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Ford Ramping-Up Production in China to Ease Pain from Trump Tariffs

Ford Motor Company, the second largest U.S. automaker, has announced plans to boost production of its models made in China, especially its Lincoln luxury sedans, to remain competitive in light of Trump’s trade war.

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Arthur J. Villasanta – Fourth Estate Contributor

Dearborn, MI, United States (4E) – Ford Motor Company, the second largest U.S. automaker, has announced plans to boost production of its models made in China, especially its Lincoln luxury sedans, to remain competitive in light of Trump’s trade war.

Executive vice president for global operations Joseph Hinrichs said Ford will accelerate plans to build more of its Lincoln models in Chinese plants as the increasingly bitter trade war with the United States make American cars more expensive and less attractive.

Hinrichs pointed out the spate of tariffs makes it difficult for Ford to plan for the future. He revealed that since tariffs on vehicles exported to China now reach 40 percent, there is no business case for exporting vehicles from the United States. This only leaves Ford with one option: produce more of its cars in China.

Ford’s move to make more in China is being driven by Ford’s realization it doesn’t see any easy resolution to the trade dispute between the United States and China. On Sept. 24, Trump imposed 10 percent tariffs on an additional $200 billion worth of Chinese exports, drawing rapid retaliation from Beijing on $60 billion in American products.

Hinrichs said Ford has long championed balanced and free trade. He noted that Ford continues to encourage the Trump administration and the Chinese government “that it’s in everyone’s interest to work out their differences.” But, he said trade talks between both warring countries “will go on for a while.”

Hinrichs emphasized that China “is a core business for us.” But since this trade war involved two very powerful economies “we’re going to have to plan accordingly.”

Ford has been planning to launch new vehicles in China to halt its recent slide in that market, said Hinrichs. In 2014, Ford brought the luxury Lincoln brand to China. It launched Lincoln with the mid-size MKZ sedan and MKC small SUV.

Lincoln’s sales in 2016 rose 180 percent from 2015, its first full-year in China. To add more Chinese consumers, Lincoln introduced “The Lincoln Way,” an ownership plan that provides highly personalized services to customers.

Trump’s trade war is also very costly for Ford financially. Ford CEO Jim Hackett said Trump’s tariffs on steel and aluminum “took about $1 billion in profit from us — and the irony is we source most of that in the U.S. today anyways. If it goes on longer, there will be more damage (to Ford).”

Hackett urges Trump to resolve trade disputes with all countries quickly or it will do “more damage” to Ford, which is already suffering losses from tariffs imposed by Trump.

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Finance

European Central Bank Finally Ends Massive QE Program

On December 31, the European Central Bank (ECB) will formally end its almost four-year old quantitative easing (QE) program that prevented the euro zone economy from succumbing to its own version of the U.S. Great Recession of 2008.

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Arthur J. Villasanta – Fourth Estate Contributor

Frankfurt, Germany (4E) – On December 31, the European Central Bank (ECB) will formally end its almost four-year old quantitative easing (QE) program that prevented the euro zone economy from succumbing to its own version of the U.S. Great Recession of 2008.

ECB will stop expanding the multi-trillion Euro asset purchasing program, and will instead switch to reinvesting cash from maturing bonds to purchase additional debt. These purchases should keep borrowing costs on the low-end until 2021.

The ECB Governing Council confirmed that bond purchases will plunge from €15 billion a month to zero by the end of the year. It also left benchmark interest rates unchanged.

Introduced in March 2015, ECB’s QE program saw the bank buy more than €2.6 trillion ($2.9 trillion) in a successful bid to prevent the bloc’s banking system from unraveling. The QE measures are widely credited with helping revive the 19-member currency bloc after a double-dip recession and the holdover effects of the European debt crisis.

“With the most prominent crisis-fighting measure of the ECB now almost back in the toolbox, the big question is, what will be next?” asked Carsten Brzeski, chief economist at ING. “It seems as if the ECB wants to keep as many cards as possible close to its chest,” Brzeski said.

The timing of the ECB’s move, however, is contentious. Political developments in the United Kingdom over Brexit; Italy over excessive government spending and France over street violence seems to question the wisdom of ending QE by year-end.

The ECB meeting comes a week ahead of the U.S. Federal Reserve’s December meeting where it is expected to raise interest rates one-quarter point, its last for the year. Slowing growth in the U.S. and worldwide, due partly to Trump’s trade war, has some economists expecting the Fed to forego the next quarter-point rate hike in March.

The U.S. economy is showing clear signs of slowing down while its three equities markets have been wracked by extreme volatility linked to Trump’s trade war for the past two months.

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California’s Housing Crisis Spiraling Out of Control

California’s four decades’ old housing shortage now threatens to strangle the high-tech industries on which it relies for prosperity while hurling more people into poverty and inflating the ranks of the homeless.

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Arthur J. Villasanta – Fourth Estate Contributor

Sacramento, CA, United States (4E) – California’s four decades’ old housing shortage now threatens to strangle the high-tech industries on which it relies for prosperity while hurling more people into poverty and inflating the ranks of the homeless.

The current housing shortage has been estimated at 3 to 4 million housing units, or some 20% to 30% of California’s current housing inventory of 14 million. That’s not enough for the new jobs being created at Silicon Valley.

San Francisco Bay area cities added 400,000 new jobs but only issued 60,000 permits for new housing units from 2012 to 2017. As a result, the housing crisis is damaging the state’s high-growth economy as employers now have to contend with an increasing shortage of skilled workers who can’t find housing.

State officials estimate that California needs to build 180,000 new units of housing every year. Housing has topped 100,000 units in recent years, but that’s far short of the demand

This shortage is especially acute in coastal areas where the housing squeeze is the tightest. This supply dearth is worsened by stiff local resistance to housing construction. Several California counties such as Ventura County and a number of cities have adopted Save Open Space and Agricultural Resources (SOAR) restrictions that make it almost impossible to build housing on agricultural land.

Worse, the wildfires that devastated communities in Ventura County and other regions are adding to the housing squeeze.

One of the dire consequences of this huge imbalance between supply and demand is that California now has the 49th lowest ratio of housing units per resident in the United States. The worst result is sky high real estate prices. Median home prices now stand at $1.3 million in San Francisco and $1 million in San Jose, for example.

Worse, the housing crisis has exacerbated old social ills. Homelessness per capita is now the third highest in the U.S. while less than a third of Californians can afford a median priced home. California’s has the country’s highest level of poverty.

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U.S. CEOs Predict Economic Recession by Year-end

It’s the post-Christmas “gift” no right-minded person wants to receive — but a recession might be in the offing before this tumultuous year ends.

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New York, NY, United States (4E) – It’s the post-Christmas “gift” no right-minded person wants to receive — but a recession might be in the offing before this tumultuous year ends.

A demoralizing new survey shows American CEOs think a recession might strike as early as the year-end only two short weeks away. Economists and investors alike have been sounding the alarm for months about the likelihood of an economic recession, one of whose main triggers is the economic uncertainty caused by Trump’s trade war.

A New York Times survey surprisingly revealed that almost half of the 134 business leaders at the Yale CEO Summit expected a recession to strike by the end of the year. It said this finding was the direst yet, and shows just how worried corporate executives are about an imminent recession.

A full 67 percent of the leaders cited U.S. political instability — especially Trump’s poor performance as president — and Trump’s trade war with the world as the major triggers for the upcoming recesison.

The U.S. has enjoyed a record 10 years of economic growth since the Great Recession of 2008, and by all measures, is due for a recession. Analysts said the gnawing fear about the oncoming recession is reaching fever pitch.

“The end is near for the near-decade-long burst of global economic growth,” predicted John Graham, a finance professor at Duke and overseer of the survey.

The findings from the New York Times survey also coincide with a Duke University Fuqua School of Business survey earlier this month that found nearly half of all U.S. CFOs also believe a recession is near but predicted it will hit by the end of 2019.

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