The economy gives Trump a chance to shift from weakness to strength - CNN

Economy

The economy gives Trump a chance to shift from weakness to strength – CNN

Published

4 years ago

February 4, 2020

Harry Miller

The President’s weakness — his insistence on crossing behavioral and ethical, if not legal, lines — landed him in the Senate impeachment trial scheduled to conclude Wednesday. It has made Trump the only modern President never to reach 50% job approval among the American public.

But economic performance on his watch justifies boasting on the biggest stage American presidents command. No wonder Trump ahead of the Super Bowl previewed Tuesday night’s remarks as “very, very positive.”

Growth has slowed lately after the short-term acceleration in 2018, stimulated by tax cuts and spending increases. It remains vulnerable to external shocks, such as the coronavirus crisis that’s frightening investors, and the self-inflicted wound of trade conflict, which dampened business confidence before Trump called a truce with China last month.

Yet nine months before Election Day, history places the Trump economy squarely in territory consistent with winning another term.

Of his six most recent predecessors, each one who avoided an economic downturn in the last half of his first term won reelection. Only Bill Clinton and Trump, so far, avoided any brush with recession at all.

Unpresidential behavior notwithstanding, Trump has overseen a three-year extension of the expansion he inherited from Barack Obama. The expansion has broken previous records to become the longest in US history.

It has driven unemployment to its lowest rate in a half-century and boosted wages for average workers. The Dow Jones Industrial Average has risen 43% since his inauguration.

What Trump has and hasn’t done

All Presidents have limited ability to shift the trajectory of America’s $20 trillion economy. That hasn’t stopped Trump from characteristically wild exaggerations, which television viewers can expect to hear again Tuesday night as he touts “The Great American Comeback.”

He has not created “the greatest economy in the history of our country.” The late-1990s boom under Clinton produced far more robust growth.

He has not ended an economic “nightmare” by replacing the North American Free Trade Agreement with the US-Mexico-Canada deal he signed last week. It actually represents a modest revision of NAFTA, much of it negotiated by the Obama administration for the larger Trans-Pacific Partnership that Trump junked.

He has not delivered job gains “nobody would’ve believed” before his presidency. The 8 million jobs created during Obama’s last three years in office outnumbers those created in Trump’s first three.

In fact, Trump has largely surfed growth and employment trends that began in the Obama-era recovery from the Great Recession. The 2% annual growth economists now forecast over the next decade matches forecasts from before he took office.

“The potential of the US economy to produce goods and services has not fundamentally changed,” observes Michael Strain, who directs economic policy studies at the conservative American Enterprise Institute.

Yet Strain sees an opening for Trump to brighten a national economic debate that has emphasized shrinking opportunities for middle- and working-class Americans. His forthcoming book, “The American Dream Is Not Dead,” argues that both parties have overlooked improving conditions while playing to voter anxieties.

Trump vs. Democrats on the economy

Trump’s eventual Democratic opponent — Bernie Sanders, Joe Biden or anyone else — will make those anxieties a central theme this fall. Organizational bungling in the Iowa caucuses temporarily delayed the first round of competition.

But presidential incumbents, as Ronald Reagan showed with his 1984 “Morning in America” campaign, usually strike upbeat themes as they argue for another term.

Holes in Trump’s record complicate his case. He has not delivered better health care coverage to vulnerable Americans, instead threatening benefits they gained under Obamacare.

He has not upgraded American infrastructure or revived a coal industry still beset by economic and environmental pressures that drive down demand. Manufacturing — the object of his pledge to end the “carnage” afflicting blue-collar workers — has fallen into recession.

Despite his promises to the contrary, the 2017 tax cut has ballooned the federal budget deficit, delivered its greatest rewards to wealthy Americans and failed to sustain growth of 3% or more. Business investment lags even after the top corporate tax rate dropped from 35% to 21%.

Spending by consumers has sustained Trump-era growth. And economists see their confidence as fragile.

“Consumers say they feel good, but have proven they’ve grown more susceptible to a negative news shock,” notes Diane Swonk, chief economist for the business consulting firm Grant Thornton.

Coronavirus fears

That raises the stakes for Trump’s handling of the coronavirus, which threatens to damage global economic activity. His administration has not earned a reputation for competent governance.

The coronavirus wild card could yet trigger a 2020 recession, which Mark Zandi of Moody’s Analytics calls a 35% possibility. So could setbacks on trade policy.

Fear of economic fallout led White House advisers to dissuade Trump from new tariffs on imports from China late last year. But an unpredictable president governed by impulse often bucks attempts to control him — on the economy, national security and everything else.

The nature of 21st century polarization makes culture at least as important as the economy in driving election outcomes. No one doubts Trump could return to truculent populism if he deems it necessary to motivate core supporters, whatever economic advisers say.

“He’s not going to listen to them,” says Douglas Holtz-Eakin, once a top economic aide to President George W. Bush. “Who knows what he’ll do?”

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Economy

China Wants Everyone to Trade In Their Old Cars, Fridges to Help Save Its Economy

Published

11 hours ago

April 24, 2024

Harry Miller

China’s world-beating electric vehicle industry, at the heart of growing trade tensions with the US and Europe, is set to receive a big boost from the government’s latest effort to accelerate growth.

That’s one takeaway from what Beijing has revealed about its plan for incentives that will encourage Chinese businesses and households to adopt cleaner technologies. It’s widely expected to be one of this year’s main stimulus programs, though question-marks remain — including how much the government will spend.

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Economy

German Business Outlook Hits One-Year High as Economy Heals

Published

12 hours ago

April 24, 2024

Harry Miller

German business sentiment improved to its highest level in a year — reinforcing recent signs that Europe’s largest economy is exiting two years of struggles.

An expectations gauge by the Ifo institute rose to 89.9. in April from a revised 87.7 the previous month. That exceeds the 88.9 median forecast in a Bloomberg survey. A measure of current conditions also advanced.

“Sentiment has improved at companies in Germany,” Ifo President Clemens Fuest said. “Companies were more satisfied with their current business. Their expectations also brightened. The economy is stabilizing, especially thanks to service providers.”

A stronger global economy and the prospect of looser monetary policy in the euro zone are helping drag Germany out of the malaise that set in following Russia’s attack on Ukraine. European Central Bank President Christine Lagarde said last week that the country may have “turned the corner,” while Chancellor Olaf Scholz has also expressed optimism, citing record employment and retreating inflation.

There’s been a particular shift in the data in recent weeks, with the Bundesbank now estimating that output rose in the first quarter, having only a month ago foreseen a contraction that would have ushered in a first recession since the pandemic.

Even so, the start of the year “didn’t go great,” according to Fuest.

“What we’re seeing at the moment confirms the forecasts, which are saying that growth will be weak in Germany, but at least it won’t be negative,” he told Bloomberg Television. “So this is the stabilization we expected. It’s not a complete recovery. But at least it’s a start.”

Monthly purchasing managers’ surveys for April brought more cheer this week as Germany returned to expansion for the first time since June 2023. Weak spots remain, however — notably in industry, which is still mired in a slump that’s being offset by a surge in services activity.

“We see an improving worldwide economy,” Fuest said. “But this doesn’t seem to reach German manufacturing, which is puzzling in a way.”

Germany, which was the only Group of Seven economy to shrink last year and has been weighing on the wider region, helped private-sector output in the 20-nation euro area strengthen this month, S&P Global said.

–With assistance from Joel Rinneby, Kristian Siedenburg and Francine Lacqua.

(Updates with more comments from Fuest starting in sixth paragraph.)

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Economy

Parallel economy: How Russia is defying the West’s boycott

Published

18 hours ago

April 23, 2024

Harry Miller

When Moscow resident Zoya, 62, was planning a trip to Italy to visit her daughter last August, she saw the perfect opportunity to buy the Apple Watch she had long dreamed of owning.

Officially, Apple does not sell its products in Russia.

The California-based tech giant was one of the first companies to announce it would exit the country in response to Russian President Vladimir Putin’s full-scale invasion of Ukraine on February 24, 2022.

But the week before her trip, Zoya made a surprise discovery while browsing Yandex.Market, one of several Russian answers to Amazon, where she regularly shops.

Not only was the Apple Watch available for sale on the website, it was cheaper than in Italy.

Zoya bought the watch without a moment’s delay.

The serial code on the watch that was delivered to her home confirmed that it was manufactured by Apple in 2022 and intended for sale in the United States.

“In the store, they explained to me that these are genuine Apple products entering Russia through parallel imports,” Zoya, who asked to be only referred to by her first name, told Al Jazeera.

“I thought it was much easier to buy online than searching for a store in an unfamiliar country.”

Nearly 1,400 companies, including many of the most internationally recognisable brands, have since February 2022 announced that they would cease or dial back their operations in Russia in protest of Moscow’s military aggression against Ukraine.

But two years after the invasion, many of these companies’ products are still widely sold in Russia, in many cases in violation of Western-led sanctions, a months-long investigation by Al Jazeera has found.

Aided by the Russian government’s legalisation of parallel imports, Russian businesses have established a network of alternative supply chains to import restricted goods through third countries.

The companies that make the products have been either unwilling or unable to clamp down on these unofficial distribution networks.

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