Despite what Trump says, tariffs aren't boosting the American economy - NBC News

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May 6, 2019, 3:34 PM UTC

By Martha C. White

In threatening an escalation of a trade war with China over the weekend, President Donald Trump asserted that the tariffs already in place have boosted the economy.

“These payments are partially responsible for our great economic results,” he tweeted on Sunday.

Economists disagree.

“It’s pretty hard to justify the argument that tariffs have strengthened the economy,” said Dan North, chief economist at Euler Hermes North America. “In the first quarter GDP report, there was a very sharp reduction in imports. Of course that makes GDP look bigger, so that would be a result of the tariffs coming into play. However, that is not a way to grow an economy,” he said.

"The economy has done well in spite of the tariffs,” said Michael O. Moore, a professor of economics and international affairs at George Washington University.

Moore said the domestic economy is thriving because of other Trump administration initiatives like deregulation and a big corporate tax cut, along with low interest rates.

“His assertion generally that the Chinese are paying these tariffs is just simply nonsense. It’s a complete misunderstanding of how tariffs work, because tariffs are paid by the importing company and those companies are overwhelmingly American,” said Jacob Kirkegaard, a senior fellow at the Peterson Institute for International Economics. “Ultimately, that means this is a tax paid by the American consumers. The idea that it’s somehow something the Chinese pay is wrong.”

The amount of tariffs collected by the U.S. rose in 2018 by $7 billion over the prior year, a very tiny portion of the $3 trillion-plus the Treasury takes in annually. Even if Trump were to carry through on his threat to apply tariffs to all of Chinese imports at rates as high as 25 percent, it wouldn’t be enough money to make much of a difference in the national budget.

“In theory, the government should be earning $32.5 billion a year on top of what they were already earning. That hasn’t happened. If you look at tariff revenue in 2018, it was only about $50 billion, whereas in 2017, it was about $35 billion. It hasn’t gone up by as much as you’d think,” Kirkegaard said.

Conversely, the plunge in markets on Monday morning is one example of how just the threat of a trade war subtracts value, said David Dollar, a senior fellow at the Brookings Institution.

“Every time the president tweets and there’s a suggestion that the trade war is ratcheting up, we generally get a bad reaction from markets around the world,” he said.

“That obviously hurts shareholders and broader confidence, but I think the bigger issue is we haven’t seen during 2018 much pickup in business capital investment,” Kirkegaard said. Even though they got a huge tax break, companies have been hesitant to sink money into plants or facilities.

“Today it’s very difficult to set up new businesses without, to some extent, relying on a global supply chain,” Kirkegaard said, and a trade war would throw into question that crucial access to global markets.

The biggest risk with the current China situation is that of escalation, Moore said, because Trump needs a political win to hold on to critical upper Midwest states in the 2020 election.

“We can’t underestimate what a huge political victory this would be for him, if he could get victories he could trumpet on Chinese trade,” he said. “He’s probably willing to play pretty tough on this… That’s what people are worried about — that it will get out of hand.”

While tariffs have had some impact on China’s gigantic economy, escalation at the scale Trump has threatened would lead to higher prices on imported Chinese goods, forcing Americans to pay more for everything from computers to clothing, and would almost certainly prompt Beijing to retaliate, which would hurt critical exports like soybeans and airplanes.

“China has devalued the currency a bit to compensate, and companies are eating a bit of margin as well, but none of that can go on forever. It’s going to end up coming out of the consumer’s pocketbook at some point,” North said.

Martha C. White

Martha C. White is an NBC News contributor who writes about business, finance, and the economy.

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2019-05-06 15:34:00Z
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Trade turmoil wipes out a chunk of stock rally - CNN

The Dow plunged 450 points on Monday morning after President Donald Trump surprised investors by threatening to impose higher tariffs on China in a late Sunday tweet. Half an hour into trading, the Dow bounced back from its initial low, and was some 320 points lower.

The Dow is still up 13.6% this year, but Monday's plunge wiped out the last three weeks of gains.

The sudden escalation of US-China trade tensions deals a major blow to investors' expectations that Washington and Beijing would reach a trade deal in the near term. Trump's threats raise the risk of a prolonged fight between the world's two largest economies.

Heavy selling knocked the S&P 500 and the Nasdaq (COMP), which dropped 1.6% and 2.2% at the open. Just like the Dow, they retraced their initially losses, and were down 1.1% and 1.3%, respectively, half an hour into trading.

For the year, the S&P remains 17.5% higher; the Nasdaq has gained 21.5%.

The VIX, a market volatility index, jumped to its highest level since January.

"A big underpinning of the rally was this consensus that a trade deal with China would eventually get done," said Michael Block, market strategist at Third Seven Advisors. "This tweet may be a tactic but it has bulls unglued and playing what if."

World markets suffered even sharper losses as investors express concern about how tariffs and trade uncertainty will impact China's already-slowing economy. China's Shanghai Composite Index (SHCOMP) tumbled 5.6%, its worst one-day drop since February 2016, according to Refinitiv. The Shenzhen-based CSI 300 Index closed 5.8% lower. China's yuan dropped 0.8% against the US dollar in offshore trading. Hong Kong's Hang Seng dropped almost 3%.

"Shocking escalation — even on Trump standards," Chris Krueger, analyst at Cowen Washington Research Group, wrote in a note to clients on Sunday.

On Sunday, Trump threatened on Twitter to increase tariff rates on $200 billion in imports from China to 25%, up from 10% currently. The president said the increase would take effect on Friday.

Investors are unsure if Trump is trying to apply more pressure to Beijing to get a deal done quickly, or if he intends to carry through on his threat, market analysts said. Either way, the threat increases the risk that the trade deal could come undone.

The threat also has negative implications for the outlook of other trade spats, including autos and the passage of the the USMCA deal that is set to replace NAFTA, according to analysts at Goldman Sachs.

"His move injects major uncertainty into negotiations, which now face a rising risk of an extended impasse — perhaps even through the US presidential election," Michael Hirson, head of China and Northeast Asia at the Eurasia Group, wrote in a note on Sunday.

China signaled on Monday it still plans to attend upcoming trade talks in Washington.

The Goldman Sachs analysts said that while Trump's announcement "lowers the odds of a successful conclusion" to US-China trade negotiations, the firm thinks there is only a 40% chance that tariffs on China will go up on Friday.

"We believe an agreement is slightly more likely to be reached instead," Goldman Sachs wrote in a note to clients on Sunday.

Still, that represents quite the shift given the fact that US stocks had raced higher in recent months due in part to hopes of a US-China trade deal. The market's rebound was also driven by stronger economic reports and the Federal Reserve slamming the brakes on plans to raise interest rates.

"While the Fed's dovish policy pivot has been the biggest driver of the equity rally to date, future equity performance rests largely on optimism about a potential reacceleration and global economic and earnings growth in the second half," said Alec Young, managing director of global markets research at FTSE Russell. "Without a successful US-China trade breakthrough, it's much harder to be constructive on the global macro outlook."

The S&P 500 and Nasdaq hit record highs over and over again over the past weeks. All three major indexes have posted double-digit percentage gains this year, recovering sharply from the late 2018 plunge.

Renewed trade tensions could slow down US economic growth by creating uncertainty and raising costs on businesses and households.

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2019-05-06 14:04:00Z
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Dow braces for 500-point drop on return of trade war fears - CNN

Dow futures plunged about 500 points on Monday morning after President Donald Trump surprised investors by threatening to impose higher tariffs on China in a tweet.

The sudden escalation of US-China trade tensions deals a major blow to investors' expectations that Washington and Beijing would reach a trade deal in the near term. Trump's threats raise the risk of a prolonged fight between the world's two largest economies.

Heavy selling knocked the S&P 500 futures down by 1.6%, while Nasdaq futures tumbled more than 2%. The VIX, a market volatility index, jumped to its highest level since January.

"A big underpinning of the rally was this consensus that a trade deal with China would eventually get done," said Michael Block, market strategist at Third Seven Advisors. "This tweet may be a tactic but it has bulls unglued and playing what if."

World markets suffered even sharper losses as investors express concern about how tariffs and trade uncertainty will impact China's already-slowing economy. China's Shanghai Composite Index tumbled 5.6%, its worst one-day drop since February 2016, according to Refinitiv. The Shenzhen-based CSI 300 Index closed 5.8% lower. China's yuan dropped 0.8% against the US dollar in offshore trading. Hong Kong's Hang Seng dropped almost 3%.

"Shocking escalation — even on Trump standards," Chris Krueger, analyst at Cowen Washington Research Group, wrote in a note to clients on Sunday.

On Sunday, Trump threatened on Twitter to increase tariff rates on $200 billion in imports from China to 25%, up from 10% currently. The president said the increase would take effect on Friday.

Investors are unsure if Trump is trying to apply more pressure to Beijing to get a deal done quickly, or if he intends to carry through on his threat, market analysts said. Either way, the threat increases the risk that the trade deal could come undone.

The threat also has negative implications for the outlook of other trade spats, including autos and the passage of the the USMCA deal that is set to replace NAFTA, according to analysts at Goldman Sachs.

"His move injects major uncertainty into negotiations, which now face a rising risk of an extended impasse — perhaps even through the US presidential election," Michael Hirson, head of China and Northeast Asia at the Eurasia Group, wrote in a note on Sunday.

China signaled on Monday it still plans to attend upcoming trade talks in Washington.

Goldman Sachs analysts said that while Trump's announcement "lowers the odds of a successful conclusion" to US-China trade negotiations, the firm thinks there is only a 40% chance that tariffs on China will go up on Friday.

"We believe an agreement is slightly more likely to be reached instead," Goldman Sachs wrote in a note to clients on Sunday.

Still, that represents quite the shift given the fact that US stocks had raced higher in recent months due in part to hopes of a US-China trade deal. The market's rebound was also driven by stronger economic reports and the Federal Reserve slamming the brakes on plans to raise interest rates.

"While the Fed's dovish policy pivot has been the biggest driver of the equity rally to date, future equity performance rests largely on optimism about a potential reacceleration and global economic and earnings growth in the second half," said Alec Young, managing director of global markets research at FTSE Russell. "Without a successful US-China trade breakthrough, it's much harder to be constructive on the global macro outlook."

The S&P 500 and Nasdaq hit record highs over and over again over the past weeks. All three major indexes have posted double-digit percentage gains this year, recovering sharply from the late 2018 plunge.

Renewed trade tensions could slow down US economic growth by creating uncertainty and raising costs on businesses and households.

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https://www.cnn.com/2019/05/06/investing/stock-market-today-dow-jones-trade-war/index.html

2019-05-06 12:17:00Z
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Brunei won't enforce death-by-stoning punishment for gay sex - New York Post

KUALA LUMPUR, Malaysia — Brunei’s sultan has said a moratorium on capital punishment is in effect for new Shariah criminal laws including stoning people for gay sex and adultery that sparked an international outcry.

The United Nations has called the laws implemented April 3 “draconian” while the U.S. and several other countries have urged Brunei to halt its plans. Celebrities including George Clooney, Elton John and Ellen DeGeneres have rallied for a boycott of nine hotels in the U.S. and Europe linked to Brunei.

Even before 2014, homosexuality was already punishable in Brunei by a jail term of up to 10 years. The new laws say those found guilty of gay sex can be stoned to death or whipped.

Adulterers risk death by stoning too, while thieves face amputation of a right hand on their first offense and a left foot on their second. The new laws apply to children and foreigners, even if they are not Muslim.

Sultan Hassanal Bolkiah said Sunday in a speech to mark the start of Ramadan that he was aware of the “many questions and misperceptions” over the penalties provided for under new sections of Brunei’s Shariah Penal Code, but stressed that there should be no fear.

Brunei has had a “de facto moratorium” on capital punishment for over two decades and “this will also be applied to cases under the (Shariah laws) which provides a wider scope for remission,” he said. The announcement came as a surprise but appeared aimed at deflecting criticism that Islamic criminal laws are cruel.

“We are conscious of the fact that misperceptions may cause apprehension. However, we believe that once these have been cleared, the merit of the law will be evident,” the sultan said.

Sultan Hassanal said Brunei will also ratify the U.N. Convention Against Torture to show its commitment to human rights.

“Both the common law and the Shariah law aim to ensure peace and harmony of the country. They are also crucial in protecting the morality and decency of the public as well as respecting the privacy of individuals,” he added.

In an immediate reaction, Commonwealth Secretary-General Patricia Scotland on Monday hailed the moratorium on the death penalty but also urged Brunei to revoke other harsh punishments such as amputation and flogging. Brunei is a member of the Commonwealth.

Sultan Hassanal instituted the Shariah Penal Code in 2014 to bolster the influence of Islam in the oil-rich monarchy of around 430,000 people, two-thirds of whom are Muslim. There has been no vocal opposition to the new penalties in Brunei, where the sultan rules as head of state with full executive authority. Public criticism of his policies is extremely rare in the country.

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2019-05-06 10:22:00Z
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Fragile Cease-Fire Takes Hold Between Israel and Gaza After Weekend Attacks - The New York Times

JERUSALEM — A tentative cease-fire between Israel and Palestinian militant groups in Gaza appeared to have taken hold Monday morning, bringing a short but deadly bout of cross-border fighting to an end as abruptly as it had started. At least 22 Palestinians, including militants and children, were killed in Gaza over the weekend, and four Israeli civilians died in the fighting.

Hamas and Islamic Jihad, the Gaza groups that fired about 600 projectiles at southern Israel on Saturday and Sunday, had indicated a readiness to restore the fragile truce that went into effect nearly five years ago but has been interrupted repeatedly by violence. A Hamas-run television channel reported in the early hours of Monday that a new cease-fire had been reached, and would come into effect at 4:30 a.m.

According to Arab news reports, the understanding was brokered by Egypt and the United Nations, and includes measures to ease the acute economic crisis in the impoverished Gaza Strip, home to two million people. It came with the start of the Muslim holy month of Ramadan.

At least nine militants and as many Palestinian civilians, including two children, were killed by Israeli forces on Sunday alone, according to Health Ministry officials in the Hamas-run coastal territory. It was the worst violence between the two sides since a 50-day war in 2014.

The Israeli military said it had struck 350 militant targets over the weekend. It resumed wartime tactics that included the targeted assassination of individuals and bombing multistory buildings it said were used for military purposes.

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The remains of a building in Gaza City after it was hit by Israeli air strikes on Sunday.CreditMahmud Hams/Agence France-Presse — Getty Images

The Israeli government did not overtly confirm a renewed cease-fire, as is customary in such situations, with officials reluctant to go public about understandings or agreements with groups that Israel classifies as terrorist organizations.

But in an acknowledgment of the restoration of calm, the Israeli military announced the lifting, from 7 a.m., of all restrictions on public gatherings in communities within a 25-mile radius of Gaza. Roads in the vicinity of the border and most schools reopened.

Then, in a statement issued around 11 a.m., Prime Minister Benjamin Netanyahu alluded to the end of this round of battle, if not the general state of war.

“Over the last two days, we struck Hamas and Islamic Jihad with great force,” he said. “We hit over 350 targets. We struck at terrorist leaders and operatives and we destroyed terrorist buildings. The campaign is not over, and it demands patience and sagacity. We are prepared to continue. The goal has been — and remains — ensuring quiet and security for the residents of the south. I send condolences to the families and best wishes for recovery to the wounded.”

Israeli commentators said that Israel had also been eager to cut short the fighting, with Memorial Day and Independence Day celebrations coming this week, and a stream of international singers arriving to compete in the Eurovision song contest in Tel Aviv this month. In hosting the international contest, Israel intends to showcase itself as a tourist destination.

The exact terms of the cease-fire were not publicized, but in the past they have included measures like an extension of the fishing zone off the Gaza coast in the Mediterranean waters controlled by Israel, assurances for the smooth transfer of Qatari money into the territory and other measures to ease the blockade imposed by Israel, with Egypt’s help. Both countries restrict the movement of people and goods in and out of the enclave, citing security grounds and the need to stop weapons smuggling.

Image

A building in the southern Israeli city of Ashdod that was damaged by a rocket strike from the Gaza Strip.CreditJack Guez/Agence France-Presse — Getty Images

This latest round of fighting appeared to have been set off by events on Friday, when two Israeli soldiers were wounded by a Gaza sniper and four Palestinians were killed.

Two of the Palestinians were shot by Israeli forces during weekly protest along the fence dividing the territory from Israel, according to Gaza health officials. The others, who were identified as Hamas militants, were killed in an Israeli airstrike in retaliation for the sniper attack. Starting Saturday morning, Hamas and Islamic Jihad unleashed an unusually heavy barrage of rockets and mortar shells into southern Israel.

Perennially simmering tensions along the border have burst into at least eight brief but increasingly fierce rounds of fighting over the past year, sometimes lasting little more than a day. These exchanges appear to have replaced the broader wars that occurred in 2008, 2009, 2012 and 2014, with neither side showing any appetite now for a full-scale showdown.

Mr. Netanyahu, who also serves as Israel’s defense minister, is in the process of forming a new, right-wing governing coalition after his party’s victory in the general elections in April.

Opposition leaders from the political center and left have repeatedly criticized him as lacking a more decisive and strategic policy toward Gaza.

Yair Lapid, of the centrist Blue and White party, accused Mr. Netanyahu of “a complete surrender” to Hamas.

Mr. Netanyahu was also criticized by a senior politician in his own Likud party.

“The cease-fire, given the circumstances under which it was reached, lacks achievements for Israel,” the politician, Gidon Saar, who is considered a rival for the party leadership, wrote on Twitter. “The time ranges between the rounds of violent attacks on Israel and its citizens are getting shorter, and the terrorist organizations in Gaza use the periods in between to get stronger. The campaign has not been prevented, but postponed.”

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2019-05-06 11:04:40Z
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Aeroflot jet's black boxes recovered after Moscow crash kills dozens - NBC News

The Flightradar24 tracking service showed that the Murmansk-bound aircraft had circled twice over the Russian capital before making an emergency landing after just under 30 minutes in the air. Storms were passing through the Moscow area at the time.

Survivor Pyotr Egorov said the plane appeared to have been hit lightning.

"We were so scared, we almost lost consciousness," the Komsomolskaya Pravda daily quoted Egorov as saying. "The plane jumped down the landing strip like a grasshopper and then caught fire on the ground."

The Aeroflot plane burns after making an emergency landing on Sunday.Russian Investigative Committee / via AFP - Getty Images

Video captured at the scene showed passengers leaping from the wreckage onto an inflatable slide and people clinging to their luggage as emergency vehicles sped toward the jet.

Russian news agencies reported that the plane had been serviced as recently as last month.

Aeroflot has long shaken off its troubled post-Soviet safety record and now has one of the world's most modern fleets on international routes where it relies on Boeing and Airbus aircraft.

The airline said the pilot had some 1,400 hours of experience flying the two-engine regional aircraft.

The remnants of the Aeroflot jet after it made an emergency landing on Sunday.HANDOUT / Reuters

The Sukhoi Superjet was the first passenger plane developed in Russia since the fall of the Soviet Union.

The model was put into service in 2011 and has been used by airlines in countries including Mexico.

One crashed in Indonesia in 2012, killing all 45 people on board. Human error was blamed.

Yuliya Talmazan

Yuliya Talmazan is a London-based journalist.

Elena Holodny

Elena Holodny is a Moscow-based producer for NBC News.

Reuters and Associated Press contributed.

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2019-05-06 09:50:00Z
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Ceasefire appears to take hold in Gaza, ending deadly weekend of hostilities - CNN

At least 23 people were killed in Gaza, including two infants and two pregnant women, in the exchanges that began Friday, while four people were killed in Israel by rockets.

A spokesman for the Palestinian group Islamic Jihad told CNN that the agreement took effect at 4:30 a.m. local time in Gaza.

Israel rarely confirms or comments on the existence of any ceasefire. But Israeli authorities have lifted all restrictions on civilians in the Gaza periphery, which is likely a clear indication that Israel expect this latest round of fighting has ended.

Israeli Prime Minister Benjamin Netanyahu had warned Sunday that "massive attacks against terrorist elements" would continue due to the rocket attacks coming from Gaza.

At his weekly Cabinet meeting Sunday morning, Netanyahu said "Hamas bears the responsibility not only for its own attacks and actions but also for the actions of Islamic Jihad, and it is paying a very heavy price for this."

Israeli Economy Minister Eli Cohen used similar language in discussing the conflict.

"The rules of the game have changed. We are preparing for a campaign that, by the end of it, Hamas and Islamic Jihad will beg for a ceasefire," Cohen said in a statement posted on social media.

"The heads of the snake in Gaza are already paying a price and they will continue to a heavy price for the unnecessary provocation and the harm to our citizens."

Hamas threatened a similar escalation if the fighting continued.

"We stress that the more atrocious the Israeli attacks on the Palestinian civilians are, the stronger the Palestinian response will be," Ismail Haniyeh, Hamas' leader in Gaza, said in a statement Sunday.

"If the Israeli occupation does not implement the ceasefire understandings, the battlefield will witness more escalation."

The violence marks the first serious escalation in hostilities since the Israeli election about a month ago. Included among the deceased in Gaza are eight members of the armed wing of Islamic Jihad -- the Quds Brigade -- a spokesman for the group said.

The weekend also saw the first use of a targeted killing by Israeli authorities in Gaza in years. Israeli aircraft struck the vehicle of Hamid Ahmed Abdul Khudri, according to the Israel Defense Forces (IDF), who they say was responsible for money transfers from Iran to militant groups like Islamic Jihad and Hamas, the two largest factions inside the Gaza Strip.

The catalyst for the weekend of hostilities occurred Friday afternoon.

Two Palestinians were shot and killed by Israeli troops during weekly protests along the fence between Gaza and Israel Friday, according to Palestinian health officials.

Also during the demonstrations, a sniper in Gaza wounded two Israeli soldiers near the border. Israel responded by striking a Hamas military post, killing two members of Hamas' military wing.

Hamas and other factions inside Gaza vowed to hit back. On Saturday morning, militant factions fired a barrage of rockets into Israel.

The fighting escalated by the hour. Short-range rockets targeting the Gaza periphery gave way to more powerful rockets aimed at Beer Sheva and Ashdod, some of the largest cities in southern Israel. Islamic Jihad also fired an anti-tank missile at an Israeli civilian vehicle. Israel's attacks escalated as well, from hitting smaller military posts to larger multi-story buildings the IDF says were used as terror infrastructure by Hamas and Islamic Jihad.

By the time the sun rose Monday, Palestinian militants had fired about 690 rockets into Israel, according to the IDF, and Israel had conducted airstrikes on 350 targets.

Those killed in Israel include two men in their fifties, health officials said. In Gaza, two infants, a 12-year-old boy and two pregnant women were among the dead, per Gazan officials.

There is a dispute over the cause of the deaths of one of the infants and one of the pregnant women -- Gaza health officials say both died in an Israeli airstrike, while the Israeli military says they were killed when a militant rocket misfired on launch.

Diplomatic attempts to bring an end to the fighting continued throughout the weekend, including "very intense" mediation efforts by Egypt and the United Nations, a source with direct knowledge of the negotiations told CNN.

UN Secretary-General Antonio Guterres' office condemned "in the strongest terms the launching of rockets from Gaza into Israel, particularly the targeting of civilian population centers" in a statement Sunday.

CNN's Joshua Berlinger contributed to this report

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2019-05-06 09:00:00Z
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