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Trump Team Weighs $1 Trillion for Infrastructure to Spur Economy – BNN

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(Bloomberg) — The Trump administration is preparing a nearly $1 trillion infrastructure proposal as part of its push to spur the world’s largest economy back to life, according to people familiar with the plan.

A preliminary version of the proposal being prepared by the Department of Transportation would reserve most of the money for traditional infrastructure work, like roads and bridges, but would also set aside funds for 5G wireless infrastructure and rural broadband, the people said.

President Donald Trump is scheduled to discuss rural broadband access at a White House event on Thursday.

An existing U.S. infrastructure funding law is up for renewal by Sept. 30, and the administration sees that as a possible vehicle to push through a broader package, the people said. They asked not to be identified because the Trump proposal isn’t final and hasn’t been announced.

The plan is emerging as lawmakers from both parties and Trump debate the timing and scope of more stimulus for a U.S. economy plunged into recession by nationwide lock-downs needed to halt the spread of coronavirus. It’s the latest sign of momentum in Washington for some kind of infrastructure spending blitz ahead of the election.

House Democrats have offered their own $500 billion proposal to renew infrastructure funding over five years. It’s unclear how long the administration’s draft would authorize spending or how it would pay for the programs.

Trump is pushing to rev up the U.S. economy — which four months ago was the centerpiece of his argument for a second term — as he trails Democrat Joe Biden in most national polls. The White House explored ways to shift the next round of federal virus aid from personal financial support to growth-fostering initiatives, such as infrastructure spending.

The White House declined to comment specifically on the administration’s plans.

“Since he took office, President Trump has been serious about a bipartisan infrastructure package that rebuilds our crumbling roads and bridges, invests in future industries, and promotes permitting efficiency,” White House spokesman Judd Deere said in a statement.

It’s still possible that the infrastructure measures could be rolled into the next round of pandemic relief. The House passed $3 trillion in additional stimulus in May, but the Republican-led Senate spurned that bill and will instead weigh its options next month.

The Democratic bill to reauthorize the current infrastructure program was unveiled this month. It includes investments in roads and bridges, funding to make certain projects more resilient to climate change, and funding for public transit and Amtrak, among other priorities. The House Transportation committee is set to take up the measure on Wednesday.

The existing surface transportation authorization law, known as the FAST Act, authorizes $305 billion over five years and expires on Sept. 30. Lawmakers will either extend it or come up with a long-term replacement. It’s not yet clear how closely the administration’s plan will align with the Democrats’ proposal — or with what Senate Majority Leader Mitch McConnell might do.

Infrastructure spending has long held appeal for lawmakers as a way to spur growth, and the pandemic is renewing calls to fast-track roads and other projects. Mary C. Daly, president of the Federal Reserve Bank of San Francisco, called for public-works spending on infrastructure, including projects that could help low-income people.

“We need to focus on investments that leverage the talent of everyone and contribute to the economy’s long-term growth prospects,” Daly said in a speech Monday. She cited health, education and digital infrastructure, such as internet access.

One major question facing lawmakers will be how to pay for the measures, a hurdle that has stopped previous moves on infrastructure. Increasing the federal gas tax to support a massive round of new spending is unlikely though, as Trump cheers low gas prices and calls for other measures, including a payroll tax cut, to put cash in Americans’ pockets as the country copes with fallout from the virus.

Congress has shown little concern about the more than $2 trillion allocated to curb the pandemic’s economic damage, though some conservatives have begun to urge Trump to turn off the taps. But interest rates are near zero, making additional government spending more palatable, Daly said.

“Now is an especially good time to take on this type of debt,” Daly said. “Even before the crisis, we were in an environment of low interest rates – and that is expected to continue for the foreseeable future. This makes public spending relatively cheap and easy to finance.”

©2020 Bloomberg L.P.

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UK economy risks shrinking 14% this year, budget forecasters warn – TheChronicleHerald.ca

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LONDON (Reuters) – Britain’s economy could shrink by more than 14% this year and government borrowing risks approaching 400 billion pounds ($500 billion) if there is lasting damage from the coronavirus, government budget forecasters warned on Tuesday.

The Office for Budget Responsibility said its central scenario, with only moderate scarring, showed a 12.4% fall in output, with a 14.3% decline if scarring is deeper.

Under an ‘upside scenario’ – which it said was an update of the sole scenario it presented in April – output would fall by 10.6%, while government borrowing would be limited to 263 billion pounds.

(Reporting by David Milliken, editing by Andy Bruce)

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Return of North American economy will negate need for tariffs, PM tells Trump – CP24 Toronto's Breaking News

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WASHINGTON – Prime Minister Justin Trudeau urged Donald Trump to think twice Monday before imposing new tariffs on Canadian aluminum, saying the sector is emerging from the pandemic-induced production stance that prompted the White House to consider such measures in the first place.

Trudeau, who said in a news conference he had spoken to the U.S. president earlier in the day, told him that with the North American economy getting back up to speed, Canada’s aluminum smelters would soon be back producing value-added specialty products for the American auto sector.

The spectre of new tariffs emerged last month after Canadian producers, unable to shut down production and with their usual customers hamstrung by the impact of COVID-19, were forced to make a more generic form of aluminum and ship it to warehouses in the United States.

That alarmed certain U.S. smelter owners and operators, who have been urging the U.S. trade representative’s office to slap fresh levies on imports from Canada.

The pandemic “caused certain disruption in the aluminum sector that is starting to realign itself, given the economies are starting up again and manufacturing is getting going,” Trudeau said after his call with Trump.

“I impressed upon him that it would be a shame to see tariffs come in between our two countries at a time where we’re celebrating NAFTA and at a time where we want our businesses and our manufacturers to get going as quickly as possible.”

Canada has been on the outside looking in when it comes to the coming into force of NAFTA’s successor, the U.S.-Mexico-Canada Agreement, which took shape in 2017 and 2018 before a backdrop of steadily worsening relations between Trump and Trudeau.

While Trump welcomed Mexico’s President Andres Manuel Lopez Obrador to a celebratory event at the White House last week, Trudeau kept his distance, citing the tariff dispute and the ongoing COVID-19 pandemic among his reasons. A readout from Monday’s call said the prime minister “expressed regret” for being unable to attend.

The U.S. trade representative reportedly gave Canada a deadline of July 1 to impose export restrictions – the very day the USMCA took effect. That deadline has come and gone without a hint from either the White House or U.S. trade ambassador Robert Lighthizer about what happens next.

Trudeau said he and Trump also discussed the Canada-U.S. border, where non-essential travel has been curtailed since March in an effort to limit the spread of the novel coronavirus. The 30-day bilateral agreement to limit discretionary cross-border travel without restricting trade or essential workers has been extended three times and is now set to expire July 21.

Since the last extension, however, the public health crisis in the U.S. has exploded.

More than 100,000 new COVID-19 cases were identified over the weekend, particularly in southern states that reopened early, with Florida emerging as the new epicentre. Canada has had 108,000 confirmed cases in total, compared with more than 3.3 million cases and 135,000 deaths in the U.S. to date.

Hospitals in major urban centres across the United States are again nearing capacity and health care workers face another critical shortage of personal protective equipment like masks and respirators.

Recent polls suggest Canadians remain unequivocally opposed to reopening the border any time soon – a predictable symptom of the accelerating crisis in the U.S., said Kathryn Friedman, a University at Buffalo law professor and Wilson Center global fellow.

But there could be other lingering foreign-policy irritants at play, she added.

“I wonder if the United States had treated our dear neighbour, friend and ally a little bit better over the last three-and-a-half or so years, if the reaction would be as harsh,” Friedman said. “Maybe people are just like, ‘Well, too bad, I don’t care if you want to open the border.”’

Friedman is among several Canada-U.S. experts, border community leaders, northern state lawmakers and others who want to see a plan for when the time comes to lift the restrictions.

“I think we have to have this conversation,” she said. “I think we have to engage the right people now, so that when the border restrictions are eased, whenever that’s going to be, they are done so responsibly.”

It’s less a question of when and more a question of how, Friedman said – what sort of controls, testing and screening measures and other tools will need to be in place even after the emergency has passed.

“I’m more concerned that the climate will change, and some relevant government officials won’t have given any thought to how this border opening is going to take place,” she said.

“We have to get our act together and really think more clearly about how we’re going to handle these kinds of situations in the future, and really use science-based data – an evidence-based, science-based approach – to health screenings when it comes to border restrictions and border policies.”

Trudeau demurred Monday when asked whether this time, Canada and the U.S. might negotiate a closure that lasts longer than the standard 30-day window.

“We will be discussing with our American partners what the next steps should be, and I think this is a situation that is evolving rapidly and we need to keep responding to the situation on the ground.”

This report by The Canadian Press was first published July 13, 2020.

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China's economy seen growing 2.5% in second quarter as lockdowns end, stimulus kicks in: Reuters poll – TheChronicleHerald.ca

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By Kevin Yao

BEIJING (Reuters) – China’s economy likely returned to modest growth in the second quarter after a record contraction, as lockdown measures ended and policymakers announced more stimulus to combat the shock from the coronavirus crisis, according to a Reuters poll.

The world’s second-largest economy likely grew 2.5% in April-June from a year earlier, reversing a 6.8% decline in the first quarter – the first contraction since at least 1992 when official quarterly gross domestic product (GDP) records started, the poll showed.

But the expected growth rate would still be the weakest expansion on record.

Forecasts by 55 analysts polled by Reuters ranged from a

3.1% contraction in gross domestic product (GDP) to a 4.0% expansion in the second quarter, reflecting uncertainty over the pace of recovery.

China’s services sector, which is dominated by smaller companies, has not rebounded as quickly as industrial production, though there are some signs that consumer confidence is gradually improving.

On a quarterly basis, GDP is expected to have grown 9.6% in April-June, compared with a decline of 9.8% in the previous

quarter.

The government has rolled out a raft of measures, including more fiscal spending, tax relief and cuts in lending rates and banks’ reserve requirements to revive the virus-hit economy and support employment.

Still, analysts say the recovery remains fragile, as rising coronavirus inflections in some countries overshadow improved demand for Chinese exports while heavy domestic job losses and lingering health concerns have kept consumers cautious.

Data on Tuesday showed the country’s imports in June rose for the first time this year as stimulus boosted demand for building materials, while exports also edged up as overseas economies reopened after lockdowns.

While China’s economy is showing a steady recovery, a hard battle still lies ahead as the situation remains severe both at home and abroad, state radio quoted Premier Li Keqiang as saying on Monday.

China releases second-quarter GDP data on Thursday (0200 GMT), along with June factory output, retail sales and fixed-asset investment.

Analysts polled by Reuters expect industrial output to grow 4.7% in June from a year earlier, quickening from a 4.4% rise in May, while retail sales were seen rising 0.3%, versus a 2.8% fall in May. Retail sales have slumped for five months in a row.

Fixed-asset investment is forecast to fall 3.3% in the

first six months from a year earlier, easing from a 6.3%

slide in the first five months, according to the poll.

POLICY SUPPORT STILL NEEDED

Central bank governor Yi Gang has said China would keep financial system liquidity ample in the second half but would need to consider withdrawing support at some point, raising questions among investors over when it may start dialing down stimulus.

Still, analysts expect policymakers to maintain support for the economy for a while longer to ensure the recovery remains on track, despite a rise in overall debt levels.

Tang Jianwei, senior economist at Bank of Communications, expected the central bank to dole out 1-2 more targeted reserve requirement cuts and another 20 basis points of cuts in the interest rate on the medium-term lending facility in the second half.

Credit growth is also expected to remain strong. New bank lending hit a record 12.09 trillion yuan ($1.72 trillion) in the first half of the year.

Moreover, China has allowed local governments to issue 3.75 trillion yuan in special bonds to fund infrastructure projects, up from 2.15 trillion yuan last year, and issue 1 trillion yuan in special treasury bonds to spur activity.

Tang expected the economy to grow around 2.5% this year.

The International Monetary Fund has forecast an expansion of 1.0% for China for the full year, the only major economy expected to report growth in 2020.

($1 = 7.0092 Chinese yuan renminbi)

(Polling by Shaloo Shrivastava in Bengaluru and Jing Wang in Shanghai; Reporting by Kevin Yao; Editing by Kim Coghill)

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