International Economics: IB Economics

This strikes me as something that's rather self-evident. However, people are likely to interpret economic data more favourably when the party they support are in power. 

Interestingly, it seems that even though the US economy is doing well at present, with unemployment low at around 4%, inflation falling and the economy growing, a large number of Americans think that they're experiencing a recession.

It's interesting - and entirely in character for Elon Musk to contradict himself - that the Tesla boss is opposed to US tariffs on Chinese electric vehicles. 

His argument, according to the article is that "Things that inhibit freedom of exchange or distort the market are not good". China is, of course, likely to retaliate.

A rather sad lament in today's Guardian proclaiming the end of free trade, with both Presidential candidates in favour of protectionism, having introduced tariffs on Chinese-made goods. It seems as though nearly 40 years of economic orthodoxy, believing in free trade as lowering prices and promoting competition, have been sacrificed on the altar of politics. 

Larry Elliott produces a number of justifications for US protectionist measures against China: economic growth  hasn't been accompanied by liberalization, China's disregard for intellectual property rights and the fact that it has hollowed out much of American manufacturing all suggest that there's a case for aggressive industrial policy and the imposition of tariffs. 

The headline to this article looks to be remarkable: can an economy be doing "too well". However, the reason for it might be that for all the talk of a successful green transition and job creation in the US, the economy is only operating beyond the full employment level of national income because of borrowing, and the inflationary effects of this mean that the standard of living of the average US worker hasn't really been improved at all. 

A little look at the increase in US tariffs on Chinese electric vehicles among other items. It looks at the reasons for tariffs - not economic - and their likely implications, not least if China retaliates. 

Again, the US-China trade war rumbles on - this time the Americans have placed restrictions on the export of some computer chips to Huawei, designed to stop the company accelerating its development of artificial intelligence.

Much like the UK, it seems as though the US is currently stuck in limbo, unable to decide whether to fully recover or not. Having seen the Federal Reserve keep interest rates at 5.25-5.5%, the latest US jobs data saw comparatively few new jobs created an unemployment rise. 

As a result, some are speculating that interest rate cuts might be back on the agenda sooner rather than later.

Mixed data from the US: economic growth is good-ish, at an annualised rate of 1.6%, although lower than expected, but inflation for the first three months of the year is 3.4%. 

The latter means that there's little imminent prospect of the Federal Reserve cutting interest rates, and thus similarly little prospect of other central banks following suit.  

Larry Elliott, always keen to publish Monday's article, highlights the changing global order, with current crises seemingly spelling the end of the US-led world order, and the end of the globalization we became familiar with in the first decade of the 21st century. 

It seems that US interest rates aren't going to fall any time soon, according to one rate setter; this has wider implications for the global economy. Higher interest repayments on dollar-denominated debt, for a start and it also means that other central banks are likely to be wary when cutting rates.  

See what I mean? The Chairman of the Federal Reserve, Jerome Powell, has gone public expressing concerns about recent data - notably the uptick in inflation. He has appeared to suggest that interest rate cuts will be delayed until there are clearer signs that inflation and inflationary expectations are under control. 

US inflation remains problematically high, and has actually gone up over the last month, driven by fuel and housing costs. As a result, the Fed are likely to be more reluctant to lower interest rates and this has implications for the conduct of monetary policy everywhere. 

Rising job creation in the US might have implications for the conduct of monetary policy, with the prospect of further rate cuts being delayed because of concerns about the level of aggregate demand in the economy. 

It will be interesting to see what the Federal Reserve will do.

Evidence in the US of widespread 'greedflation' with companies using an inflationary environment to hike up prices - so-called price gouging. 

Matt Stoller cites evidence alleging that the practice is widespread, occurring everywhere from the oil industry to rents to food, and the suggestion is that there's also been a commensurate rise in collusion between firms too. As a result, he's calling for tougher competition policy, and more vigorous enforcement by the Federal Trade Commission. 

Both the UK and the US are currently waiting for the next interest rate cut; however, it doesn't seem to be imminent in either economy because in both instances the respective central bank is nervous about the fact that inflation hasn't quite fallen far enough.

In the US inflation is currently 3.4%, but that's still 1.4% higher than the Federal Reserve's medium-term goal of 2%, and there's concern that inflationary pressure hasn't yet been driven out of either economy. 

And here's China's retaliation to US and EU trade barriers - and further proof of why trade wars are so damaging. China is launching an anti-dumping probe into imports of an EU plastic, further distorting markets, increasing prices and reducing consumer choice.

A slight easing of inflationary pressure in the US is going to see calls for a loosening of monetary policy, although I'd hardly call a fall from 3.4% to 3.5% significant, and indeed that seems to be the mood music emanating from the Fed. 

The trade war continues with the US imposing sizeable tariff on Chinese electric cars - from 25% to 100% - and solar panels - from 25% to 50% - too. In practical terms, it's difficult to see much immediate effect, given the low level of Chinese imports in many of these sectors,  but it will be interesting, and more meaningful, if the EU follows suit.

Of course, whilst the tariffs have raised more than $200bn, you need to remember that it's paid by US consumers and not Chinese firms, something that seems to have escaped the former President.  

This Guardian article looks at the functional distribution of income and highlights the fact that the share of income going to capital, relative to labour has risen, heightening income inequality.

In common, with most parts of the world, it seems as though productivity gains result in higher wages for executives but little change in the wages of the ordinary worker. 

The Federal Reserve has stayed its hand, keeping interest rates unchanged at 5.25% to 5.5% because of a lack of progress towards reaching the inflation target. US inflation is currently 3.5% and has been stubborn in falling any further, so the Federal Reserve are cautious.

And what the Fed does, other central banks generally follow - Bagpuss economics, if you will - meaning that interest rates in the Eurozone and the UK might stay higher for longer too. 

I'm not sure I approve of the tone of this article: why is Mexico a 'backdoor' to Chinese firms manufacturing furniture in Mexico? Isn't Chinese FDI into Mexico providing jobs, training, import revenues and taxes to Mexico?

I can only assume that US FDI allowing US-owned firms to manufacture overseas are going to be portrayed as a backdoor too. Imagine how many backdoors the US has into the EU - it's scarcely worth bothering with the front door. 

And if it provides US citizens with greater choice, and cheaper furniture then the only people that seem to lose out are US furniture manufacturers - of whom there are far fewer than there were - and the people who work for them.

So rather than portray the Chinese investment in Mexico as malign, why doesn't the BBC celebrate the fact that it shows the dynamism, and potential gains from trade.

This clip from the BBC News looks at the current state of China; it's surprising recent growth and the pivot towards green manufacturing, something that's caused increased trade tension with the West.

It's part of the China paradox: a major producer of carbon emissions, and yet also a world leader in adopting new, and greener, technology and renewable energy. 

The US looks set to increase tariffs on the imports of certain Chinese metals, notably aluminium and steel. It seems as though popular political sentiment will trump economic sense, as it invariably does. 

Is the US-China trade war set to continue? It appears that way with calls for the US to ban imports of Chinese electric vehicles. 

I'd love to know the grounds for this: it's no doubt populist, but it would seem to have adverse effects on consumer choice and economic efficiency.