The failure of the world’s financial leaders to agree on resisting protectionism and support free trade marks a setback in the G20 process and poses a risk for growth of export-driven economies such as host Germany, economists said on Sunday.
Acquiescing to an increasingly protectionist United States after a two-day meeting in the German town of Baden-Baden, the finance ministers and central bank governors of the 20 biggest economies dropped a pledge to keep global trade free and open.
Instead, they only made a token reference to trade in their main communique by saying the G20 would work together to strengthen the contribution of trade to their economies.
“The weak wording on trade is a defeat for the German G20 presidency,” Ifo economist Gabriel Felbermayr told Reuters.
“This is particularly true in the light of the fact that Germany is one of the world’s strongest export nations and relies on open markets to maintain its prosperity like hardly any other country.”
Pemex, Mexico’s national oil company, slashed its 2016 net loss by nearly 60 per cent to 296bn ($14.3bn) pesos from 713bn pesos in 2015 amid cost-cutting, and Juan Pablo Newman, finance director, told a conference call “finances are stable, but can certainly be improved”.
In the fourth quarter, Pemex trimmed its net loss by 91 per cent to 32.2bn pesos from 360bn. It was its 17th straight loss, but as a sign of the improving trend, Mr Newman noted that with 2016 average production of 2.154m barrels per day, crude output beat the company’s target.
He said efforts to reduce costs and improve efficiency would “continue to bear fruit” and highlighted key associations, asset sales plus the sale this month of the biggest-ever emerging market eurobond as signs that Pemex is on the right track.
However, in 2016, a 65 per cent increase in foreign exchange losses underscored the uncertainty facing Mexico’s economy with Donald Trump’s pledges to rewrite the North American Free Trade Agreement, which has hammered the peso currency.
On Friday, the US Commerce Department announced its plans to raise import tariffs for the Chinese stainless steel products from 63 percent to 190 percent citing a probe that found they were selling on US market at dumping-level price.
“China is disappointed that the United States continued to launch high taxes on Chinese steel export products and calls into question the unfair way the US conducted its investigation,” Wang said, as quoted by the South China Morning Post newspaper.
The United States did not take into the account the evidence previously submitted by the Chinese steel manufacturers and avoided cooperation with the Chinese government, violating the rules of the World Trade Organisation (WTO), the Chinese official underlined.
This is a second blow for the Chinese steel importers in the recent months. The European Commission imposed in January anti-dumping duties on Chinese stainless steel tubes and pipe butt-welding fittings to protect its industry from steel overcapacity.
According the European Commission, Chinese imports will be taxed with duties ranging from 30.7 to 64.9 as its investigation commission confirmed that Chinese stainless steel products had been sold in Europe at dumping prices.
The cross-border movement of goods, services, and capital increased markedly for the thirty years up to the Great Financial Crisis. Although the recovery has given way to a new economic expansion in the major economies, global trade and capital flows remain well below pre-crisis levels. It gives a sense globalization is ending.
The election of Donald Trump as the 45th US President has underscored these fears. His first few weeks in office clearly mark a new era not just for America, but given its central role in late-20th-century globalization, for the world as well. Trump is a bit of a Rorschach test. He did not win a plurality, let alone a majority of the popular vote, but that does not stop pundits from claiming that Trump won because of this or that issue.
There are some campaign promises which Trump has backed away such as citing China as a currency manipulator on his first day as President or pursuing legal charges against Hillary Clinton. His priorities have been repealing the national health insurance, formally withdrawing from the Trans-Pacific Partnership, and signaled an intention to re-open the North American Free Trade Agreement.
Trump and his closest advisers seem intent to unwind not just his predecessor’s initiatives, but the general thrust of America’s grand strategy since the end of WWII. His rhetoric of America First harkens back to Warren Harding, who succeeded Woodrow Wilson after the US Senate rejected the League of Nations. Some historians refer to that period as ‘isolationism, ’ but in practice it was unilateralist.
Stocks jumped Tuesday as the S&P 500 and Nasdaq hit new all-time highs and the Dow moved back up toward the 20,000 level.
The Dow Jones industrial averagegained 113 points, or 0.6%, to 19,912.71. The Standard & Poor’s 500 index climbed 0.7% to an all-time closing high of 2280.07. The tech-heavy Nasdaq composite index rose 0.9% to set a new closing record of 5600.96.
Materials and financial companies led the stock indexes higher in afternoon trading as investors sized up the latest round of company earnings news. Energy stocks also rose as crude oil prices headed higher. Health care, phone companies and other high-dividend stocks were among the biggest laggards as bond yields rose.
The heads of General Motors, Ford Motor and Fiat Chrysler Automobiles met with President Donald Trump early Tuesday. Trump wants the automakers to build new factories in the U.S. He’s warned of a “substantial border tax” on companies that move manufacturing out of the country and promised tax advantages to those that produce domestically. GM (GM) shares gained 1%, Ford (F) added 2.4% and Fiat Chrysler (FCAU) jumped 5.9%.
Trump’s latest moves on trade and regulations have raised concerns over future access to the U.S. market, particularly among Asian countries. Trump signed a memorandum saying the U.S. will withdraw from the trade pact known as the Trans-Pacific Partnership. He also said he would renegotiate the North American Free Trade Agreement.
“The lack of any key U.S. economic data overnight had dealers focused exclusively on the Trump administration’s trade policy and the signing of the executive order to pull out of the TPP,” said Stephen Innes, senior trader at Oanda, of the Trans-Pacific Partnership.
Benchmark U.S. crude rose 43 cents, or 0.8%, to $53.18 a barrel in New York. Brent crude, used to price international oils, gained 21 cents, or 0.4 %, at $55.44 a barrel in London.
The 10-year Treasury yield jumped to 2.47% from 2.40% late Monday.
“It’s a great thing for the American worker, what we just did,” Trump said on Monday after signing an order withdrawing the U.S. from the Trans-Pacific Partnership accord with 11 other nations. He didn’t sign any actions to direct a renegotiation of the Nafta accord with Mexico and Canada, yet he said on Sunday he would begin talks with the two leaders on modifying the accord, BBG reported. “We’ve been talking about this a long time,” Trump said.
As the AP notes, the move is basically a formality, since the agreement had yet to receive required Senate ratification. Trade experts say that approval was unlikely to happen given voters’ anxiety about trade deals and the potential for job losses. It remains unclear if Trump would seek individual deals with the 11 other nations in TPP— a group that represents roughly 13.5 percent of the global economy, according to World Bank figures. Trump has blamed past trade deals such as the North American Free Trade Agreement and China’s entrance into the World Trade Organization for a decline in U.S. factory jobs.
Trump’s trade focus fulfills a campaign promise to rewrite America’s trade policy during his first days as president. In declaring his determination to renegotiate Nafta, Trump would rework an agreement that has governed commerce in much of the Western hemisphere for 22 years. By scrapping the Trans-Pacific Partnership accord negotiated by former President Barack Obama, Trump will delight many of his most fervent supporters as well as a good many Democrats, while opening an economic vacuum in Asia that China is eager to fill.
Trump campaigned against the TPP and other trade deals, including Nafta, during his campaign for the White House. In a video released in November, Trump promised to exit TPP “on day one,” calling it “a potential disaster for our country.”
A reversal in U.S. trade policy could make 2017 the year that efforts to build multinational trade zones crumble, returning the focus to tough, bilateral dealmaking.
In October 2015, officials from 12 nations including the U.S. and Japan gathered in the American city of Atlanta to ink the historic Trans-Pacific Partnership, confident of the dawning of a new age of trade governed by such high-level, multilateral agreements. Yet that dream lies all but dead just over a year later, not least due to Donald Trump’s presidential victory and his pledge to pull the U.S. from the agreement upon taking office Jan. 20.
Many bilateral free trade agreements, which reduce or abolish tariffs and set rules for trade in goods and services between two nations, have been struck over the years. Multilateral agreements extend this notion to the regional level and improve security in the areas they cover, further greasing the wheels of commerce.
Yet Trump prefers his trade pacts one on one — the better to drive hard bargains, leveraging U.S. economic and diplomatic might to secure the most advantageous terms. Multilateral pacts involve far more careful compromise and require each nation to give and take small concessions rather than pushing for an unambiguous win.
As the FT first reported yesetrday, in a dramatic development for Sino-US relations, Trump picked Peter Navarro, a Harvard-trained economist and one-time daytrader, to head the National Trade Council, an organization within the White House to oversee industrial policy and promote manufacturing. Navarro, a hardcore China hawk, is the author of books such as “Death by China” and “Crouching Tiger: What China’s Militarism Means for the World” has for years warned that the US is engaged in an economic war with China and should adopt a more aggressive stance, a message that the president-elect sold to voters across the US during his campaign.
In the aftermath of Navarro’s appointment, many were curious to see what China’s reaction would be, and according to the FT, Beijin’s response has been nothing short of “shocked.” To wit:
The appointment of Peter Navarro, a campaign adviser, to a formal White House post shocked Chinese officials and scholars who had hoped that Mr Trump would tone down his anti-Beijing rhetoric after assuming office.
“Chinese officials had hoped that, as a businessman, Trump would be open to negotiating deals,” said Zhu Ning, a finance professor at Tsinghua University in Beijing. “But they have been surprised by his decision to appoint such a hawk to a key post.”
Mexico could contribute as much as 150,000 barrels per day to non-OPEC oil cuts – OPEC source.
Russia has already said they would cut output by 300,000.
The non-OPEC members meet with OPEC members in Vienna tomorrow.
in other Mexican news Fitch downgrades outlook for Mexico to negative.
As per Fitch:
The revision in Mexico’s Outlook reflects increased downside risks to the country’s growth outlook and the challenges this could pose for stabilization of the public debt burden. Growth has been under-performing rating peers and the general government debt burden has been increasing steadily in recent years. The victory of Donald Trump in the U.S. presidential election has increased economic uncertainty and asset price volatility in Mexico as the President-elect has alluded to renegotiating or terminating the North American Free Trade Agreement (NAFTA) with Mexico and tightening immigration controls.
U.S. President Barack Obama’s strategic “pivot” toward Asia, unveiled in 2012, attracted much international attention but did little to tame China’s muscular approach to territorial, maritime and trade disputes. Indeed, with the United States focused on the Islamic world, Obama’s much-touted Asian pivot seemed to lose its way somewhere in the arc between Iraq and Libya. Will President-elect Donald Trump’s approach to Asia be different?
In his first meeting with a foreign leader since his surprise Nov. 8 election triumph, Trump delivered a reassuring message to Japanese Prime Minister Shinzo Abe who, in turn, described him as a “trustworthy leader.” In a smart diplomatic move, Abe made a special stop in New York on Nov. 17, en route to the Asia-Pacific Economic Cooperation summit in Peru, to meet face-to-face with Trump, who shares his conservative, nationalistic outlook.
Today, Asia faces the specter of power disequilibrium. Concern that Trump could undo Obama’s pivot to Asia by exhibiting an isolationist streak ignores the fact that the pivot has remained more rhetorical than real. Even as Obama prepares to leave office, the pivot — rebranded as “rebalancing” — has not acquired any concrete strategic content.
If anything, the coining of a catchy term, “pivot,” has helped obscure the key challenge confronting the U.S.: To remain the principal security anchor in Asia in the face of a relentless push by a revisionist China to expand its frontiers and sphere of influence.
Trump indeed could face an early test of will from a China determined to pursue its “salami slicing” approach to gaining regional dominance. In contrast to Russia’s preference for full-fledged invasion, China has perfected the art of creeping, covert warfare through which it seeks to take one “slice” of territory at a time, by force.
With Obama having increasingly ceded ground to China in Asia during his tenure, Beijing feels emboldened, as evident in its incremental expansionism in the South China Sea and its dual Silk Road projects under the “One Belt, One Road” initiative. The Maritime Silk Road is just a new name for Beijing’s “string of pearls” strategy, aimed at increasing its influence in the Indian Ocean. Meanwhile, without incurring any international costs, China aggressively continues to push its borders far out into international waters in a way that no other power has done.
Indeed, boosting naval prowess and projecting power far from its shores are at the center of China’s ambition to fashion a strongly Sino-centric Asia. Boasting one of the world’s fastest-growing undersea fleets, China announced earlier in November that its first aircraft carrier, the Liaoning, is ready for combat. Such revanchist moves will inevitably test the new U.S. administration’s limits.