank would “act as appropriate to sustain the expansion” amid growing economic uncertainty. The remarks sparked a rally in American share prices and signalled the Fed’s willingness to cut interest rates. Futures markets indicate a 59% chance of a rate cut by July. See article.
China announced plans to create a list of “unreliable” foreign firms, groups and individuals deemed harmful to the interests of Chinese firms. The move follows America’s decision last month to place Huawei on its own blacklist, in effect banning American firms from doing business with the Shenzhen-based telecoms giant. China has not provided details about which companies would be included on its blacklist or what measures would be taken against them.
By the same token
A group of 14 financial firms, led by Swiss bank UBS, is preparing to launch a blockchain-based digital currency for use in settling cross-border trade. The bitcoin-like token, called the utility settlement coin, or USC, is expected to reduce risk and make transactions more efficient. The USC will be backed by major global currencies held at central banks. The firms behind the effort—which include banks in America, Europe, and Japan—expect the digital currency to be operational by 2020.
Africa’s most industrialised economy shrunk by an annualised 3.2% in the first quarter, its largest decline in a decade. Almost every sector of the South African economy was hit, according to the country’s statistics office, with manufacturing, mining and agriculture output falling by 8.8%, 10.8% and 13.2% respectively. The contraction can be blamed in part on severe power outages. Eskom, the state-owned utility responsible for supplying nearly all of the country’s power, has struggled to meet demand and is now regarded as a significant risk to South African growth.
Blackstone, a private-equity firm, announced that it will buy a portfolio of industrial warehouses in America from GLP, a Singapore-based property investment manager, for $18.7bn. The acquisition, one of the largest private real-estate deals in history, represents a big bet on the continued growth of e-commerce, which has spurred demand for warehouse space by retailers.
Infineon Technologies, a German chipmaker, agreed to acquire a rival, Cypress Semiconductor, for €8.4bn ($9.4bn). The deal, which valued San Jose-based Cypress at $23.85 per share, a 46% premium over its share price in the last month, will create the world’s eighth-largest semiconductor maker. Infineon investors were dissatisfied with the acquisition, sending shares in the Munich-based firm tumbling more than 9%.
Apple said it will shut down its iTunes music service, replacing it with its Music, TV and Podcasts apps. The decision to phase out the software was announced at the firm’s annual developer conference. The change will be rolled out later this year with its latest operating system, macOS Catalina.
Midnight in Paris
Fiat Chrysler withdrew its $35bn proposal to merge with Renault. The tie-up, which would have created the world’s third-biggest carmaker, was abandoned by the Italian-American firm shortly after midnight on June 5th when the French government, Renault’s largest shareholder, requested a delay to a final decision on the merger. Fiat Chrysler blamed “political conditions in France” for the deal’s collapse. See article.
A social-media campaign calling for a ban on office dress codes that require women to wear high heels went viral in Japan. The effort spread under the hashtag #KuToo, which plays on the Japanese words for shoe (kutsu) and pain (kutsuu). Asked to comment on the online campaign, Japan’s health minister said that such workplace rules are “necessary and appropriate”.
As US regulators gear up to launch another antitrust probe of Google’s business, an alternative Android app store is dialling up its long time complaint of anti-competitive behavior against the search and smartphone OS giant.
Portugal-based Aptoide is launching a campaign website to press its case and call for Google to “Play Fair” — accusing Mountain View of squeezing consumer choice by “preventing users from freely choosing their preferred app store”.
Aptoide filed its first EU antitrust complaint against Google all the way back in 2014, joining a bunch of other complainants crying foul over how Google was operating Android.
In the case of Aptoide, the alternative Android app store says Google has damaged its ability to compete by unjustifiably flagging its app as insecure.
“Since Summer 2018, Google Play Protect flags Aptoide as a harmful app, hiding it in users’ Android devices and requesting them to uninstall it. This results in a potential decrease of unique Aptoide users of 20%. Google Play Protect is Google’s built-in malware protection for Android, but we believe the way it works damages users’ rights,” it writes on the site, where it highlights what it claims are Google’s anti-competitive behaviors, and asks users to report experiences of the app being flagged.
Aptoide says Google has engaged in multiple behaviors that make it harder for it to gain or keep users — thereby undermining its ability to compete with Google’s own Play Store.
“In 2018, we had 222 million yearly active users. Last month (May’19), we had 56 million unique MAU,” co-founder and CEO Paulo Trezentos tells TechCrunch. “We estimate that the Google Play removal and flagging had cause the loss of 15% to 20% of our user base since June’18.”
(The estimate of how many users Aptoide has lost was performed using Google SafetyNet API which he says allows it to query the classification of an app.)
“Fortunately we have been able to compensate that with new users and new partnerships but it is a barrier to a faster growth,” he adds.
“The googleplayfair.com site hopes to bring visibility to this situation and help other start ups that may be under the same circumstances.”
Among the anti-competitive behaviors Aptoide accuses Google of engaging in are flagging and suspending its app from users’ phones — without their permission and “without a valid reason”.
“It hides Aptoide. User cannot see Aptoide icon and cannot launch. Even if they go to ‘settings’ and say they trust Aptoide, Aptoide installations are blocked,” he says. “If it looks violent, it’s because it’s a really aggressive move and impactful.”
Here’s the notification Aptoide users are shown when trying to override Google’s suspension of Aptoide at the package manager level:
Even if an Aptoide user overrides the warning — by clicking ‘keep app (unsafe)’ — Trezentos says the app still won’t work because Google blocks Aptoide from installing apps.
“The user has to go to Play Protect settings (discover it it’s not easy) and turn off Play protect for all apps.”
He argues there is no justification for Aptoide’s alternative app store being treated in this way.
“Aptoide is considered safe both by security researchers [citing a paper by Japanese security researchers] and by Virus Total (a company owned by Google),” says Trezentos, adding: “Google is removing Aptoide from users phone only due to anticompetitive practices. Doesn’t want anyone else as distribution channel in Android.”
On the website Aptoide has launched to raise awareness and inform users and other startups about how Google treats its app, it makes the claim that its store is “proven… 100% secure” — writing:
We would like to be treated in a fair way: Play Protect should not flag Aptoide as a harmful app and should not ask users to uninstall it since it’s proven that it’s 100% secure. Restricting options for users goes against the nature of the Android open source project [ref10]. Moreover, Google’s ongoing abusive behaviour due to it’s dominant position results in the lack of freedom of choice for users and developers.We would like to keep allowing users and developers to discover and distribute apps in the store of their choice. A healthy competitive market and a variety of options are what we all need to keep providing the best products.
Trezentos stands by the “100% secure” claim when we query it.
“We think that we have a safer approach. We call it ‘security by design’: We don’t consider all apps secure in the same way. Each app has a badge depending on the reputation of the developer: Trusted, Unknown, Warning, Critical,” he says.
“We are almost 100% sure that apps with a trusted badge are safe. But new apps from new developers, [carry] more risk in spite of all the technology we have developed to detect it. They keep the badge ‘unknown‘ until the community vote it as trusted. This can take some weeks, it can take some months.”
“Of course, if our anti-malware systems detect problems, we classify it as ‘critical’ and the users don’t see it at all,” he adds.
Almost 100% secure then. But if Google’s counter claim to justify choking off access to Aptoide is that the app “can download potentially harmful apps” the same can very well be said of its Play Store. And Google certainly isn’t encouraging Android users to pause that.
On the competition front, Aptoide presents a clear challenge to Google’s Android revenues because it offers developers a more attractive revenue split — taking just 19%, rather than the 30% cut Google takes off of Play Store wares. (Aptoide couches the latter as “Google’s abusive conditions”.)
So if Android users can be persuaded to switch from Play to Aptoide, developers stand to gain — and arguably users too, as app costs would be lower.
While, on the flip side, Google faces its 30% cut being circumvented. Or else it could be forced to reduce how much it takes from developers to give them a greater incentive to stock its shelves with great apps.
As with any app store business, Aptoide’s store of course requires scale to function. And it’s exactly that scale which Google’s behavior has negatively impacted since it began flagging the app as insecure a year ago, in June 2018, squeezing the rival’s user-base by up to a fifth, as Aptoide tells it.
“Google is ignoring the injunction result and is disregarding the national court. No company, independently of the size, should be above court decisions. But it seems that is the case with Google,” he says.
“Our legal team believe that the decision applies to 82 countries but we are pursuing first the total compliance with the decision in Portugal. From there, we will seek the extension to other jurisdictions.”
“We tried to contact Google several times, via Google Play Protect feedback form and directly through LinkedIn, and we’ve not had any feedback from Google. No reasons were presented. No explanation, although we are talking about hiding Aptoide in millions of users’ phones,” he adds.
“Our point in court it’s simple: Google is using the control at operating system level to block competitors at the services level (app store, in this case). As Google has a dominant position, that’s not legal. Court [in Portugal] confirmed and order Google to stop. Google didn’t obey.”
Aptoide has not filed an antitrust complaint against Google in the US — focusing its legal efforts on that front on local submissions to the European Commission.
But Trezentos says it’s “willing to cooperate with US authorities and provide factual data that shows that Google has acted with anti-competitive behaviour” (although he says no one has come knocking to request such collaboration yet.)
Despite some changes rivals continue to complain that its changes do not go far enough to create a level playing field for competition.
There has also not been any relief for Aptoide from the record breaking antitrust enforcement. On the contrary Google appears to have dug in against this competitive threat.
“The remedies are positive but the scope is very limited to OEM partnerships,” says Trezentos of the EC’s 2018 Android antitrust decision. “We proposed additionally that Google would be obliged to give the same access privileges over the operating system to credible competitors.”
We’ve reached out to the Commission for comment on Aptoide’s complaint.
While it’s at least technically possible for an OEM to offer an Android device in Europe which includes key Google services (like search and maps) but preloads an alternative app store, rather than Google Play, it would be a brave device maker indeed to go against the consumer grain and not give smartphone buyers the mainstream store they expect.
So, as yet, there’s little high level regulatory relief to help Aptoide. And it may take a higher court than a Portuguese national court to force Google to listen.
But with US authorities fast dialling up their scrutiny of Mountain View, Aptoide may find a new audience for its complaint.
“The increased awareness to Google practices is reaching the regulators,” Trezentos agrees, adding: “Those practices harm competition and in the end are bad for developers and mobile users.”
We reached out to Google with questions about its treatment of Aptoide’s rival app store — but at the time of writing the company had not responded with any comment.
There have also been some recent rumors that Aptoide is in talks to supply its alternative app store for Huawei devices — in light of the US/China trade uncertainties, and the executive order barring US companies from doing business with the Chinese tech giant, which have led to reports that Google intends to withdraw key Android services like Play from the company.
But Trezentos pours cold water on these rumors, suggesting there has been no change of cadence in its discussions with Huawei.
“We work with three of top six mobile OEMs in the world. Huawei is not one of them yet,” he tells us. “Our Shengzhen office had been in conversations for some months and they are testing our APIs. This process has not been accelerated or delayed by the recent news.”
Foreign investors remained enthusiastic about China, the foreign ministry said on Tuesday, following U.S. President Donald Trump’s claim that his tariffs are causing companies to move production away from the world’s second largest economy.
Trump said in an interview aired on Sunday that his tariffs on Chinese goods are causing companies to move manufacturing out of China to Vietnam and other Asian countries, and added that any agreement to end a trade war with China cannot be a “50-50” deal.
No further trade talks between top Chinese and U.S. trade negotiators have been scheduled since the last round ended on May 10 – the same day Trump raised the tariff rate on $200-billion worth of Chinese products to 25 per cent from 10 per cent.
Trump took the step after China sought major changes to a deal that U.S. officials said had been largely agreed.
Since then, China has struck a sterner tone in its rhetoric, suggesting that a resumption of talks aimed at ending the 10-month trade war was unlikely to happen soon.
Chinese foreign ministry spokesman Lu Kang, responding to a question on Trump’s claim at a daily news briefing, said foreign investors were “still bullish” on China.
“Even though over the past year or more the United States has continued to menace Chinese products with additional tariffs, everyone can see that the enthusiasm for foreign investors in China remains high,” Lu said.
Lu listed companies, including Tesla, BASF and BMW, as all having recently increased their investment in China. He added that China would continue to improve business and investment conditions for foreign companies.
But foreign firms have grown weary of what they say are China’s piecemeal economic reforms.
Long considered a cornerstone of an otherwise fraught bilateral relationship, the U.S. business community in China in recent years has advocated a harder line on what it sees as discriminatory Chinese trade policies.
The American Chamber of Commerce in China said in February that a majority of its members reported in an annual survey that they favoured the United States retaining tariffs on Chinese goods while Washington and Beijing try to hammer out a deal to end the trade war.
At the time, which was well before the latest tariff hikes, the chamber said that 19% of its member companies were adjusting supply chains or seeking to source components and assembly outside of China as a result of tariffs, while 28% were delaying or cancelling investment decisions in China.
China’s other trade partners also complain about unfair treatment.
The European Union Chamber of Commerce in China said on Monday that compelled transfers of technology to Chinese firms in exchange for market access are increasing for European companies despite Beijing saying the problem does not exist.
Resolving that issue in an enforceable manner is a core U.S. demand in trade negotiations.
PASIR GUDANG, Malaysia/JOKHABAD, India (Reuters) – When local investigators scoured a riverbed in southern Malaysia for clues in a chemical dumping case that hospitalized over one thousand people earlier this year, they found a cocktail of toxins, including a colorless liquid commonly secreted when tires are recycled.
Steel wire recovered after the pyrolysis process of used tyres is seen at a unit in Jokhabad industrial area in the northern state of Uttar Pradesh, India May 9, 2019. REUTERS/Adnan Abidi
That led environment officials and police to a small firm called P Tech Resources involved in pyrolysis – a business of burning old tires to make low-grade oil that industry sources say is also common elsewhere in Southeast Asia, China and India.
Police have charged a truck driver and all three of P Tech’s directors for violating a law prohibiting the illegal dumping of waste. The firm’s directors and the firm also each face 15 charges for offences related to waste controls and air pollution brought by the environment department.
They have all denied wrongdoing. Lawyers representing them and local police declined comment citing ongoing court proceedings.
Reuters was not able to reach the three directors of P Tech or the company secretary, the only four company officials listed in documents filed with Malaysia’s companies regulator. Its premises were closed and calls to its registered office went unanswered.
The documents show P Tech, registered in 2017, manufactures and trades tire oils.
Done properly, in a controlled environment, tire pyrolysis has been lauded by the recycling industry as a green way of turning a complex waste into a useful energy source. In this process, tires are heated in the absence of oxygen and the gases released are condensed into a low-quality oil that can be used in asphalt or fuel oil, depending on its purity.
Some firms in Europe and the United States have developed technology to limit emissions and waste from pyrolysis, but with low margins this green approach has not had widespread commercial success, industry experts said.
Reuters visited the premises of P Tech. Piles of tires bound in bales, a tall chimney and a filthy pond could be seen behind closed gates.
Neighboring workers told Reuters the firm operated at night and its work produced a stench that would linger until the morning. No one from P Tech was available for comment.
“Tire pyrolysis is not a problem. The problem is with the mismanagement of it,” Yeo Bee Yin, Malaysia’s environment minister told Reuters when asked about the pyrolysis industry in her country. She noted P Tech was licensed for pyrolysis but did not speak specifically about the dumping case.
Yeo said Malaysia used to have “very lax environmental laws” and “very low punishments” for breaches but has stepped up enforcement recently and closed down some illegal pyrolysis operators in order to better regulate the sector.
Malaysia’s department of environment said 22 tire pyrolysis firms across the country are licensed but declined comment on the number of unlicensed operators.
Over half a dozen industry sources said pyrolysis in India, China and Southeast Asia also is prevalent mostly in small backyard operations.
Earlier this month, Reuters visited a cluster of about 10 tire burning factories in an industrial area in Jokhabad, a town on the outskirts of India’s capital New Delhi.
Mounds of black powder lay on open ground at the first plant, as about half a dozen workers wearing no protection, some barefoot, their clothes and skin stained black, milled about.
Most said they lived inside the plant itself, pointing to a cement shed set up barely a few feet away from large, round recycling machines.
At a second plant, where a teenager sorted through a pile of odd-sized tires, plant supervisor Manoj Kumar said he was producing oil mainly used as tar for road construction.
While he maintained his plant had high standards, Kumar said most of the other firms in the area were lax, had no mechanism for waste processing and their factories emitted potentially harmful gases in the air. Reuters could not verify his comments.
Shops and homes stood barely a kilometer (a half-mile) from the industrial cluster.
A report commissioned by Indian environmental rights group SAFE last year said at one site in Jokhabad, carbon fumes and sludge were so bad that monkeys in the surrounding area had black faces and fur. Reuters couldn’t independently confirm its findings.
SAFE sent its findings on six plants in a letter to India’s environment ministry in January, and said they were exposing “people at large to environmental risks” and “risking the lives of those involved in such practices for perverse profits.”
India’s environment ministry did not respond to a request for comment on the SAFE report.
There is no official data on the size of this business, which is being fueled by a global demand for tires expected to rise about 3 percent this year to nearly 3 billion units, according to a report by Cleveland, Ohio-based research firm Freedonia.
With free raw material – used tires – and demand for unconventional oils increasing for everything from tar to build roads to fuel for ships, pyrolysis can be a lucrative business even at a small scale.
Asphalt currently sells for about $100 per ton, while fuel oil sells for about $400 per ton.
Villager Zulkifly Kassim was one of the first to become aware of the dumping of chemicals by P Tech in the Sungai Kim Kim river in the Malaysian state of Johor on March 7.
Shortly after midnight he was awoken by a putrid smell. He went outside to investigate and shone a torchlight into the stream behind his house.
“I could see the water already had become black and the fish were coming up and down,” said Zulkifly, 50.
Minutes before Zulkifly was awoken, a truck parked near a bridge upstream from his house and dumped oil waste and sludge into the river, according to the chargesheet filed in court by the police against P Tech.
Over the next few hours and days after the dumping, noxious vapors caused breathing problems, vomiting and dizziness, especially among children and elderly, local authorities said.
Selahudeen Aziz, Johor state’s health director, said over 1,200 people were hospitalized with 26 treated in intensive care. Fourteen people were brought to hospital unconscious.
The ports around southern Malaysia where the March dumping took place and nearby Singapore make up the world’s most important marine refueling hub.
Two oil traders in Singapore, requesting anonymity, told Reuters that oil from Malaysian tire pyrolysis had been offered around the market in recent months in the marine oil sector, known as bunker fuel.
They said blending such oil into bunker fuels was on the rise as tightening regulations due to come in next year have pushed up benchmark bunker fuel prices to their highest seasonal level in years.
Slideshow (4 Images)
($1 = 4.1890 ringgit)
Additional reporting by Sudarshan Varadhan and Adnan Abidi in NEW DELHI, Roslan Khasawneh and Fathin Ungku in SINGAPORE and Emily Chow in KUALA LUMPUR; Editing by Joe Brock and Raju Gopalakrishnan
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.”
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.”
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!”