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WTO Slashes World Trade Growth Forecast to 3.7% in 2019

Trump’s trade war has weakened global trade to such an extent the World Trade Organization (WTO) said global growth in merchandise trade is likely to slow further this quarter.

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Arthur J. Villasanta – Fourth Estate Contributor

Geneva, Switzerland (4E) – Trump’s trade war has weakened global trade to such an extent the World Trade Organization (WTO) said global growth in merchandise trade is likely to slow further this quarter.

In light of Trump’s trade war, the WTO now forecasts 3.9 percent global growth this year and 3.7 percent in 2019. These estimates, however, still seem too optimistic for some economists.

“Risks to the forecast are considerable and firmly weighted to the downside. A further ratcheting up of trade tensions could have direct negative effects on trade, but also beyond,” said the WTO in its new quarterly trade outlook indicator.

The indicator revealed declines in all seven of the drivers of trade that it tracks. It showed a reading of 98.6, the lowest since October 2016. This plunge reflects a further loss of trade growth momentum since August, when the index was at 100.3. A reading below 100 signals below-trend growth in trade.

Trump began his trade war against the European Union, Canada, Mexico, Turkey and China in March in a maniacal bid to redress trade imbalances.

The key WTO indicator is based on seven drivers: merchandise trade volume in the previous quarter, export orders, international air freight, container port throughput, car production and sales, electronic components and agricultural raw materials.

The newest reading shows electronic components plummeting to 93.3 from 102.2 in the previous quarter. Agricultural raw materials tumbled to 97.2 from 100.1 while export orders slid to 96.6 from 97.2 in August.

World trade growth has struggled to outpace economic growth since the global financial crisis of 2008. This phenomenon ended a long streak where trade increased at double the rate of global GDP.

Trade seemed to be reviving last year when it grew by 4.7 percent, leading analysts to issue upbeat forecasts in April of a further 4.4 percent rise this year and 4.0 percent in 2019. That’s nownot the case.

The WTO reduced those forecasts in September after Trump imposed his unwarranted tariffs on steel and aluminium and on goods from China.

The WTO report said a build-up of economic and financial risks could undermine trade and output. Developing and emerging economies could experience capital outflows and financial contagion as developed countries raise interest rates.

Other potential risks included geopolitical tensions. Medium-to-long term risks include ageing populations in developed countries and China, and economic rebalancing in China.

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Politics

U.S. Auto Industry Bosses Want Trump to End Trade War; Re-open Government

Leaders of the U.S. motor vehicle industry are urging the Trump administration and Congress to resolve Trump’s trade war against the world and end the government shutdown.

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Arthur J. Villasanta – Fourth Estate Contributor

Washington, DC, United States (4E) – Leaders of the U.S. motor vehicle industry are urging the Trump administration and Congress to resolve Trump’s trade war against the world and end the government shutdown.

They also declare the political uncertainty being engendered by Trump is hobbling the industry.

Fiat Chrysler Automobiles NV Chief Executive Mike Manley said U.S. metals tariffs imposed by trading partners in response to Trump’s will boost Fiat’s costs by $300 million to $350 million this year. The price hike comes to some $135 to $160 per vehicle.

Manley also said the U.S. government shutdown is preventing certification of one of the company’s new heavy duty pickup truck models. “The earlier it can be resolved, clearly the better,” he said.

Toyota Motor Corporation executive vice president for North American sales, Bob Carter, said the company has had to increase prices three times because of higher tariff costs. This, despite 96 percent of steel used in Toyota U.S. vehicles comes from U.S. steel plants. Carter said retaliatory tariffs boosted their vehicles prices by about $600 on average.

General Motors Company and Ford Motor Company are groaning from the U.S. steel and aluminum tariffs imposed by Trump.

GM Chief Executive Mary Barra promised investors the company will boost 2019 profit despite tariff-related costs and investments in electric vehicles. She restated an earlier decision to close five North American factories and cut nearly 15,000 jobs.

Ford Executive Chairman Bill Ford Jr. said “Certainty is something we really desire because of our product lead times. We don’t have that right now.”

Ford said he has no idea when the various trade and political issues will be resolved.

And then there’s NAFTA or its updated version Trump is trying to foist as a totally new agreement. Industry leader want the U.S. Congress decide quickly on the updated agreement’s fate.

“We just need it resolved,” said Brian Smith, CEO of Hyundai Motor Company in North America. Smith said his company needs clarity so it can adjust its supply chain as necessary. “It’s been going on way too long.”

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U.S. Army Will Test Missiles for Mobile A2/AD Zones in Asia

The U.S. Army is pushing ahead with a plan to establish mobile anti-access/anti denial (A2/AD) zones along the coastlines of allied nations in Asia and will test the first such zone in Okinawa this month.

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Arthur J. Villasanta – Fourth Estate Contributor

Washington, DC, United States (4E) – The U.S. Army is pushing ahead with a plan to establish mobile anti-access/anti denial (A2/AD) zones along the coastlines of allied nations in Asia and will test the first such zone in Okinawa this month.

The tests will confirm the capability of its battlefield surface-to-surface missiles (SSMs) to sink warships of the People’s Liberation Army Navy (PLAN) when it conducts its first-ever missile tests of these weapons in Asia on Okinawa.

The United States Forces Japan (USFJ), which is responsible for all United States Armed Forces units in Japan, has informed the Japan Self-Defense Force (JSDF) of plans to conduct missile tests in the waters around Okinawa later this year as a deterrent against the PLAN, according to Japanese media.

Japan’s Ministry of Defense said this will be the first missile test in or around Okinawa, which is a Japanese Prefecture.

The Army will test two of its battle-proven tactical missiles on Okinawa: the MGM-140 Army Tactical Missile System (ATacMS) and the M142 High Mobility Artillery Rocket System (HIMARS). Originally designed as land-attack missiles, both ATacMS and HIMARS are being developed into anti-ship missiles (ASMs) capable of attacking and sinking PLAN warships.

The new role for these mobile missiles is in keeping with the Army’s new concept of establishing anti-access/anti denial (A2/AD) zones along the coasts of allied nations such as Japan and the Philippines using ATacMS and HIMARS. Both these weapons are long-range missiles with a maximum range of 300 km.

Previous tests beginning 2016 sought to confirm if both SSMs could become effective ASMs. To this end, ATacMS has been upgraded to attack moving targets on land and at sea.

Using ATacMS as an ASM will eliminate the massive cost and long wait times often associated with developing a new weapons system. The newest version of ATacMS — MGM-168 ATacMS-Block IVA — can hurl its 230 kg unitary warhead towards a target 300 km away while flying at Mach 3 (3,700 km/h). This version will be converted into an ASM capable of attacking warships.

Analysts said the Army will have to integrate an existing seeker capable of detecting and tracking moving targets onto the front of the ATacMS. The seeker is effective against warships and mobile land targets such as tanks.

With this capability, what before was an Army surface-to-surface missile system will soon prevent enemy warships such as those from the PLAN from venturing inside the ATacMS kill zone.

The HIMARS mobile launcher will be shipped to Okinawa by cargo aircraft and operated by soldiers from the U.S. Army 1st Infantry Division headquartered at Fort Riley, Kansas.

HIMARS can carry either one ATacMS missile or six HIMARS rockets. It gained notoriety by being one of the weapons that slaughtered more than 300 Russian mercenaries on Feb. 7, 2018 near the town of Khasham (or Al Tabiyeh) in the Deir ez-Zor governorate in Syria.

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China’s Annual Trade Surplus with U.S. in 2018 is Largest on Record

Another month and again, another record for China. China’s annual trade surplus with the United States reached the highest level on record in December, marching upwards to $57.06 billion, the largest since December 2015.

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Arthur J. Villasanta – Fourth Estate Contributor

Beijing, China (4E) – Another month and again, another record for China. China’s annual trade surplus with the United States reached the highest level on record in December, marching upwards to $57.06 billion, the largest since December 2015.

And here’s another record: for all of 2018, the surplus rose by 17.2% to $323.32 billion, which is the highest level yet. Surprisingly, total bilateral trade rose by 5.7% compared to the levels seen in 2017 despite Trump’s trade war with China that began in July, said China’s General Administration of Customs.

Analysts expected the December surplus to increase to only $51.5 billion after rising to $44.71 billion in November. As in November, front loading of China’s exports to the U.S. explained the hefty number.

On the other hand, China’s monthly trade surplus with the U.S. fell to $29.87 billion compared to $35.54 billion in November. Imports from the United States grew by 0.7% year-on-year, far outpaced by a 11.3% increase in the value of exports to the U.S.

Good news for the U.S.: the value of China’s imports and exports fell by the largest value since 2016 in the 12 months to December.

Analysts said the declines reflect the reversal of a front-loading in orders before higher import tariffs were introduced in China and the U.S. earlier in the year.

Including trade with all countries, China’s trade surplus with the world fell to the lowest level since 2013. The value of Chinese imports and exports was the lowest for the year in December, adding to evidence all is not well in China today.

The value of exports plunged 7.6% year-on-year in U.S. dollar terms, coming in well below the median economist forecast for an increase of 5%. Exports fell by 4.4% in U.S. dollar terms from December 2017, missing forecasts for an increase of 3%.

China’s year-on-year drop in imports and exports was the largest since the second half of 2016. The drop mostly reflects the reversal of front-loading of trade orders before increased trade tariffs were implemented by both the U.S. and China earlier in 2018.

Compared to 2017, China’s trade surplus with the world (including the U.S.) fell to $351.8 billion, the smallest since 2013. The value of imports rose by 15.8% in U.S. dollar-denominated terms, faster than the 9.9% rise in exports.

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