‘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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Hong Kong lawmakers fight over extradition law

Hong Kong lawmakers fight over extradition law

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Media captionTensions flare up with lawmakers jumping over tables

Fighting erupted in Hong Kong’s legislature on Saturday over planned changes to the law allowing suspects to be sent to mainland China for trial.

Several lawmakers were injured and one was taken to hospital as politicians clashed in the chamber.

Critics believe the proposed switch to the extradition law would erode Hong Kong’s freedoms.

But authorities say they need to make the change so they can extradite a murder suspect to Taiwan.

One pro-Beijing lawmaker called it “a sad day for Hong Kong”.

Pro-democracy lawmaker James To originally led the session on the controversial extradition bill but earlier this week those supportive of the new law replaced him as chairman.

Tensions boiled over on Saturday, with politicians swearing and jumping over tables amid a crowd of reporters as they fought to control the microphone.

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Opponents and supporters of the bill clashed in the legislature

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Pro-democracy lawmaker Gary Fan was taken out on a stretcher

Pro-democracy legislator Gary Fan collapsed and was carried out on a stretcher, while one pro-Beijing legislator was later seen with his arm in a sling.

Why change the extradition laws?

Under a policy known as “One Country, Two Systems”, Hong Kong has a separate legal system to mainland China.

Beijing regained control over the former British colony in 1997 on the condition it would allow the territory “a high degree of autonomy, except in foreign and defence affairs” for 50 years.

But Hong Kong’s pro-Beijing leader Carrie Lam earlier this year announced plans to change the law so suspects could be extradited to Taiwan, Macau or mainland China on a case-by-case basis.

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Some critics say Carrie Lam has “betrayed” Hong Kong over the law change

Ms Lam has cited the case of a 19-year-old Hong Kong man who allegedly murdered his pregnant girlfriend while on holiday in Taiwan before fleeing home.

While Taiwan has sought his extradition, Hong Kong officials say they cannot help as they do not have an extradition agreement with Taiwan.

Why object to the switch?

The proposed change has generated huge criticism.

Protesters against the law marched on the streets last month in the biggest rally since 2014’s pro-democracy Umbrella Movement demonstrations.

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”.

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We just got the latest evidence Trump’s trade war is throwing a wrench in business plans

We just got the latest evidence Trump’s trade war is throwing a wrench in business plans

  • Commentary from businesses around the US shows disputes between the US and key trading partners Mexico and China are chipping away at sentiment.
  • The Federal Reserve’s latest Beige Book, a report that takes the temperature of economic conditions across districts, featured businesses’ concerns about trade-related uncertainty.
  • “Outlooks were generally less positive than during the prior reporting period, with tariff and trade negotiations driving up uncertainty,” the Dallas Fed said.
  • Visit Markets Insider’s homepage for more stories.

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.

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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.

Read more: ‘Mayhem,’ ‘Crippling,’ ‘Serenity now’: Trump’s threatened tariffs on Mexico would spur chaos, Wall Street warns

“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.

Read more: An increasing number of major US companies are warning that tariffs may force them to raise prices

“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:

The job market is so hot that one restaurant ‘moved to counter service and disposable utensils’ to stay open

Stocks are having their best week of 2019 after the bleak jobs report fueled hopes for a Fed rate cut

US economy adds far fewer jobs than expected in May

How politics, miscommunication, and ‘betrayal’ of Nissan crashed Fiat Chrysler’s deal with Renault


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Mailbag Episode: Questions from Listeners

Mailbag Episode: Questions from Listeners

Listen and subscribe to this podcast via Apple Podcasts | Google Podcasts | RSS

Youngme Moon, Felix Oberholzer-Gee, and Mihir Desai answer questions from listeners and end up discussing everything from the U.S.-China trade dispute to Disney, CVS Health, short-termism, and how to express an opinion persuasively.

Download this podcast

Some recent picks:

You can email your comments and ideas for future episodes to: harvardafterhours@gmail.com. You can follow Youngme and Mihir on Twitter at: @YoungmeMoon and @DesaiMihirA.

HBR Presents is a network of podcasts curated by HBR editors, bringing you the best business ideas from the leading minds in management. The views and opinions expressed are solely those of the authors and do not necessarily reflect the official policy or position of Harvard Business Review or its affiliates.

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China issues 5G licenses in timely boost for Huawei

China issues 5G licenses in timely boost for Huawei

By Josh Horwitz and Sijia Jiang

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)

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Business this week

Business this week

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”.

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Aptoide, a Play Store rival, cries antitrust foul over Google hiding its app

Aptoide, a Play Store rival, cries antitrust foul over Google hiding its app

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.

And while the European Commission did eventually step in, slapping Google with a $5BN penalty for antitrust abuses last summer after a multi-year investigation, rivals continue to complain the Android maker still isn’t playing fair.

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.

Trezentos says Google’s flagging of its app store affects all markets and “continues to this day” — despite a legal ruling in its favor last fall, when a court in Portugal ordered Google to stop removing Aptoide without users’ permission.

“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.)

In Europe, the Commission’s 2018 antitrust decision was focused on Android licensing terms — which led to Google tweaking the terms it offers Android OEMs selling in Europe last fall.

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.”

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China rebuffs Trump claim U.S. tariffs are making firms leave – The Globe and Mail

China rebuffs Trump claim U.S. tariffs are making firms leave – The Globe and Mail

Chinese Foreign Ministry spokesman Lu Kang, responding to a question on U.S. President Donald Trump’s claim at a daily news briefing, said foreign investors were ‘still bullish’ on China. REUTERS/Jason Lee/File Photo


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.

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Burning tires: the murky oil business polluting parts of Asia

Burning tires: the murky oil business polluting parts of Asia

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

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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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