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The Trump administration’s point man on China trade talks says the U.S. will hold fast to its 90-day deadline, leaving a short window to resolve thorny commercial issues.
Good morning. Jeff Sparshott here to take you through key developments in the global economy. We’ll also look at the latest on Huawei’s CFO, how a global slowdown doesn’t signal an imminent recession, political turmoil in Europe, and what home flippers are telling us about the market. Let us know what you think by replying to this email.
THE FINAL COUNTDOWN
The Trump administration plans punishing tariffs on Chinese imports if the sides don’t reach a lasting trade agreement during their 90-day cease fire. “It has to be verifiable, it has to be monitored, it can’t be just vague promises like we’ve seen over the last 25 years,” U.S. Trade Representative Robert Lighthizer said. If there’s no deal, tariffs on $200 billion of Chinese goods would rise to 25% from the current 10%.
China issued an ultimatum to Canada, demanding the immediate release of Huawei Technologies Co.’s finance chief or face “severe consequences.” The warning marks an escalation in rhetoric by the Chinese government over the case of Meng Wanzhou, who is in the midst of hearings in Canada for extradition to the U.S. to face allegations she violated Iran sanctions, Eva Dou reports.
There’s some concern the Huawei arrest could contaminate U.S.-China trade talks. Mr. Lighthizer said the development “shouldn’t really have much of an impact…It is totally separate from anything that I work on.”
WHAT TO WATCH TODAY
The U.S. job openings and labor turnover survey for October is out at 10 a.m. ET.
China’s November export data was the worst, excluding the holiday period around Lunar New Year, since late 2016. Import growth also slowed sharply, partly due to falling oil prices.
Economists have been expecting Chinese trade data to falter in line with the rest of the world for months. The fact that it finally has—and that exports to the U.S. held up better than elsewhere—hands additional leverage to President Trump’s team as negotiations on a comprehensive trade deal with China shift into high gear, Nathaniel Taplin writes.
Maurice Obstfeld, chief economist of the International Monetary Fund, warned that global growth is slowing and the U.S. will likely feel the drag. “The slowdown outside the U.S., to the extent we’re seeing signs of that, seems to be more dramatic,” Mr. Obstfeld said ahead of his end-of-the-year departure from the IMF, Josh Zumbrun reports.
The remarks are a downbeat note from an economist who, during his three years at the IMF, was often upbeat. Mr. Obstfeld isn’t predicting a recession. He is warning of a slowdown: “For the rest of the world there seems to be some air coming out of the balloon and that, I think, will come back and also affect the U.S.”
Investors are growing anxious about the prospect of recession. Stocks are declining, the Treasury yield curve is close to inverting, oil prices are signaling weaker demand, German, Italian and Japanese economies shank in the third quarter, China’s economy is slowing, and trade tensions are still running high, Paul Hannon reports.
But here’s some good news: Economists at UBS Securities examined 120 recessions in 40 different countries over the past 40 years for clues about what’s next. “We find that on several dimensions, the behaviour of the data over the last four quarters in the U.S., Eurozone and Japan is completely incongruous with any of the recessions that took place since 1980,” the bank’s Pierre Lafourcade and Arend Kapteyn write. While the model is consistent with a “sharp slowdown” in global growth, it doesn’t presage the end of the business cycle.
President Emmanuel Macron is facing unprecedented pressure to roll back his overhauls of the French economy after a fourth consecutive weekend of “yellow vest” protests. Rioters among some 136,000 protesters waged pitched battles with police in Paris and other major cities, lighting fires, smashing storefronts and leading to 135 injuries and more than 1,000 arrests. Mr. Macron is facing calls to reverse course on his signature agenda: making France more economically competitive through sweeping changes to its labor market, taxes, public spending and pension system, Noemie Bisserbe and Stacy Meichtry report.
Adding to pressure: The French economy will grow more slowly than originally projected in the fourth quarter due to the violent protests, according to the latest Bank of France survey.
SHOULD I STAY OR SHOULD I GO
Britain’s politics also are in crisis mode. Parliament is expected to reject Prime Minister Theresa May’s Brexit deal on Tuesday, throwing plans for the U.K.’s departure from the bloc on March 29 into turmoil. The way out won’t be obvious: Brexit divides both the country and Parliament, transcending the usual right-versus-left split in British politics, Stephen Fidler reports. The latest wrinkle: The European Court of Justice said the U.K. government can unilaterally reverse its decision and remain in the bloc without the approval of its EU counterparts.
Breaking: Mrs. May has reportedly called Cabinet ministers for an emergency meeting Monday morning.
FLIP OR FLOP
The pace of real-estate speculation is slowing, a sign of the darkening outlook in the U.S. housing market. The number of new home loans issued with terms of three years or less, typically used by investors looking to make a quick profit, dropped by 11% in the July-to-September period from a year earlier. It was the smallest amount since the second quarter of 2015, Ben Eisen reports.
Cause: Higher interest rates and slower home-price appreciation are squeezing the market. The sector has been a drag on the overall economy this year.
QUOTE OF THE DAY
The future’s not here. –Entrepreneur Steve Mushero, speaking about business prospects for Americans in China
TWEET OF THE DAY
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WHAT ELSE WE’RE READING
Dang, NPR. The Washington Post reports that about 1 in 5 of the public broadcaster’s union-covered newsroom workforce is a temp. “Temps were often left in the dark about how long their assignments would last, how much they’d be paid, who they were reporting to, or what their title was. They also said they received little feedback from supervisors after completing an assignment, and were ‘routinely’ overlooked in NPR’s recruiting efforts,” Paul Farhi writes.
There’s a nifty economic link between farming and grammar. “The study establishes that geographical characteristics that were conducive to higher natural return to agricultural investment, and thus to the emergence of long-term orientation, contributed to the emergence of a structure of the future tense that complements long-term oriented behavior,” Oded Galor, Ömer Özak and Assaf Sarid write in a National Bureau of Economic Research working paper.
UP NEXT: TUESDAY
The National Federation of Independent Business small-business survey is out at 6 a.m. ET.
The U.S. producer price index for November, out at 8:30 a.m. ET, is expected to fall 0.1% from the prior month. Economists forecast a 0.2% rise when excluding food and energy.
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