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U.S. employers are thought to have hired at a solid pace in May and helped extend the economy’s nearly nine-year expansion, the second-longest on record, despite uncertainty caused by trade disputes.

Economists have forecast that employers added 190,000 jobs last month and that the unemployment rate remained at a 17-year low of 3.9 percent, according to data provider FactSet.

The Labor Department’s May jobs report will be released at 8:30 a.m. EDT Friday.

Economy firm footing

Solid hiring data would coincide with other evidence that the economy is on firm footing after a brief slowdown in the first three months of the year. The economy grew at a modest 2.2 percent annual rate in the January-March quarter, after three quarters that had averaged roughly 3 percent annually.

Some economists remain concerned that the Trump administration’s aggressive actions on trade could hamper growth. The administration on Thursday imposed tariffs on steel and aluminum imports from key allies in Europe, Canada and Mexico. Earlier in the week, it threatened to hit China with tariffs on $50 billion of its goods.

Still, while Trump has made such threats since March, most employers so far haven’t suspended hiring.

​Consumer spending up

And consumers have started to spend more freely, after having pulled back in the January-March quarter. That gain could reflect in part the effect of the Trump administration’s tax cuts, which might be encouraging more Americans to step up spending. Consumer spending rose in April at its fastest pace in five months.

Some of the spending reflects more money needed to pay higher gas prices, a potential trouble spot for consumers in the coming months. The average price of a gallon of gas nationwide reached $2.96 on Thursday, up 15 cents from a month ago, according to AAA. Some economists calculate that higher gas costs could offset up to one-third of the benefit of the tax cuts.

More hiring, more growth

Companies are spending more on industrial machinery, computers and software, signs that they’re optimistic enough about future growth to expand their capacity. A measure of business investment rose in the first quarter by the most in 3½ years. That investment growth has been spurred partly by higher oil prices, which have encouraged the construction of more drilling rigs.

Manufacturers have benefited from the healthier business spending and have increased hiring. In April, factories expanded production of turbines and other heavy machinery by the most in seven months.

Macroeconomic Advisers, a forecasting firm, said Thursday that it now foresees the economy expanding at a robust 4 percent annual pace in the April-June quarter, which would be the fastest in nearly four years. That is up from its forecast last week of less than a 3 percent rate for the current quarter.

Wage growth lagging

Yet even with unemployment at a 17-year low, wage growth has been chronically sluggish in most industries, leaving many Americans still struggling to pay bills, particularly as inflation has ticked up.

Average hourly pay rose just 2.6 percent in April from a year earlier, before adjusting for inflation. That’s far below historic trends: Paychecks were rising at roughly a 4 percent pace in 2000, the last time unemployment was this low.

Still, companies are starting to pay more to lure workers from other companies, a trend that could lead to broader pay gains in coming months. Workers who switched jobs received annual pay increases averaging 4 percent in April, compared with average gains of 2.9 percent for those who stayed in their jobs, according to data compiled by the Federal Reserve Bank of Atlanta.

Mark Zandi, chief economist at Moody’s Analytics, said higher pay for job-switchers tends to augur more robust raises for everyone else.

“Employers will have no choice but to adjust their pay scales to ensure wage parity across their entire workforce,” Zandi said.

At the same time, Martha Gimbel, head of economic research at the job listing site Indeed, notes that wages for people who remain in their jobs have actually declined in recent months. That suggests that many employers have yet to worry about their workers being lured away.
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The United States’ allies in the G-7 vowed Thursday to push back against Washington’s decision to impose tariffs on their steel and aluminum exports, saying as they gathered for a meeting that the move threatens global growth.

The escalating trade conflict between the United States and many key allies will dominate the three-day meeting in Canada of financial leaders from the Group of Seven industrialized nations that began Thursday, with U.S. Treasury Secretary Steven Mnuchin the top target for their complaints and lobbying.

The United States said it was moving ahead to impose tariffs of 25 percent on steel imports and 10 percent on aluminum, starting at midnight (0400 GMT Friday), ending months of uncertainty about potential exemptions and sending a chill through financial markets.

French Finance Minister Bruno Le Maire demanded a “permanent and total exemption” from the tariffs and said that European Union countries would respond with their own measures.

The U.S. tariff decision “is unjustified and unjustifiable and will have dangerous consequences for global growth,” Le Maire said in comments to media on his way to the meeting of policymakers from the United States, Britain, Germany, France, Italy, Japan and Canada in the mountain resort of Whistler, British Columbia.

His German counterpart, Olaf Scholz, said EU member states would show their unity and sovereignty by acting in a determined way. “Our response should be clear, strong and smart,” Scholz told Reuters.

Canadian Finance Minister Bill Morneau said the tariffs would color the G-7 meeting.

“There will be some challenging discussions I’m sure,” Morneau told a news conference as top policymakers gathered. “We are not saying there won’t be frictions,” he added. “We’re not saying we won’t have strong words. We’re not saying we won’t be able to send messages.”

Mnuchin, who was not at the introductory discussion panels focused on development and sharing the benefits of global growth, is scheduled to meet individually with many of his global counterparts during the three-day meeting.

Bank of England Governor Mark Carney said the U.S. decision to target trade in goods, not services, was misplaced.

“This focus on goods trade, bilateral goods, is not the right focus in a hyperconnected world where most of the economic activity, most people work, most small businesses, most women work in the service sector,” Carney told a panel.

“If we were to liberalize services to the same degree as we have liberalized [trade in] goods, these balances would be cut in half for the United States and for the U.K.,” Carney added.

International Monetary Fund Managing Director Christine Lagarde said if trade was “massively disrupted,” the level of public trust in leaders would be severely damaged.

“First of all, those who will suffer most are the poorest, the less privileged people, those who actually rely on imported goods to have their living,” she said, adding that long-standing supply chains also would be disrupted.

The U.S. actions on trade policy, which also include potential tariffs and investment restrictions on China and a national security probe that could lead to tariffs on auto imports, are expected to also dominate the G-7 summit of world leaders in Quebec next week. 
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When Oregon lawmakers created the state’s legal marijuana program, they had one goal in mind above all else: to persuade illicit pot growers to leave the black market.

That meant low barriers to entry that also targeted long-standing medical marijuana growers, whose product is not taxed. As a result, weed production boomed — with a bitter consequence.

Now, marijuana prices here are in free fall, and the craft cannabis farmers who put Oregon on the map decades before broad legalization say they are in peril of losing their now-legal businesses as the market adjusts.

Oregon regulators on Wednesday announced they will stop processing new applications for marijuana licenses in two weeks to address a severe backlog and ask state lawmakers to take up the issue next year.

​California takes heed

Experts say the dizzying evolution of Oregon’s marijuana industry may well be a cautionary tale for California, where a similar regulatory structure could mean an oversupply on a much larger scale.

“For the way the program is set up, the state just wants to get as many people in as possible, and they make no bones about it,” Hilary Bricken, a Los Angeles-based attorney specializing in marijuana business law, said of California. “Most of these companies will fail as a result of oversaturation.”

A staggering inventory

Oregon has nearly 1 million pounds (453,600 kilograms) of marijuana flower, commonly called bud, in its inventory, a staggering amount for a state with about 4 million people. Producers told The Associated Press wholesale prices fell more than 50 percent in the past year; a study by the state’s Office of Economic Analysis found the retail cost of a gram of marijuana fell from $14 in 2015 to $7 in 2017.

The oversupply can be traced largely to state lawmakers’ and regulators’ earliest decisions to shape the industry.

They were acutely aware of Oregon’s entrenched history of providing top-drawer pot to the black market nationwide, as well as a concentration of small farmers who had years of cultivation experience in the legal, but largely unregulated, medical pot program.

Getting those growers into the system was critical if a legitimate industry was to flourish, said Sen. Ginny Burdick, a Portland Democrat who co-chaired a committee created to implement the voter-approved legalization measure.

Lawmakers decided not to cap licenses; to allow businesses to apply for multiple licenses; and to implement relatively inexpensive licensing fees.

The Oregon Liquor Control Commission, which issues licenses, announced Wednesday it will put aside applications for new licenses received after June 15 until a backlog of pending applications is cleared out. The decision comes after U.S. Attorney Billy Williams challenged state officials to address Oregon’s oversupply problem.

“In my view, and frankly in the view of those in the industry that I’ve heard from, it’s a failing of the state for not stepping back and taking a look at where this industry is at following legalization,” Williams told the AP in a phone interview.

But those in the industry supported the initial decisions that led to the oversupply, Burdick said.

“We really tried to focus on policies that would rein in the medical industry and snuff out the black market as much as possible,” Burdick said.

​Consolidation

Lawmakers also quickly backtracked on a rule requiring marijuana businesses have a majority ownership by someone with Oregon residency after entrepreneurs complained it was hard to secure startup money. That change opened the door to out-of-state companies with deep pockets that could begin consolidating the industry.

The state has granted 1,001 producer licenses and has another 950 in process as of last week. State officials worry if they cut off licensing entirely or turn away those already in the application process, they’ll get sued or encourage illegal trade.

Some of the same parameters are taking shape in California, equally known for black-market pot from its Emerald Triangle region.

The rules now in effect there place caps only on certain, medium-sized growing licenses. In some cases, companies have acquired dozens of growing licenses, which can be operated on the same or adjoining parcels. The growers association is suing to block those rules, fearing they will open the way for vast farms that will drive out smaller cultivators.

Beau Whitney, senior economist at national cannabis analytics firm New Frontier Data, said he’s seeing California prices fall.

In contrast, Washington knew oversupply could draw federal attention and was more conservative about licensing. As the market matured, its regulators eased growing limits, but the state never experienced an oversupply crisis.

Colorado has no caps on licenses, but strict rules designed to limit oversupply allow the state to curtail a growers’ farm size based on past crop yields, existing inventory, sales deals and other factors.

Chain stores

In Oregon, cannabis retail chains are emerging to take advantage of the shake-up.

A company called Nectar has 13 stores around the state, with three more on tap, and says on its website it is buying up for-sale dispensaries too. Canada-based Golden Leaf Holdings bought the successful Oregon startup Chalice and has six stores around Portland, with another slated to open.

William Simpson, Chalice’s founder and Golden Leaf Holdings CEO, is expanding into Northern California, Nevada and Canada. Simpson welcomes criticism that he’s dumbing down cannabis the same way Starbucks brought coffee to a mass market.

“If you take Chalice like Starbucks, it’s a known quantity, it’s a brand that people know and trust,” he said.

Amy Margolis, executive director of the Oregon Cannabis Association, says that capping licenses would only spur even more consolidation in the long-term. The state is currently working on a study that should provide data and more insight into what lies ahead.

“I don’t think that everything in this state is motivated by struggle and failure,” she said. “I’m very interested to see … how this market settles itself and (in) being able to do that from a little less of a reactionary place.”

​Craft growers

For now, Oregon’s smaller marijuana businesses are trying to stay afloat.

A newly formed group will launch an ad campaign this fall to tell Oregonians why they should pay more for mom-and-pop cannabis. Adam Smith, who founded the Oregon Craft Cannabis Alliance, believes 70 percent of Oregon’s small growers and retailers will go out of business if consumers don’t respond.

“We could turn around in three to four years and realize that 10 to 12 major companies own a majority of the Oregon industry and that none of it is really based here anymore,” he said. “The Oregon brand is really all about authenticity. It’s about people with their hands in the dirt, making something they love as well as they can. How do we save that?”
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President Donald Trump’s administration is planning to impose tariffs on European steel and aluminum imports after failing to win concessions from the European Union, a move that could provoke retaliatory tariffs and inflame trans-Atlantic trade tensions.

The tariffs are likely to go into effect on the EU with an announcement by Friday’s deadline, according to two people familiar with the discussions. The administration’s plans could change if the two sides are able to reach a last-minute agreement, said the people, who spoke on condition of anonymity to discuss internal deliberations.

Trump announced in March the United States would slap a 25 percent tariff on imported steel and a 10 percent tariff on imported aluminum, citing national security interests. But he granted an exemption to the EU and other U.S. allies; that reprieve expires Friday.

​Europe bracing

Europe has been bracing for the U.S. to place the restrictions even as top European officials have held last-ditch talks in Paris with American trade officials to try to avert the tariffs.

“Realistically, I do not think we can hope” to avoid either U.S. tariffs or quotas on steel and aluminum, said Cecilia Malmstrom, the European Union’s trade commissioner. Even if the U.S. were to agree to waive the tariffs on imported steel and aluminum, Malmstrom said, “I expect them nonetheless to want to impose some sort of cap on EU exports.”

European officials said they expected the U.S. to announce its final decision Thursday. The people familiar with the talks said Trump could make an announcement as early as Thursday.

U.S. Commerce Secretary Wilbur Ross attended meetings at the Organization for Economic Cooperation and Development in Paris on Wednesday, and U.S. Trade Representative Robert Lighthizer joins discussions in Paris on Thursday.

The U.S. plan has raised the threat of retaliation from Europe and fears of a global trade war — a prospect that is weighing on investor confidence and could hinder the global economic upturn.

​

If the U.S. moves forward with its tariffs, the EU has threatened to impose retaliatory tariffs on U.S. orange juice, peanut butter and other goods in return. French Finance Minister Bruno Le Maire pledged that the European response would be “united and firm.”

Limits on cars

Besides the U.S. steel and aluminum tariffs, the Trump administration is also investigating possible limits on foreign cars in the name of national security.

“Unilateral responses and threats over trade war will solve nothing of the serious imbalances in the world trade. Nothing,” French President Emmanuel Macron said in an impassioned speech at the Organization for Economic Cooperation and Development in Paris.

In a clear reference to Trump, Macron added: “These solutions might bring symbolic satisfaction in the short term. … One can think about making voters happy by saying, ‘I have a victory, I’ll change the rules, you’ll see.’”

But Macron said those “who waged bilateral trade wars … saw an increase in prices and an increase in unemployment.”

Tariffs on steel imports to the U.S. can help local producers of the metal by making foreign products more expensive. But they can also increase costs more broadly for U.S. manufacturers who cannot source all their steel locally and need to import the raw material. That hurts the companies and can lead to more expensive consumer prices, economists say.

Ross criticized the EU for its tough negotiating position.

“There can be negotiations with or without tariffs in place. There are plenty of tariffs the EU has on us. It’s not that we can’t talk just because there’s tariffs,” he said. He noted that “China has not used that as an excuse not to negotiate.”

But German Economy Minister Peter Altmaier insisted the Europeans were being “constructive” and were ready to negotiate special trade arrangements, notably for liquefied natural gas and industrial goods, including cars.

WTO reforms

Macron also proposed to start negotiations between the U.S., the EU, China and Japan to reshape the World Trade Organization to better regulate trade. Discussions could then be expanded to include other countries to agree on changes by the end of the year.

Ross expressed concern that the Geneva-based World Trade Organization and other organizations are too rigid and slow to adapt to changes in global business.

“We would operate within (multilateral) frameworks if we were convinced that people would move quickly,” he said.

Ross and Lighthizer seemed like the odd men out at this week’s gathering at the OECD, an international economic agency that includes the U.S. as a prominent member.

The agency issued a report Wednesday saying “the threat of trade restrictions has begun to adversely affect confidence” and tariffs “would negatively influence investment and jobs.”
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The two largest resort operators in Las Vegas would lose more than $10 million a day combined if housekeepers, cooks and others go on strike, a possibility starting Friday, the union representing thousands of casino workers said Wednesday.

The Culinary Union detailed how it thinks a one-month strike would impact MGM Resorts International and Caesars Entertainment, which operate more than half the properties that would be affected if 50,000 workers walk off the job. Workers last week voted to authorize a strike as disputes over workplace training, wages and other issues have kept the union and casino operators from agreeing on new contracts.

The union conceded that it is difficult to estimate how the strike at more than 30 casino-hotels would affect Las Vegas overall because the last citywide strike took place in 1984, when the city had 90,000 fewer hotel rooms and only about 12.8 million annual visitors. Last year, more than 42.2 million people visited.

Contract expires midnight Thursday

But it says MGM and Caesars would see a 10 percent reduction in revenue because of the loss of group and independent travelers. A strike also could happen as fans head to Las Vegas for the Stanley Cup Final.

“Furthermore, one might assume a 10 percent worsening of operating margins due to the use of less experienced and less skilled replacements … to keep the doors open, rooms cleaned, food cooked, and cocktails served, not to mention other factors such as the disruptions to management staff’s regular work,” the union wrote.

Using the companies’ earnings reports for the first three months of the year, the union’s estimates show a one-month strike could reduce MGM’s earnings before interest, taxes and other items by more than $206 million and Caesars’ by over $113 million.

Contracts expire at midnight Thursday for bartenders, housekeepers, cocktail and food servers, porters, bellmen, cooks and other kitchen workers at properties on the Las Vegas Strip and downtown Las Vegas, including Caesars Palace, Bellagio, Stratosphere, Treasure Island, The D and El Cortez.

Dealers are not part of the Culinary Union. Casino-resorts that would not be affected by the strike include Wynn Las Vegas, Encore, The Venetian and Palazzo.

More talks scheduled

MGM, which employees 24,000 of the workers, said it met with union negotiators Monday and has more talks scheduled this week. The company says it remains confident that it “can resolve the outstanding contract issues and come to an agreement that works for all sides.”

Caesars said it “expects to agree to a new 5-year contract with the Culinary Union on or about June 1 when the current contract expires.” About 12,000 of its workers are part of the negotiations for new five-year contracts.

The union said it is asking for training on new skills and job opportunities as the companies adopt technology that can displace workers. It also wants an independent study to analyze the workload of housekeepers and contract language that would protect workers if properties are sold.

“What is going to happen to my position?” said Fernando Fernandez, a guest runner at Caesars Palace. “I think they are going to be disappearing it, because robots are going to be available to deliver everything.”

He said he wants training to fix or program the robots that he believes could eventually replace him.

The union says it has asked MGM for average annual wage increases of 4 percent for each of the five years. A document says the company has countered with an approximate 2.7 percent increase.

Caesars workers are asking for an increase of 4.2 percent effective Friday, and annual increases of about 4 percent thereafter. Another document shows the company has offered an approximate 2.8 percent increase for each of the five years.

The average hourly wage of union workers is $23, including benefits such as premium-free health care, a pension and a 401(k) retirement savings plan and $25,000 down-payment assistance for first-time homebuyers.
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Malaysia and China are looking to re-balance ties as the new government of Prime Minister Mahathir Mohammad seeks to renegotiate billions of dollars of Chinese backed infrastructure spending, with the goal of reducing the country’s national debt.

China is Malaysia’s leading foreign direct investor at over $3.38 billion, ahead of the U.S., Japan and Singapore, with major infrastructure deals negotiated during the previous government of Najib Razak.

The main contract is a $14 billion (55 billion ringgit) East Coast Rail Link, as well as manufacturing, real estate and sovereign wealth fund bonds.

Carl Thayer, a professor of politics at Australia’s University of New South Wales, says Malaysia is seeking to move beyond anti-Chinese rhetoric that had been an undercurrent of the May 9 national polls.

Thayer said during the campaign Chinese investment in Malaysia was an issue, amid concerns Malaysia was excessively indebted to China.

“But Prime Minister Mahathir since the election has basically declared that the existing agreements will stand — that’s with any country. But there will be a review of these agreements with China. And the key project there seems to be the east coast rail line which is seen as a ‘white elephant’, costing a lot of money and not really delivering,” he said.

The East Coast Rail line is a key portion of Beijing’s Belt and Road initiative (BRI) infrastructure into South East Asia covering 688 kilometers connecting the South China Sea with the Thai Border.

The new government says the fresh negotiations are a bid to reduce the national debt burden, put at $251.32 billion (one trillion ringgit ) or 80 percent of national output (GDP).

Prime Minister Mahathir sees a need to reassess the projects and the Chinese investment strategy generally, especially depending on imported Chinese labor and technicians.

“We need to find out what benefit there is to us. To find out firstly the train is not going to be viable; secondly, its not benefiting Malaysia as much as we would like to see,” Mahthir told VOA.

“We don’t want to have a huge number of immigrants in Malaysia. Some of the Chinese companies have done that; that is not foreign direct investment,” he said.

WATCH: Mahathir Seeks to Implement Reforms

He said such projects as the rail link need to be scaled back in order to reduce the cost to renegotiate the loans and ensuring greater Malaysian participation.

“I think we will be able to convince [China] that some restructuring of the terms of the borrowing and the projects and all that will have to be done in order to reduce spending, in order to reduce the loans that we took from foreign countries,” Mahathir said.

In media reports Mahathir said he planned to scrap a 350 kilometer bullet train line from Singapore to the Malaysian capital of Kuala Lumpur.

The project, valued at around $20 billion, had attracted bidding interest from China, Japan and South Korea.

But Mahathir said this project “would be dropped” as it was unnecessary” and would “not earn a single cent.”

University of New South Wales’ Thayer expects China will be pragmatic in dealings with the new government.

“It’s got massive investments in Malaysia it would want to protect. China would roll with the punches and take the long view. Eventually that Malaysia — as I indicated — all the fundamentals are there to continue the relationship.”

“Trade is managed in Malaysia’s favor; substantial growing Chinese investment building infrastructure projects, some of which are needed, others maybe excessive, renewing, renegotiating the balance in that relationship, but not lurching to the U.S. camp,” Thayer said.

Both Mahathir and wealthy Malaysian businessman Robert Kouk, who sits on a powerful advisory panel to the Malaysian government, recently met China’s ambassador to Malaysia, Bai Tian. Mahathir later said Malaysia’s “strong ties with China will continue to flourish.”

James Chin, director of the South East Asia Institute at the University of Tasmania, says China’s Malaysian investments are also key to China’s regional strategic goals.

“Part of the reason China is such a big player in Malaysia is due to the geopolitical realities facing China. People do not realize that Malaysia is the only country in South East Asia that surrounds the South China Sea,” Chin said.

China has established disputed claims over much of the South China Sea.

But Bridget Walsh, based at the John Cabot University in Italy, said eventually Malaysia-China ties will return to a steady course.

“China is the regional global power in terms of economic issues, especially in South East Asia, and it is going to play a very big role and Malaysia is looking for new economic drivers,” Walsh said.

Walsh said outside infrastructure projects, China will look to other economic areas to continue a role in Malaysia’s economy. “And I think there are people in the system that understand that,” she said.

David Boyle contributed to this report.

 
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U.S. Commerce Secretary Wilbur Ross said Wednesday a U.S.-European Union trade deal could still be reached even if the United States imposes tariffs on EU steel and aluminum imports.

EU and U.S. officials are holding last-minute negotiations two days before U.S. President Donald Trump decides to apply tariffs on Europe.

The threat of tariffs has increased prospects of retaliation and a global trade war that could hinder the global economy.

“There can be negotiations with or without tariffs in place,” Ross said at the Organization for Economic Cooperation and Development in Paris. “There are plenty of tariffs the EU has on us. It’s not that we can’t talk just because there’s tariffs.”

The Trump administration is also exploring possible limits on foreign auto imports, citing national security. 

The EU wants exemptions on steel and aluminum tariffs, which Trump hopes will benefit the U.S., or impose tariffs on U.S. peanut butter, orange juice and other products.

In a speech at the OECD, French President Emmanuel Macron said Europe should stand its ground in the face of unilateral actions and warned against trade wars.

“Unilateral responses and threats over trade wars will solve nothing of the serious imbalances in world trade. Nothing,” he proclaimed.

In an apparent reference to Trump’s proposed tariffs, Macron said, “These solutions might bring symbolic satisfaction in the short term. …. One can think about making voters happy by saying, ‘I have a victory. I’ll change the rules. You’ll see.’” 

Macron also called on the EU, the U.S., China and Japan to draft a World Trade Organization reform plan for the G-20 summit in Argentina later this year.

“The new rules must meet the current challenges of world trade: massive state subsidies creating distortions of global markets, intellectual property, social rights and climate protection,” he said. 

But Macron’s multilateral approach has produced limited results to date, as Trump has withdrawn from the Paris Climate Accord and the Iran nuclear deal, and is threatening to disrupt trade relations between China, the EU and other economic powers.

 

 
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China vows it will fight back if the United States goes through with plans to impose huge tariffs on Chinese goods.

President Donald Trump’s administration said in a statement Tuesday it planned to impose 25 percent tariffs on $50 billion of Chinese goods that contain “industrially-significant technology.” It said the proposed tariffs are in response to China’s practices with respect to technology transfer, intellectual property, and innovation.  

Chinese Foreign Ministry Spokeswoman Hua Chunying blasted the Trump administration’s apparent reversal Wednesday in Beijing. Hua warned the administration risked squandering its credibility in international relations with every “flip flop” and contradiction of its previous stance.

Hua stressed Beijing is not afraid of engaging in a trade war, and will take “forceful” measures if the tariffs are imposed.

The White House said it will announce the final list of covered imports by June 15, 2018, and the tariffs will be imposed shortly thereafter.

Trump announced in April he planned to impose tariffs on $150 billion worth of Chinese goods, and Beijing responded by declaring it will retaliate by imposing similar amount of tariffs of imported American goods.

After two rounds of trade talks aimed at avoiding a full-blown trade war, U.S. Treasury Secretary Steven Mnuchin announced the two sides had reached a deal for Chinato buy more American goods to “substantially reduce” the huge trade deficit with the United States.

The Trump administration said in its statement trade talks with China will continue and it will request China remove all of its many trade barriers, including non-monetary trade barriers, and that tariffs and taxes between the two countries be “reciprocal in nature and value.” 

China in violation

The Trump administration’s decision to take action is a result of an investigation conducted by the U.S. Trade Representative under Section 301 of the Trade Act of 1974 to determine whether Beijing’s trade practices may be “unreasonable or discriminatory” and that may be “harming American intellectual property rights, innovation or technology development.”After a seven-month investigation, the USTR found the policies were in violation.

U.S. Commerce Secretary Wilbur Ross is set to go to Beijing this week to negotiate on how China might buy more American goods to reduce the huge U.S. trade deficit with Beijing, which last year totaled $375 billion.
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Anglo American unit De Beers is launching a company to sell laboratory-produced diamonds for jewelry in a departure from its century-old business model of promoting natural stones.

Real diamonds created over thousands of years remain the priority, but De Beers is responding to customer demand for more affordable jewelry using stones made in days or weeks and sold for hundreds rather than thousands of dollars.

“They’re not to celebrate life’s greatest moments, but they’re for fun and fashion,” De Beers Chief Executive Officer Bruce Cleaver said of synthetic stones in a telephone interview.

“We have always said we are a natural diamonds business. We remain a natural diamonds business,” he said, adding that manmade diamonds used in fashion would not undermine the business for real diamonds as they served different markets.

As the world’s biggest seller of natural diamonds by value, De Beers is a leader in technology and security processes to guarantee the authenticity of natural stones.

To ensure there is no confusion between manmade gems that have little resale value and the real thing, the manufactured diamonds used in jewelry will include a tiny mark showing they are made by Element Six, a unit of De Beers that until now has focused on making stones for industrial uses.

The technology to insert the mark has been developed by Opsydia, an offshoot of Oxford University, and the diamonds will be sold by a new company called Lightbox Jewelry beginning in September in the United States, the world’s leading diamond jewelry market where demand hit an all-time high last year.

De Beers’ parent, Anglo American, was hit by the commodity price crash of 2015-16, but has recovered strongly and is leading the sector this year with a 13 percent rise in its share price.

The diamond business accounted for 16 percent of the Anglo American group’s full-year earnings.

Element Six does not publish separate earnings figures, but industry sources say it has returned to profit as recovering oil prices have increased demand for industrial stones for drill bits used in oil exploration.

If the move by De Beers into fashion jewelry gains traction, Element Six’s existing capacity will need to expand.

De Beers plans to invest $94 million over four years to build an Element Six factory near Portland, in the U.S. state of Oregon, which should produce more than half a million rough carats a year when fully operational in about 2020.

That remains modest in comparison to De Beers’ investment in maintaining production of natural diamonds of $3 billion over five-to-seven years.
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Taiwan will struggle to stop a shrinking pool of mostly poor diplomatic allies from shifting allegiance to its rival, China, because it lacks the amounts of money they want, experts and officials in Taipei say.

The number of countries that recognize Taiwan diplomatically fell to 18 last week after Burkina Faso severed 24 years of relations.

The West African country, one of the world’s poorest, established formal relations with China days later and became the fourth country to make the change since 2016.

Taiwan had extended medical and farming support to Burkina Faso, but Taiwanese media said China had offered $50 billion last year. China often sends investors to Africa to tap natural resources and build infrastructure.

Failure to match Chinese money could shift more allies from Taipei to Beijing, experts believe, minimizing Taiwan’s voice in the United Nations and hurting its struggle to be seen internationally as separate from China.

“Quantitatively, China can undoubtedly offer much more than Taiwan and can offer that over a spectrum that is much wider than the Taiwan side’s spectrum,” said Fabrizio Bozzato, a Taiwan Strategy Research Association fellow.

China sees Taiwan as part of its territory rather than a state entitled to diplomacy. Each side has ruled itself since the Chinese civil war of the 1940s.

Backed by more than 170 countries including the world’s most powerful, China insists the two sides eventually unify despite polls showing Taiwanese prefer autonomy.

Taiwan’s government says China pays Taiwanese allies to switch allegiance as a way to put pressure on President Tsai Ing-wen. Tsai took office in Taiwan two years ago and rejects Beijing’s idea that the two sides belong to a single China.

Funding limitations in Taiwan

Taiwan gives aid to its allies based on evaluations of what each one needs to develop socially or economically, foreign ministry spokesman Andrew Lee said. It may set a timeline of two to three years, Lee said. Common types of aid are scholarships, farming technology and medial programs.

Taiwan has a limited budget, Lee told a news conference Tuesday.

“Our government maintains a steady stance, and the most important thing now is what the president has indicated and foreign minister has emphasized, which is no diplomatic acts that are related to so-called money diplomacy,” he said.

“Presently, with our government financial problems and our foreign affairs budget being only so much, we must use the smallest budget to do the biggest deployment, so in this aspect we must positively use our creativity.”

On Tuesday Taiwan agreed to expand economic and infrastructure aid to Haiti with an eye toward luring more Taiwanese investors to the impoverished Caribbean country. They reached that deal as Haitian President Jovenel Moise visited Taipei.

Taiwan seldom specifies amounts of aid to particular countries, which are mostly in the Caribbean, Central America and the South Pacific.

More money, faster, from China

China as a Communist country need not vet aid money through parliament or test the opinion of citizens who may prefer the aid money be kept at home, analysts say. It has more money as well as farther-reaching programs to distribute it, they add.

One channel is the $1 trillion Belt-and-Road Initiative for building new infrastructure around Eurasia.

China also can encourage its tourists to visit impoverished countries as a source of hospitality income, Bozzato said. Chinese took 130.5 million trips overseas last year, more than in 2016.

Some money from China reaches its allies “under the table,” he said. China is “richer” than Taiwan and is seen as a “great power that keeps on rising,” he said.

South Pacific nations allied with the United States, he said, “can extract resources both from the traditional Western partners and the new Chinese partner.”

Exporters from nations allied with Beijing have access to the world’s biggest consumer market, as well.

When the Dominican Republic cut ties with Taiwan May 1, its presidential office website said domestic industries had “requested greater diplomatic, commercial and economic growth with the People’s Republic of China.”

Since the African nation of Sao Tome and Principe left Taiwan for China in 2016, Beijing has pledged $146 million for the modernization of its international airport and construction of a deep-sea container port to facilitate Chinese trade in Africa.

Taiwanese aid had focused on farming, energy and public health.

Countries that need peacekeeping can look to China for help because it’s a United Nations Security Council member, as well, said Huang Kwei-bo, international affairs college vice dean at National Chengchi University in Taipei. Taiwan has no U.N. seat.

“You could threaten Taiwan a bit and it would give you more money, but that’s still not as much as Beijing can offer,” Huang said.

 

 
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Greece’s largest labor unions are staging a general strike against plans to extend austerity measures, in a 24-hour protest that halted ferry services to the islands, and disrupted flights, public transport and other services.

 

Wednesday’s strike also closed schools and left public hospitals running on emergency staff.

 

Government budget austerity measures are due to continue for at least two more years after the international bailout ends in August, starting with another major round of pension cuts next January. Hundreds of protesters gathered in central Athens as several protest marches are planned in the capital and other cities Wednesday.

 

“The government is continuing disastrous policies for society and the economy, forcing unsustainable measures onto the backs of wage-earners and retired people,” the country’s largest union, the GSEE, said.

 

“The constant deterioration in the living standards is part of a downward trend that people [in government] chose not to see.”

 

Greece is currently negotiating the terms of its bailout exit with European creditors, including how its finances will be monitored and the conditions of a promised debt relief package. But the talks, due to be concluded in a few weeks, have been overshadowed by the political crisis in Italy and the resulting financial turmoil.

 

Eurozone member Greece has relied on money from three consecutive bailouts since losing market access in 2010. The rescue funds have been provided by a eurozone bailout fund and the International Monetary Fund, though the IMF has held off on a cash contribution toward Greece latest program.

 

A new round of administrative and market reforms demanded by creditors is due to be voted on in parliament on June 14.

 

 
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Consumer confidence rebounded in May, but households were a bit pessimistic about their short-term income prospects even as they expected strong job growth to persist, which could restrain consumer spending.

The Conference Board said on Tuesday its consumer confidence index rose 2.4 points to a reading of 128.0 this month from a downwardly revised 125.6 in April. The index was previously reported at 128.7 in April.

“If consumers don’t step up their spending … then the growth outlook this year may disappoint on the weak side,” said Chris Rupkey chief economist at MUFG in New York.

U.S. financial markets were little moved by the data amid a deepening political crisis in Italy. The dollar rose to a 10-month high against the euro, while U.S. Treasury yields fell.

Stocks on Wall Street dropped, with the S&P 500 and Dow Jones Industrial Average touching near three-week lows.

The Conference Board’s so-called labor market differential, derived from data on respondents’ views on whether jobs are plentiful or hard to get, increased to 26.6 in May, the best reading since May 2001, from 22.7 in April.

That measure, which closely correlates to the unemployment rate in the Labor Department’s employment report, suggests that labor market slack continues to shrink.

But consumers were less upbeat about their short-term income prospects. The share of consumers expecting an improvement in their income fell to 21.3 percent this month from 21.8 percent in April. The proportion expecting a decrease rose to 8.2 percent in May from 7.9 percent in the prior month.

Buying plans drop

The weak income readings are despite massive tax cuts which the Trump administration claimed would boost paychecks for American workers. The $1.5 trillion tax cut package came into effect in January.

Consumers also showed a reluctance to commit to purchases of big-ticket items this month, with intentions to buy automobiles, houses and appliances declining. Consumer spending braked sharply in the first quarter and there are signs that it picked up early in the April-June period.

A separate report on Tuesday showed the S&P CoreLogic Case-Shiller composite index of home prices in 20 metropolitan areas increased 0.5 percent in March after rising 0.8 percent in February. House prices gained 6.8 percent in the 12 months to March after rising by the same margin in February.

The solid gains are at odds with recent data which had suggested a cooling in house prices. The Federal Housing Finance Agency reported last week that house prices edged up 0.1 percent in March from February.

The regulator’s index is calculated by using purchase prices of houses financed with mortgages sold to or guaranteed by mortgage finance companies Fannie Mae or Freddie Mac.

“While the weakness in the FHFA house price data raised some concerns that the trend in house price appreciation had started to shift lower, so far, the Case-Shiller data do not support that view,” said Daniel Silver, an economist at JPMorgan in New York.

The house price inflation is being fueled by an acute shortage of homes available for sale, which is hurting the housing market.
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