Los Angeles Times - 04.10.2019

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The trade wars threat-
ening to push the global
economy into recession are
entering a new phase, with
the United States and Euro-
pean Union escalating a dis-
pute that endangers the
world’s biggest trade rela-
tionship.
After the Trump admin-
istration slapped steep tar-
iffs on $7.5 billion worth of
EU goods, mainly tradi-
tional products such as
cheese and wine, the Euro-
peans made clear they
would retaliate in kind.
Some fear the tariffs could
ultimately lead to U.S. taxes
on European cars — a big
economic blow that Presi-
dent Trump has been
threatening to deliver for
months.
The exchange echoes
how the United States and
China ratcheted up a tariffs
fight in recent months that
has bruised businesses
around the globe and
stunted economic growth.
“This step triggers fears
of a new round of escalation
of tariff wars,” said Alex
Kuptsikevich, a financial an-
alyst at FxPro. “The intro-
duction of tariffs and fears of
tit-for-tat steps could fur-
ther suppress business sen-
timent, which is already at
the lowest levels for years.”
The Trump administra-
tion’s latest tariffs target
large aircraft but also many
typical European products
such as olives, whiskey, wine,
cheese and yogurt. They are
expected take effect Oct. 18
and amount to a 10% tax on
EU aircraft and a 25% rate

on the other items.

The U.S. got the legal go-

ahead Wednesday from the

World Trade Organization

in a case involving illegal EU

subsidies for the plane

maker Airbus, which pre-

dates the Trump adminis-

tration.

But the EU is expecting a

similar case involving U.S.

subsidies for Boeing to go in

its favor, with a ruling due in

coming months. It has said it

hopes the two sides can hold

off new tariffs, which

amount to taxes on domes-

tic importers. Sometimes

importers pass on the higher

costs to consumers, making

goods more expensive.

“If the U.S. imposes coun-

termeasures, it will be push-

ing the EU into a situation

where we will have to do the

same,” said European Com-

mission spokesman Daniel

Rosario, echoing the dark

outlook expressed by many

EU governments. “This is a

move that will first and fore-

most hit U.S. consumers and

companies and will make ef-

forts towards a negotiated

settlement more compli-

cated,” he said.

U.S. alcohol importers,

wholesalers and distribu-

tors are urging an end to the

tariffs. They say tariffs on

Scotch whiskey, liqueurs

and wine would affect nearly

$3.4 billion in imports and

cost 13,000 U.S. jobs.

The tariffs come on top of

existing ones that the U.S.

and EU exchanged last year

and multiply the headaches

for European businesses

fretting over Brexit, which

could see Britain leave the

EU on Oct. 31 without a deal.

More broadly, the tariffs

add to uncertainty for the

global economy, which has

been hit particularly hard by

the wide-ranging U.S. dis-

pute with China over trade

and technology.

The U.S. and European

economies are more closely

integrated than the U.S. and

China, with companies

heavily invested across bor-

ders, so the potential dam-

age from an escalation could

dwarf the dispute with

China.

Total U.S. investment in

the EU, for example, is three

times higher than in all of

Asia. And EU investment in

the U.S. is eight times that

invested in China and India

combined. The two sides ac-

count for about half the

world economy.

“If it weren’t for the wider

trade war, everybody would

kind of shake this off and say

it’s just business as usual

under WTO rules,” said Ed-

ward Alden, senior fellow at

the Council on Foreign Rela-

tions. “In the current con-

text, it’s going to be hard to

contain. The Europeans feel

like their economies are

under assault by the Trump

administration.”

U.S.-EU trade war expands

EUROPEANcheese, olives, whiskey and wine are among the products that will be

hit with new tariffs Oct. 18. Above, Parmesan cheese at a San Francisco shop.

Justin SullivanGetty Images

European officials say

they’ll retaliate after

Trump slaps steep

tariffs on $7.5 billion

worth of their goods.

associated press

The last time U.S. payroll

forecasts were this low, hur-

ricanes had slammed the

country in 2017, temporarily

closing businesses. Or go

back to the federal govern-

ment shutdown in 2013.

But for the September

jobs report due Friday, Wall

Street economists see a

more persistent storm at

play: the trade war and man-

ufacturing recession. Those

factors are starting to per-

meate the economy at a time

when companies are already

struggling with a shrinking

pool of qualified workers.

The combination of

forces has pushed down the

median estimate for private

payrolls to a gain of just

130,000 last month. That’s

the weakest projection

heading into a jobs report in

seven years, outside of

months affected by events

such as major storms or the

shutdown. Estimates for to-

tal nonfarm payrolls are

higher, at 148,000, because of

an expected boost from tem-

porary census hiring.

A reading that’s even

weaker than predicted

would probably boost in-

vestor expectations that the

Federal Reserve will cut in-

terest rates Oct. 30 for a

third straight meeting and

potentially again in Decem-

ber, completing a reversal of

all four increases from 2018.

It may also force Fed officials

to rein in their assessment of

the labor market, which

they’ve labeled as “strong”

in policy statements as re-

cently as September.

For President Trump,

who has repeatedly pinned

any economic weakness on

the central bank, a sluggish

labor market could pose a

threat to his reelection in

2020. Currently the U.S. is on
      track to add about 1.9 million

jobs this year, the smallest

gain since 2010 and down

from 2.7 million in 2018.

U.S. stocks slumped 3%

in the last two days amid

dour economic data. On

Tuesday, the Institute for

Supply Management said its

factory index fell deeper into

contraction in September

with the worst reading in a

decade, while the employ-

ment gauge hit a three-year

low. Meanwhile, companies’

hiring was the slowest in

three months, according to a

report from private data

provider ADP.

“It’s starting to roll into

one big ball of negativity,”

said Jennifer Lee, a senior

economist at BMO Capital

Markets. “You just don’t

have the supply of workers

out there, but now it’s start-

ing to become worse. If the

company’s dealing with the

manufacturing slowdown,

trade with China issues,

weaker demand, it falls into

your hiring expectations: ‘If

we’re not going to get that

many orders, we don’t need

as many people.’ ”

A separate Labor De-

partment report Thursday

showed filings for unemploy-

ment benefits ticked up to a

four-week high, though they

remain historically low.

Other indicators point to

a slowing economy and

weaker growth ahead. Com-

panies are pulling back

spending as tariffs weigh on

business decisions and glob-

al demand slides. The Au-

gust gain in consumer

spending was the smallest in

six months.

So far, manufacturing

has been hit hardest, so in-

vestors and economists will

be watching the September

report to see whether the

pain has spread in the labor

market — whose strength

has helped keep the record-

long U.S. expansion from

turning into a recession.

Jobs outlook is

weakest in 2 years

bloomberg