Just don't call it a trade war: US v. China

Last Friday’s news that President Donald Trump has upped the ante with China by increasing the tariff to $200 billion on Chinese exports, was a move that sent the Dow and global exchanges into a downward spiral that made both Wall Street and Main Street nervous as a threat to a strong US economy, since consumer spending is its main driver.

Despite saying that “The relationship between President Xi and myself remains a very strong one, and conversations into the future will continue,” Trump’s threat to increase by 25 percent on another $325 billion of Chinese exports, seemed less than a good faith measure.

Chinese Vice Premier Liu He appeared to minimize the impasse as one of distractions, and said, “But China is not afraid, nor are the Chinese people,” adding that “China needs a cooperative agreement with equality and dignity.”

Despite long running concerns over several American administrations over allegations of stealing of business strategies and price hikes, joined by European concerns, Bloomberg reported, “Before the rebound late Friday, U.S. markets had posted their worst week of the year so far, as the trade truce that had been in place for months was shattered by the new U.S. tariffs.”

China announced it would raise tariffs on $60 billion of American goods in a tit-for-tat move that has made every market nervous.

CNN Business reported that “Asian stocks dipped lower on Monday, with Japan's Nikkei Index (N225) dropping around 0.7% and the Shanghai Composite Index (SHCOMP) closing more than 1% lower. Hong Kong markets were closed for a holiday.

Major European markets like the DAX (DAX) and CAC40 (CAC40) fell more than 1% on Monday. Stocks in Germany, which exports heavily to China, were among the hardest hit. BMW (BMWYY) and Volkswagen (VLKAF) both dropped around 1.5%, Daimler (DMLRY) fell 3.3% and ThyssenKrupp (TKAMY) closed 8.3% lower. Losses on the FTSE 100 (UKX) were narrower, as rising oil prices gave a lift to BP (BP) and Shell (RDSA).”

“China has used its WTO membership to flood other countries with exports, while limiting foreign access to its own market. "Their vision is in a lot of ways zero sum," said Blaine Johnson, a policy analyst who specializes in Asia at the liberal Center for American Progress.

The result is a badly lopsided trading relationship: The U.S. trade deficit with China last year hit a record $379 billion,“ reported US News and World report, using an AP post.

In February of this year, The Economist said, “At the heart of these complaints is the role of China’s government, which funnels cheap capital towards state firms, bullies private companies and breaches the rights of foreign ones. As a result, China grossly distorts markets at home and abroad.”

Summing up the long, nearly 20 year problem, they also noted, “the U.S. says China is trying to meet its [market] aspirations by stealing trade secrets, coercing technology transfers, subsidizing its own firms and burying in red tape foreign companies that want to compete in the Chinese market. Last year, the U.S. began imposing tariffs to pressure China to drop the aggressive tactics.”

Trump has noted that the next round will begin when “he expects to meet Xi in late June at the G-20 summit in Osaka, Japan.”

Tariffs have had a long chapter in US history and after the weak Articles of Confederation, there was no room for taxation, other than requesting by the nascent federal government from the states, and tariffs, the brainchild of Alexander Hamilton, the first Secretary of the Treasury, created the idea that was also supported by George Washington and Abraham Lincoln, as a way of protecting American industry and goods.

It was a point of departure between President Cleveland and Candidate William MckInley as they argued whether a republic, a free nation, could use them. And, all came to increasing controversy with the Smoot-Hawley Act of 1930 that some felt exacerbated the oncoming Depression.

While seen as a success at first the failure of global banks decreased the benefits of the Act, but  the tide turned, and later, “The 1932 Democratic campaign platform pledged to lower tariffs. After winning the election, President Franklin Delano Roosevelt and the now-Democratic Congress passed Reciprocal Trade Agreements Act of 1934. This act allowed the President to negotiate tariff reductions on a bilateral basis, and also treated such a tariff agreement as regular legislation, requiring a majority, rather than as a treaty requiring a two-thirds vote. This was one of the core components of the trade negotiating framework that developed after World War II. The tit-for-tat responses of other countries were understood to have contributed to a sharp reduction of trade in the 1930s. After World War II this understanding supported a push towards multi-lateral trading agreements that would prevent similar situations in the future,” summed Wikipedia.

Now it’s Trump’s turn to return to high tariffs, and its alignment with his nativist stand, replete with the infamous Make America Great Again slogan; but now it promises to be a threat to his 2020 reelection campaign, just after he pinned his star on the strong economy, as a lead to keep the presidency for a second term.

He does this despite the opinion of most economists, and observers, who have shown the successful economy to be attributable more from the efforts of former Federal Reserve Chair Janet Yellen, and President Obama, with data-driven formulas, and saving the auto industry, and banking industry from fiasco, early on in his first term.

Illinois farmers have seen decreased profits over the last six years, and “Evan Hultine, a sixth-generation corn and soybean farmer in Princeton, Illinois, said a trade war is the last thing he and his fellow farmers need,” in an interview with CBS This Morning.

Pointedly he also said that "I'd tell him that we supported him from the get-go on trying to bring China to the table and make them more accountable for their practices, but every day that this ticks on, farmers are the ones that are taking it on the jaw," Hultine said.

Trump will, in turn, have to ask himself if the risk of alienating some of his most ardent supporters is worth the risk.

Despite, what many say is a strong and consistent approval base of at least 44 percent according to a recent Gallup poll, it makes some wonder if this trade war with China may chip away at support from his base, as the concern from Hultine expressed.

Some feel that China may have the upper hand, thus further jeopardizing the economic platform that the president has trumped as the means to staying in office, and created a backlash with what is essentially a tax on the American consumer.

What-a-coulda-shoulda, is an old American saying and perhaps,there was an alternative, as Washington Post columnist, Robert J. Samuelson noted in a recent column: “What the United States should have done is create a global coalition of major trading countries — itself, the European Union, Japan and other advanced societies — that would negotiate limits on subsidies, coerced technology transfers and a level playing field for competition between domestic and foreign firms. If China violated the rules and refused to join, the other countries could take action against its exports.”

Chinese state media, according to The Economist, issued this statement: “If you want to talk, our door is wide open,” said an anchor on China’s most-watched news programme on May 13th, in a clip that went viral. “If you want to fight, we’ll fight you to the end.”

American healthcare, American values

It’s no secret that America has faced a crisis with the provision of healthcare over the last several decades, and that entering the fray is like Daniel entering the lion’s den, yet that debate continued last Tuesday with a Congressional hearing, by the House Rules Committee, on major health proposals; one from the Senate, and the other from the House of Representatives, with  each one attempting to cover more ground, than the Affordable Care Act, from the Obama administration, commonly known as Obamacare.

While the Democrats are tied to the issue that propelled them into the majority in the House are committed to seeing that a plan be developed, the Republicans, are equally harnessed to seeing any effort, by them, defeated as a socialist effort, as they did with Obamacare, nevermind that most GOP supporters cannot clearly identify what socialism is, or isn't.

“Democrats are fully embracing socialism and a complete government takeover of the American health care system. Democrats’ radical plan will rip health care from 158 million Americans. Taxes would skyrocket and access to care would slow to a crawl,” House Republicans said in a statement the day before.

It also promised to be debatable within the Democratic party, with some presidential candidates on the left of the issue, while others are in the middle, some lined up behind Medicare for All, with others, lightly defined as “single-payer”, while still others, including leadership, want to take a more incremental approach with universal coverage as the goal.

The Democratic left has become energized on the issue, and want to see fast results, but in a body that is easily entrapped in debate, and with President Trump eager to use healthcare (despite his failings to replace Obamacare) as a wedge issue, to help ensure his re-election,and keep the insurance industry profitable, while further enriching the coffers of Big Pharma.

As Bloomberg News reported, “The House on Tuesday will gavel in the first-ever hearing on a sweeping Medicare for All proposal .  . . and, if private health insurers are one day put out of business by a government-run single payer health system, they may look back at Tuesday as the beginning of the end. Yet the bill coming before the House Rules Committee won’t become law anytime soon and may never get a hearing in the committees that oversee Medicare.”

“Representative Pramila Jayapal of Washington State, sponsor of the legislation and a leader of the Democrats’ progressive faction in the House, said she’s playing the long game.

“This is first step but certainly not the last step,” she said in an interview.  But, in the House, Jayapal’s bill has backing from 109 out of 235 House Democrats.”

“From my read of the room, there isn’t support for that proposal,” said Representative Ben McAdams, a freshman Democrat who represents a swing district in solidly Republican Utah. “I’m worried it causes more problems than it solves.”

Shoring up Obamacare, is the goal of Speaker of the House Nancy Pelosi, who also wants, as with most of her supporters, mostly fellow lawmakers, to lower drug costs, while letting the debate on more radical legislation continue.

Significantly, as Bloomberg noted, “The two committees with jurisdiction over Medicare haven’t agreed to hold hearings and there is no push for a floor vote this year under discussion.”

“It’s also not clear if it will be considered by the Energy and Commerce Committee, which has primary jurisdiction over health care issues,” said the Hill.

That has not deterred some, and “Things are moving at a faster pace than some had anticipated and I think that’s good,” said Massachusetts Representative Jim McGovern, the Rules Committee chairman and a supporter of the Medicare for All bill. “This is not being slow-walked, we are trying to ignite the discussion on this.”

Jayapal’s bill, H.R. 1384, is “far more generous” than one in the Senate by Sen. Bernie Sanders, “It would expand Medicare to everyone over just two years and once in place would waive all co-pays, deductibles and premiums for the insured. Unlike Medicare now, it would cover long-term nursing home care. Private insurers would be banned from competing with the new Medicare for essential services but could offer new plans for elective procedures like plastic surgery.”

There is weak support for her plan in the House and the votes, are, as of now,109 out of 235 among House Democrats.

There is good news, according to The Hill, which reported that “House: Rep. Richard Neal (D-Mass.), the chairman of the Ways and Means Committee, which shares jurisdiction on health care issues, will soon hold a hearing on the proposal.”

That may be a wise move since “Adam Green of the Progressive Change Campaign Committee organization has threatened to support a primary challenge against Ways and Means Chairman Richard Neal of Massachusetts if he refuses to hold hearings on the plan. The group also complained that Neal was moving too slowly to demand Trump’s tax returns.”

Sanders, in the lead as one of the major contenders for the 2020 Democratic nomination, “introduced his own Medicare for All bill in the Senate. Four of his Senate colleagues also seeking the Democratic nod, Kamala Harris, Cory Booker, Kirsten Gillibrand and Elizabeth Warren, have signed on as co-sponsors.”

Former Vice President Joe Biden, now a presidential contender, has taken an incremental approach, and does not support the Sanders bill, and has endorsed a public option plan, with lowered drug prices, except for people covered by a private plan.

Sensing a dust-up, “Some Democrats have said they prefer lowering the Medicare age to 55, allowing people to buy into the program or a public option to compete with traditional insurance. A group of liberals led by Connecticut’s Rosa DeLauro and Illinois’s Jan Schakowsky are introducing a bill that would allow traditional employer-based insurance to continue while enrolling the uninsured automatically in expanded versions of Medicare and Medicaid,” Bloomberg added.

Nothing is simple when it comes to healthcare legislation, as we have seen, stretching back to the days of President  Truman, in 1945, whose national health insurance was defeated, in part, by the American Medical Association's accusation of  “socialized medicine” and then President Johnson faced down his critics for ushering in Medicare and Medicaid, for the same reason, and President Obama was attacked by the same reasoning, for the ACA.

In Tuesday’s hearing “GOP panel members repeatedly pressed McGovern on why the Rules Committee, which is often controlled by the Speaker, was the one holding a Medicare for All hearing.

McGovern, who took over as head of the panel in January, responded by saying: “There’s a new sheriff in town. That’s why we’re doing the hearing.”

Tart replies aside, “The location underscored the divisions the Democratic Party faces in how it plans to improve a system where 29 million Americans are uninsured, and millions more can’t afford their premiums, deductibles and prescription drugs,” noted The Hill.

Despite the enthusiasm on both sides, “Energy and Commerce Committee Chairman Frank Pallone Jr. (D-N.J.) hasn’t committed to holding a hearing on Medicare for All, and has instead focused on bills that would strengthen the ACA.”

Another reality is that “Many Democrats are wary of Medicare for All because it would eliminate private insurance, a multibillion-dollar industry that covers 67 percent of the population,” and is also a significant employer; and, polls have shown that there is less support for the proposal, when respondents, many of whom like their employer based plan, are told that it would be eliminated.

The biggest issue, at least from the Sanders plan, is cost, and $32 trillion dollars is a hefty price tag for something that many do not fully understand, or support.

Republican witness Charles Blahous, of the Mercatus Center, has estimated that the Sanders version would require spending that amount over a decade.

All of this aside, is the human cost to those without adequate health insurance, and a recent story from NPR showed that “A study published last month in Health Affairs examined claims data from a large national insurer for 316,244 women whose employers switched insurance coverage from low-deductible health plans (i.e., deductibles of $500 or less) to high-deductible health plans (i.e., deductibles of $1,000 or more) between 2004 and 2014.”

Notably, they found that for women with possible breast cancer, those “with low incomes who had high-deductible insurance plans waited an average of 1.6 months longer for diagnostic breast imaging, 2.7 months for first biopsy, 6.6 months for first early-stage breast cancer diagnosis and 8.7 months for first chemotherapy, compared with low-income women with low-deductible plans.”

Whether, or not, these illustrative stories reach the Congress is debatable, but what cannot be ignored is the need for a comprehensive healthcare that is equitable for all all Americans.

April Jobs Report gives U.S. economy high and lows

More than hoped for, but less than what we deserved, seems to sum up the April Jobs Report released by the Labor Department on Friday which showed 263,000 jobs added the US Labor Market. With unemployment under 3.6 percent, and continued growth of 100 months in a row.

Many economists cheered after hearing the news, along with some bankers, and President Trump, who tweeted that the US is “the ENVY of the WORLD”.

As the celebratory confetti, and balloons, appeared, accompanied by a steady stream of praise, the glow was off for some, concerned about the slow wage growth that  says to many in the media, that “this is not your father’s economic recovery; and as The New York Times reported, the “. . . current expansion doesn’t resemble past booms.”

Of particular concern, was the stubborn labor force participation rate which remained the same at 62.8 percent, contributing to the still abysmally low wage increase of 3.2 percent that has weakened the “larger more durable expansion” that Michael Gapen, chief US economist at Barclays, described.

Others have attributed the low wages to the dearth of qualified workers, and others to the popularity of non-compete clauses for departing workers, the lack of organized labor for some of the big retailers, or wage freezes for those companies captured by venture capitalists; but the simple fact is that the story behind the headline numbers is not as rosy, as some would have us believe.

There are some observers, that say, at least, talks of inflation have receded, and Fed vice chair Richard Clarida said, in prepared remarks, also released on Friday: “The U.S. economy is in a very good place,” and Chair Jerome Powell has resisted pleas from Trump, and Vice-President Pence, to cut interest rates, stating that he will not bow to political pressures.

Terming wage growth as “appropriate” the Fed’s core indicator is the personal consumer expenditures and that rate was 1.6 percent in March, well below the Fed target of inflation, the traditional 2.0 percent.

There are also some that see April’s good news as a blunt to talks of a recession, something that was prevalent in January, but now might be stilled; and, extended even further are those that see global concerns such as Brexit, or the US and China trade wars will have no effect, but some critics of that assertion, think that view as overly optimistic.

There is good news for certain areas, and especially business and professional services, a catch-all category for a variety of clerical and administrative workers, including those working for temporary agencies, but has increased its numbers to 76,000 jobs and some like Diane Swonk of Grant Thornton, told the Times that their increased duties, especially technical, have placed them in greater demand.

“These people are handling the logistics of implementing this stuff,” forcing businesses to hire more administrative and support workers, Ms. Swonk said. “These are not the kind of admin jobs like we used to have. They’ve moved up significantly in terms of skills.”

As with earlier coverage, in previous months, some employers have turned to other methods to lure prospective and qualified employees, with hefty sign-on bonuses, child care, and for some, the absence of a college degree, or marijuana convictions, are no longer the impediment, that it once was - unheard of even a year, or so ago.

Justin Holland, founder and chief executive of HealthyJoy, shared with the Times, that he “is also considering workers who might not have been as appealing a decade ago. “I don’t look at a college degree as a gatekeeper”.

Interestingly, the Times coverage noted that some of the most popular search terms, on Indeed, are “felony friendly” - up 37 percent, and “no background check” - up 148 percent; all indicators that show future employers are looking beyond traditional barriers, to get the people that they need; which in turn might partly contribute to greater labor force participation.

Despite these concessions, the U-6 rate, which shows those that are underemployed, as well as those still searching, remained the same for both February and march at 7.3 percent.

Further complicating an analysis is the example of manufacturing, which showed an increase of 4,000 jobs added, but omits the previous loss of 6,000 in March.

Additionally, the jobless claims rose to 23,000 on “ a seasonally adjusted basis” but fell in the final full week of April, Yahoo Finance reported.

For those that are still looking for a silver lining, they get it with the news of the GDP which was 3.2 percent, in the first quarter, belying predictions that it would only be 2.3 percent.

Finally, just to mix apples with oranges, Amazon, has increased its hourly pay to $15 an hour, followed by Costco; and in April, Target increased its hourly pay to $13 an hour.