ReportWire

Tag: economy and economic indicators

  • Early struggles of new House Republican majority raise anxiety over high-stakes fights to come | CNN Politics

    Early struggles of new House Republican majority raise anxiety over high-stakes fights to come | CNN Politics



    CNN
     — 

    As House Republicans prepared to pass a parental rights bill – a signature plank of their governing agenda – GOP leaders ran into unexpected headwinds.

    House Majority Whip Tom Emmer, who is tasked with counting votes, began picking up on concerns from conservatives who thought the measure was federal overreach and moderates who worried about potential amendments related to transgender students.

    Even Rep. Ken Buck of Colorado, a member of Emmer’s whip team, informed leadership he would be voting against the bill – prompting grumbling from some senior Republicans who mused about kicking him off the whip team, according to sources familiar with the internal conversations.

    And when it came time for the floor vote, a last-minute hiccup – GOP Rep. Troy Nehls of Texas accidentally voting against the bill – prompted Emmer and other leaders to swarm Nehls on the floor and urge him to change his vote, a frantic scene as the clock ticked down and the measure’s fate hung in the balance.

    In the end, the bill wound up narrowly passing with five Republican defections – a margin that would have been enough to sink the legislation, had it not been for 10 Democratic absences.

    “Nobody ever said it was going to be easy,” Emmer told CNN in a phone interview. “You’re dealing with a whole bunch of people with a whole bunch of personalities, different points of view. (The amendment process) is an exciting process when members are able to come to the floor with an idea to impact a piece of legislation. … It’s always a challenge though.”

    Asked about Buck defying leadership on the education bill, Emmer said they are not booting him from the whip team, but he did joke about getting retribution.

    “I told him instead, we’re going to add a couple people to his whip card that will give him just a little bit more work,” Emmer said.

    The intense whipping effort and internal drama on a messaging bill that is dead-on-arrival in the Senate has become a recurring theme of the House GOP’s first 100 days in office. With little room for error in their razor-thin majority, Republicans have so far struggled to deliver on key priorities like the border and the budget amid their internal divisions – though they have notched some symbolic victories on energy and education, while actually succeeding in overturning a DC crime bill.

    Despite the handful of successes, the party’s more vulnerable members are frustrated with how the House Republican majority has so far spent its time in power, which has also included a heavy focus on investigations and running defense for former President Donald Trump.

    “I’m concerned about the kind of legislation that we’re working on, and what we’re talking about,” Rep. Nancy Mace of South Carolina, who represents a swing district, told CNN. “We just spent the last week talking about paying off porn stars, and that doesn’t get us anywhere closer to solving the inflation crisis, it doesn’t inch further to finding ways to protect women. … I’ve been very disappointed with what we’re doing right now.”

    Rep. Tony Gonzales of Texas, a moderate and outspoken critic of the GOP’s hardline border security bills, was even blunter: “I don’t have time to sit around all day long and drink scotch and bullsh*t about bills that have no chance of passing into law.”

    Senior Republicans chalked up the early struggles to natural growing pains that come with any new majority.

    “There’s always a bit of a learning curve. You have to understand, over half our members have never been in a majority,” said veteran Rep. Tom Cole of Oklahoma, a member of the GOP leadership team. “There’s a lot of learning that goes on – then add in a divided government and a narrow majority.”

    But the biggest hurdles are yet to come, with Congress gearing up to deal with must-pass items like lifting the nation’s debt ceiling and funding the government – two politically tricky issues with incredibly high stakes. And while GOP lawmakers say they are generally experiencing a honeymoon phase right now, the anxiety over the challenges ahead was palpable in interviews with over two dozen Republican members for this story.

    In a sign of how difficult things could get for GOP leaders, members of the hardline House Freedom Caucus are already talking about the cudgels they have at their disposal to use in those upcoming fights – namely, the power of any single member to force a floor vote on ousting the speaker. Restoring the procedural tool, known as the “motion to vacate,” was one of the key concessions Kevin McCarthy made in his bid to become speaker.

    “It hasn’t come up as far as in a serious conversation, as this needs to be enacted. But as we look at these issues … It does come up from time to time, as we game plan and we look at all of the alternatives and contingency plans that could play out over the next two years,” said freshman Rep. Eli Crane of Arizona, one of the McCarthy holdouts who ended up voting “present” on the last ballot.

    Lawmakers have largely attributed the House GOP’s slow start to the historic, drawn-out speaker’s battle that delayed their ability to organize committees.

    But there are other reasons: House Majority Leader Steve Scalise initially promised to put 11 bills on the floor within their first two weeks in office, but leadership was forced to pull five of them – including legislation on hot-button topics like border security, law enforcement and abortion – amid resistance within their ranks.

    House Republicans also promised to produce a 10-year budget, but have struggled behind the scenes to find consensus and are now discussing delaying – or even skipping – a budget in order to focus on a bill to combine hiking the debt ceiling with spending cuts.

    McCarthy can only afford to lose four Republican votes on any partisan bills. And he made a number of promises to secure his speakership that have complicated his ability to govern, such as vowing a more open amendment process that allows any member to alter legislation on the floor.

    While many lawmakers welcomed this addition to the legislative process, some have expressed concern that it could sink otherwise bipartisan pieces of legislation.

    “I’ve got mixed feelings,” GOP Rep. Don Bacon, who represents a Biden-won district in Nebraska, told CNN. “On the positive side, it gets more people involved. They feel like they have a voice. That’s good. I think, too, though, on the downside, it’s taking some of our bills that should be more bipartisan, but through the amendment process is made more partisan.”

    Rep. Kelly Armstrong of North Dakota acknowledged that the process is “not without its stumbles and it’s going to cause problems along the way,” but added: “I think we should celebrate it.”

    Abolishing the House’s remote voting system, though encouraging for many who wanted the chamber to return to its pre-Covid posture, has also made attendance an issue. Emmer told CNN that even a member who recently tore his Achilles’ heel is not planning on missing any time.

    Despite the challenging dynamics, Republicans have notched some real wins, including passing a resolution to block a DC crime bill that lessened penalties for certain offenses and a resolution to end the Covid-19 public health emergency.

    “We’re holding tight to our commitment to America. And I know it looks a little bit dicey and it doesn’t look real fluid. … That’s democracy. I think that’s a positive thing,” said Rep. Lisa McClain of Michigan, a new member of the GOP leadership team. “It’s not real pretty all the time, but I think it’s positive.”

    GOP Rep. Jennifer Kiggans, a freshman from Virgina who flipped her seat, said it is important to show what Congress looks like under Republican leadership even if the legislation is not going to pass the Senate.

    “We’ve been there three months. I don’t know anybody that assumes a new position and changes things overnight. So it’s a work in progress. I think we are demonstrating what Republican leadership looks like.”

    A number of House Republicans expressed concern that the toughest fights the party will face are still to come, from reaching a deal on the debt ceiling, to funding the government to continuing to deliver on key campaign promises.

    “We haven’t gotten to the heavy lifting yet,” GOP Rep. Mike Rogers of Alabama, a committee chairman, told CNN.

    Crane told CNN, “I’m definitely concerned about it” when asked about the pace of legislation coming to the floor.

    And GOP Rep. Steve Womack of Arkansas compared the first 100 days to a football scrimmage.

    “In football terms, we have been in a scrimmage. We’ve basically been trying to figure out how this small majority is going to work together with differing viewpoints,” he explained. “We’re going to join the varsity now. Competition is going to get a little tougher. The issues are going to get a little harder. And the challenge to leadership is going to get a little bit more compelling. But I think that they are equal to the task.”

    A number of members also voiced their concern that not enough progress has been made on crucial issues like the debt ceiling.

    “What worries me is the delay,” Cole told CNN about the state of debt ceiling talks.

    There’s also been some miscommunication issues. House Budget Chairman Jodey Arrington of Texas ruffled some feathers among Republicans when he told CNN that the GOP would produce a budget in May – a statement his office had to then walk back – and when he told a group of reporters that he is working on a “term sheet” of spending cuts, which McCarthy later shot down, saying: “I don’t know what he’s talking about.”

    Still, most House Republicans are pinning their frustrations on President Joe Biden, who they framed as unwilling to come to the negotiating table.

    “I wish we had made more progress on the debt ceiling at this point,” GOP Rep. Dusty Johnson, chair of the centrist-leaning Main Street Caucus, told CNN. “We are getting very close to go time. The fact that we’re where we’re at should concern a lot of us. That is because Joe Biden refuses to come to the table.”

    Kiggans told CNN, “there’s got to be less finger pointing” over the issue.

    “I really disagree with standing up on the floor and making really obnoxious speeches about the other side.”

    The White House has called for the debt ceiling to be raised without any conditions attached.

    Beyond the debt ceiling, the conference is still stalled on a number of key pieces of legislation including a narrow border security bill that has run into fierce opposition from moderates.

    The various ideological groups inside the House GOP met twice about a broader immigration and border package during the last week the House was recently in session, including one meeting involving McCarthy. The hope is to move a package through committee later this month.

    But the two most vocal voices on the issue, Gonzales and Texas GOP Rep. Chip Roy, do not appear to be budging.

    “I’m not going to give in, and you’re never going to out-border me,” said Gonzales, who opposes a hardline border security bill from Roy.

    Meanwhile, Roy told CNN: “I’m not really worried about what [Gonzales] has to say.”

    To help deal with the internal divisions, McCarthy tapped GOP Rep. Garret Graves of Louisiana to lead negotiations on the debt ceiling and to meet at least weekly with leaders of each faction of the House GOP conference, known as the “five families,” in an effort to privately air grievances and avoid tensions from spilling into public view.

    But the deputization of Graves – as opposed to someone on McCarthy’s elected leadership team, like Scalise, or Arrington, who is actually in charge of budget issues– has raised some eyebrows in GOP circles, who wonder if McCarthy is trying to create some distance from the talks or if he doesn’t feel like he can trust his other deputies.

    One GOP lawmaker said Arrington is not a close ally of the speaker, which has made things more challenging for the pair.

    “Jodey’s not a McCarthy guy,” the member said. “But Jodey is doing his best.”

    Another Republican acknowledged that there’s long been some distrust between McCarthy and Scalise, who were once seen as potential rivals.

    Arrington, in a statement, said he is focused on his mission “to stop the reckless spending that is bankrupting our country and restore fiscal sanity in Washington before it’s too late.”

    And Armstrong pointed out that having Graves in charge of overseeing some of these talks makes sense from a resource perspective.

    “Scalise and his team have to run the floor with a five-vote majority,” he said. “They are doing a great job, but it’s a lot.”

    Graves acknowledged to CNN the significance of being tapped by leadership to take on such a pivotal role.

    “Everything that I’m doing is sort of part of the speaker’s authority,” Graves told CNN. “I was not elected.”

    Graves likened the meetings, which McCarthy joins at least a third of the time, to “a therapy session.”

    “The best way I can describe it is a big family Thanksgiving dinner,” Armstrong, a regular meeting attendee, told CNN. “Everybody fights and is rowdy and will get into arguments but you know what? When you walk out of that Thanksgiving dinner, you better not make fun of my sister or brother at a bar or you’re going to have a problem.”

    “They’re contentious, but they’re respectful,” Armstrong added.

    These meetings are intended to open the lines of communication with members who normally wouldn’t engage with one another and be proactive about working out issues in order to avoid clashes on the House floor. From there, Emmer digs into the details with members who have specific sticking points. Beyond targeted meetings, Emmer said he and his team have had listening sessions with every member of the conference.

    The process of bringing various groups of House Republicans together has become a fixture in the conference’s first 100 days in the majority and a hallmark of McCarthy’s leadership style. Part of that is, by necessity, since McCarthy can only lose four Republicans on any given vote.

    But that process takes time, which is partly why the conference has not been able to put up some of its top priorities up for a floor vote yet.

    “It’s like getting a bunch of stray cats to all come together and go in the same direction. Pretty much the same thing with congressmen,” GOP Rep. Jeff Van Drew of New Jersey said.

    Source link

  • Here’s why beef is still pricey | CNN Business

    Here’s why beef is still pricey | CNN Business


    New York
    CNN
     — 

    A slowing economy may lead to a decline in sales of pricey beef cuts, but don’t look for any bargains just yet.

    Market forces that have been building for a long time, including devastating droughts, will likely keep hamburger and steak prices steady — and relatively expensive.

    In part, that’s because there’s less beef. A contraction in beef supplies “has been coming for a while,” said David Anderson, a professor in Texas A&M University’s agricultural economics department. “We’re starting to see the effects that we knew were going to be coming for a couple of years.”

    When extreme drought hit the United States in recent years, farmers started to rapidly sell cattle because the dry conditions, along with higher feed costs, made it expensive or impossible to maintain their herds. That wave of sales, particularly of cows used to breed, has led to supply constraints this year.

    “Tightening cattle supplies are expected to cause a significant year-over-year decrease in beef production, the first decline since 2015,” a March market outlook from the US Department of Agriculture noted.

    “If we produce less beef, the pressure’s on for higher prices,” said Anderson. The “big unknown is going to be consumer demand.”

    The beef supply tends to grow and shrink in roughly 10-year cycles, said Lance Zimmerman, senior beef analyst for the North American market with Rabobank. When supply shrinks, consumer prices tend to go up. But with people nervous about the economy, this year’s more complicated.

    “The biggest thing that looms large, in all of our minds as market analysts right now, is do we have recession risk that we need to price into the market for next year,” Zimmerman said. “If that’s the case, beef prices may be steadier.”

    And with food inflation stubbornly high, consumers are already cutting back on certain items, including beef.

    Tyson

    (TSN)    , which processes about a fifth of the country’s beef, poultry and pork, noted a sales dip in beef in the three months ending December 31, 2022.

    With grocery inflation stubbornly high, some consumers trade down.

    Beef sales “were down 5.6% compared to record high sales in the prior year,” said CFO John Tyson during a February analyst call discussing the quarterly results, noting that prices were down in the quarter due to “softer domestic demand for beef.” The company said that it expects its beef margins to fall this year because of the smaller domestic supply.

    “Retailers through last year continued to push price on the consumer,” said Adam Speck, senior livestock analyst at Gro Intelligence. Now they have to answer a question as they plan for the year: Will demand be high enough to warrant raising prices even more?

    “The answer is probably no,” said Speck. That may not be a huge relief, as beef prices are still relatively high. In 2022, fresh choice beef retailed for $7.59 per pound, according to March data from the USDA. That’s up from $7.25 per pound the previous year.

    Stores may try to test the waters during barbecue season.

    In the spring, “we’re at the bottom of our traditional seasonal demand,” said Bernt Nelson, an economist with American Farm Bureau Federation. Demand for beef typically dips after the holidays, and picks up when people fire up their grills in the summer, he noted. If demand remains strong, “we may see some higher beef prices,” towards the fall and later, Bernt said.

    Source link

  • The Fed could easily drive Black unemployment much higher than the overall jobless rate | CNN Business

    The Fed could easily drive Black unemployment much higher than the overall jobless rate | CNN Business


    New York
    CNN
     — 

    Millions of jobs could be on the chopping block this year, as the Federal Reserve continues its rate-hiking campaign to tame inflation. But the effects of that action likely won’t reverberate evenly across the economy.

    The Fed has seen some success: Inflation has cooled for eighth consecutive months, according to the February Consumer Price Index. The Producer Price Index shows a dramatic drop in wholesale prices in February. And the Fed’s favored inflation gauge, the Personal Consumption Expenditures price index, has also started to moderate.

    But the job market has proved to be a formidable force, humming steadily in the face of climbing rates meant to slow its growth. After adding more than half a million jobs in January, the US economy then added 311,000 jobs in February, with an unemployment rate of 3.6% — just above a half-century low — according to the Bureau of Labor Statistics.

    However, the jobless rate isn’t expected to be that low for long.

    At its most recent policy-making meeting, the Fed released projections for the year ahead that showed unemployment could jump to 4.5%, representing another 1.5 million job losses, by the end of the year.

    While that’s a small improvement from the central bank’s previous 4.6% jobless rate estimate, economists say it’s possible the unemployment rate could rise above the Fed’s expectations. Moreover, they say that historically disadvantaged groups could be disproportionately affected by the central bank’s stringent monetary policy.

    While some groups often sidelined in the job market have seen benefits from this hot job market — women have seen a faster pace of job gains than men in recent months, for example — others, including Black women and Latino men, have seen slower recoveries in jobless rates since the onset of the Covid pandemic.

    Recession fears gained traction last month when the collapse of Silicon Valley Bank sent markets wobbling, raising concerns about the economy’s ability to handle more stress. Goldman Sachs revised its estimate of the United States entering a recession over the next 12 months to a 35% chance, up from its estimate of a 25% chance before the banking sector turmoil.

    That’s of particular concern to certain demographic groups: Jobless rates for Black and Hispanic Americans often increase by more than those of their White counterparts during recessions, said Rakesh Kochhar, a senior researcher focusing on demographics and social trends at the Pew Research Center.

    History makes that discrepancy clear.

    A Pew Research Center report comparing two recessions in recent decades shows how Black and Hispanic Americans experience disproportionate effects on their jobless rates during periods of economic downturn. From the second quarter of 2007 to the second quarter of 2009, during the Great Recession, the unemployment rate rose 6.5 percentage points for Black Americans. The Hispanic unemployment rate climbed 6.3 percentage points. For White workers, it increased 4 percentage points.

    And from the first quarter of 1990 to the first quarter of 1991, the unemployment rate climbed 1.4 percentage points for Black Americans and 2.1 percentage points for Hispanic Americans. The White unemployment rate rose 1.3 percentage points.

    Economists say it’s hard to guess the trajectory of the unemployment rate this year, noting it could very well exceed the Fed’s estimate.

    “There’s just tons of momentum, and once you slow the economy enough to get the unemployment rate moving up, it’s very hard to sort of turn that cruise ship back around,” said Josh Bivens, research director and chief economist at the Economic Policy Institute.

    As such, the Fed’s tightening efforts could easily drive the Black unemployment rate much higher than the overall jobless rate, said William Spriggs, an economics professor at Howard University and chief economist to the AFL-CIO.

    “If the Fed continues to use unemployment as its measure of labor force slack, and thinks they want a 4.5% unemployment rate — to make that happen, the Fed would have to induce net job loss in the labor market,” Spriggs told CNN in an email. “If we go through two months of negative job growth, all bets are off. The Black unemployment rate will easily get to 9% in that scenario.”

    One other likely consequence of growing unemployment is slowing wage growth, Bivens said.

    Like rising unemployment, stunted wage growth tends to hit marginalized groups harder. A 2021 Economic Policy Institute report shows that a 1 percentage point increase in overall unemployment correlates with about 0.5% slower wage growth for White median hourly wages. Wage growth falls by roughly 0.8% for Black median hourly wages.

    “A lot of people have this idea that in a recession, if unemployment rises by a couple of percentage points, as long as you’re not one of those unlucky people to lose the job, you’ve dodged the bullet,” Bivens said. “And that’s not true at all.”

    Still, a robust labor market isn’t a permanent solution to bridging employment disparities, even if the Fed does keep rates lower, says Wendy Edelberg, director of the Hamilton Project and a senior fellow in economic studies at the Brookings Institution.

    The job market’s recent strength is unsustainable, she said. The US economy needs about 75,000 net job gains a month to keep stable and is currently adding about 350,000 net job gains a month on average, according to Edelberg.

    “[The Fed is] right to be confident that one of the things that’s going to have to happen to get inflation back down to a normal, stable level is to get job growth to a normal, sustainable level,” Edelberg said. “But if the Fed’s actions resulted in a slower labor market, then inflation stayed high — that would be a disaster.”

    The March jobs report from the Department of Labor, due to be released Friday at 8:30 a.m., is expected to show the US economy gained 240,000 positions last month. ADP’s private-sector payroll report, generally seen by investors as a proxy for the trajectory of Friday’s number, fell short of expectations, with just 145,000 jobs added. Economists had expected private hiring would rise by 200,000 positions last month.

    Source link

  • Amazon, Microsoft could face UK antitrust probe over cloud services | CNN Business

    Amazon, Microsoft could face UK antitrust probe over cloud services | CNN Business


    London
    CNN
     — 

    Britain’s media and communications regulator Ofcom says it has “significant concerns” that Amazon and Microsoft could be harming competition in the market for cloud services.

    In a statement Wednesday, Ofcom said it was “proposing to refer” the cloud services market to the Competition and Markets Authority, the UK antitrust regulator, for further investigation.

    Ofcom’s own probe, which it launched in October, had so far uncovered some “concerning practices, including by some of the biggest tech firms in the world,” said Fergal Farragher, the Ofcom director leading the investigation.

    “High barriers to switching are already harming competition in what is a fast-growing market. We think more in-depth scrutiny is needed, to make sure it’s working well for people and businesses who rely on these services,” Farragher added.

    The Competition and Markets Authority said it received Ofcom’s provisional findings Wednesday and was reviewing them. “We stand ready to carry out a market investigation into this area, should Ofcom determine it is required,” a spokesperson said.

    The Ofcom announcement comes days after Google Cloud accused Microsoft

    (MSFT)     of anti-competitive cloud computing practices. In an interview with Reuters, Google Cloud Vice President Amit Zavery said the company had raised the issue with antitrust agencies and urged EU antitrust regulators to take a closer look.

    Cloud services are delivered to businesses and consumers over the internet and include applications such as Gmail and Dropbox.

    Europe’s Digital Markets Act, which will apply from May, aims to enhance competition in online services. Britain’s own Digital Markets, Competition and Consumer Bill is expected to come before lawmakers this year.

    According to Ofcom, Amazon

    (AMZN)     Web Services and Microsoft’s Azure have a combined UK market share of 60%-70% in cloud services. Google

    (GOOGL)     is their closest competitor with 5%-10%.

    Ofcom said the three companies charged high “egress fees” for transferring data out of a cloud, which discourages customers from switching providers or using multiple providers to best serve their needs.

    It also flagged technical restrictions imposed by the leading providers that prevent some of the services of one provider working effectively with cloud services from other firms, and said that fee discounts were structured to incentivize customers to use a single provider for all or most of their cloud needs.

    There were indications that these market features were already causing harm, “with evidence of cloud customers facing significant price increases when they come to renew their contracts,” Ofcom said.

    A Microsoft spokesperson said the company would continue to engage with Ofcom on its investigation. “We remain committed to ensuring the UK cloud industry stays highly competitive,” the spokesperson added. CNN has also contacted Amazon and Google.

    Ofcom has invited feedback on its interim findings and will publish a final decision by October 5 on whether to refer the cloud services market to the Competition and Markets Authority.

    “Making a market investigation reference would be a significant step for Ofcom to take. Our proposal reflects the importance of cloud computing to UK consumers and businesses,” it said.

    Source link

  • What the OPEC cuts mean for Putin and Russia | CNN Business

    What the OPEC cuts mean for Putin and Russia | CNN Business

    A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.


    New York
    CNN
     — 

    Some of the world’s largest oil exporters shocked markets over the weekend by announcing that they would cut oil production by more than 1.6 million barrels a day.

    OPEC+, an alliance between the Organization of the Petroleum Exporting Countries (OPEC) and a group of non-OPEC oil-producing countries, including Russia, Mexico, and Kazakhstan, said on Sunday that the cuts would start in May, running through the end of the year. The news sent both Brent crude futures — the global oil benchmark — and WTI — the US benchmark — up about 6% in trading Monday.

    OPEC+ was formed in 2016 to coordinate and regulate oil production and stabilize global oil prices. Its members produce about 40% of the world’s crude oil and have a significant impact on the global economy.

    What it means for Putin: OPEC+’s decision to cut oil production could have big implications for Russia.

    After Russia invaded Ukraine last year, the United States and United Kingdom immediately stopped purchasing oil from the country. The European Union also stopped importing Russian oil that was sent by sea.

    Members of the G7 — an organization of leaders from some of the world’s largest economies: Canada, France, Germany, Italy, Japan, the United Kingdom and the United States — have also imposed a price cap of $60 per barrel on oil exported by Russia, keeping the country’s revenues artificially low. If oil prices continue to rise, some analysts have speculated that the US and other western nations may have to loosen that price cap.

    US Treasury Secretary Janet Yellen said Monday that the changes could lead to reassessing the price cap — though not yet. “Of course, that’s something that, if we’ve decided that it’s appropriate to revisit, could be changed, but I don’t see that that’s appropriate at this time,” she told reporters.

    “I don’t know that this is significant enough to have any impact on the appropriate level of the price cap,” she added.

    Russia also recently announced that it would lower its oil production by 500,000 barrels per day until the end of this year.

    Just last week Putin admitted that western sanctions could deal a blow to Russia’s economy.

    “The illegitimate restrictions imposed on the Russian economy may indeed have a negative impact on it in the medium term,” Putin said in televised remarks Wednesday reported by state news agency TASS.

    Putin said Russia’s economy had been growing since July, thanks in part to stronger ties with “countries of the East and South,” likely referring to China and some African countries.

    Russia, China and Saudi Arabia: The OPEC+ announcement came as a surprise this week. The group had already announced it would cut two million barrels a day in October of 2022 and Saudi Arabia previously said its production quotas would stay the same through the end of the year.

    “The move to reduce supply is fairly odd,” wrote Warren Patterson, head of commodities strategy at ING in a note Monday.

    “Oil prices have partly recovered from the turmoil seen in financial markets following developments in the banking sector,” he wrote. “Meanwhile, oil fundamentals are expected to tighten as we move through the year. Prior to these cuts, we were already expecting the oil market to see a fairly sizable deficit over the second half or 2023. Clearly, this will be even larger now.”

    Saudi Arabia stated that the cut is a “precautionary measure aimed at supporting the stability of the oil market,” but Patterson says it will likely “lead to further volatility in the market,” later this year as less available oil will add to inflationary feats.

    Still, the changes signal shifting global alliances with Russia, China and Saudi Arabia around oil prices, said analysts at ClearView Energy Partners. Higher-priced oil could help Russia pay for its war on Ukraine and also boosts revenue in Saudi Arabia.

    The White House, meanwhile, has spoken out against OPEC’s decision. “We don’t think cuts are advisable at this moment given market uncertainty – and we’ve made that clear,” National Security Council spokesman John Kirby said Monday.

    – CNN’s Paul LeBlanc and Hanna Ziady contributed to this report

    The crisis triggered by the recent collapses of Silicon Valley Bank and Signature Bank is not over yet and will ripple through the economy for years to come, said JPMorgan Chase CEO Jamie Dimon on Tuesday.

    In his closely watched annual letter to shareholders, the chief executive of the largest bank in the United States outlined the extensive damage the financial system meltdown had on all banks and urged lawmakers to think carefully before responding with regulatory policy.

    “These failures were not good for banks of any size,” wrote Dimon, responding to reports that large financial institution benefited greatly from the collapse of SVB and Signature Bank as wary customers sought safety by moving billions of dollars worth of money to big banks.

    In a note last month, Wells Fargo banking analyst Mike Mayo wrote “Goliath is winning.” JPMorgan in particular, he said, was benefiting from more deposits “in these less certain times.”

    “Any crisis that damages Americans’ trust in their banks damages all banks – a fact that was known even before this crisis,” said Dimon. “While it is true that this bank crisis ‘benefited’ larger banks due to the inflow of deposits they received from smaller institutions, the notion that this meltdown was good for them in any way is absurd.”

    The failures of SVB and Signature Bank, he argued, had little to do with banks bypassing regulations and that SVB’s high Interest rate exposure and large amount of uninsured deposits were already well-known to both regulators and to the marketplace at large.

    Current regulations, Dimon argued, could actually lull banks into complacency without actually addressing real system-wide banking issues. Abiding by these regulations, he wrote, has just “become an enormous, mind-numbingly complex task about crossing t’s and dotting i’s.”

    And while regulatory change will be a likely outcome of the recent banking crisis, Dimon argued that, “it is extremely important that we avoid knee-jerk, whack-a-mole or politically motivated responses that often result in achieving the opposite of what people intended.” Regulations, he said, are often put in place in one part of the framework but have adverse effects on other areas and just make things more complicated.

    The Federal Deposit Insurance Corporation has said it will propose new rule changes in May, while the Federal Reserve is currently conducting an internal review to assess what changes should be made. Lawmakers in Congress, like Democratic Sen. Sherrod Brown, have suggested that new legislation meant to regulate banks is in the works.

    But, wrote Dimon, “the debate should not always be about more or less regulation but about what mix of regulations will keep America’s banking system the best in the world.”

    Dimon’s letter to shareholders touched on a number of pressing issues, including climate change. “The window for action to avert the costliest impacts of global climate change is closing,” he wrote, expressing his frustration with slow growth in clean energy technology investments.

    “Permitting reforms are desperately needed to allow investment to be done in any kind of timely way,” he wrote.

    One way to do that? “We may even need to evoke eminent domain,” he suggested. “We simply are not getting the adequate investments fast enough for grid, solar, wind and pipeline initiatives.”

    Eminent domain is the government’s power to take private property for public use, so long as fair compensation is provided to the property owner.

    Source link

  • JPMorgan’s Jamie Dimon warns banking crisis will be felt for ‘years to come’ | CNN Business

    JPMorgan’s Jamie Dimon warns banking crisis will be felt for ‘years to come’ | CNN Business


    New York
    CNN
     — 

    The banking crisis triggered by the recent collapses of Silicon Valley Bank and Signature Bank is not over yet and will ripple through the economy for years to come, said JPMorgan Chase CEO Jamie Dimon on Tuesday.

    In his closely watched annual letter to shareholders, the chief executive of America’s largest bank outlined the extensive damage the financial system meltdown had on all banks — large and small — and urged lawmakers to think carefully before responding with increased regulation.

    “These failures were not good for banks of any size,” wrote Dimon, responding to reports that large financial institution benefited greatly from the collapse of SVB and Signature Bank as wary customers sought safety by moving billions of dollars worth of money to big banks.

    In a note last month, Wells Fargo banking analyst Mike Mayo wrote “Goliath is winning.” JPMorgan in particular, he said, was benefiting from more deposits “in these less certain times.”

    “Any crisis that damages Americans’ trust in their banks damages all banks — a fact that was known even before this crisis,” he wrote. “While it is true that this bank crisis ‘benefited’ larger banks due to the inflow of deposits they received from smaller institutions, the notion that this meltdown was good for them in any way is absurd.”

    The failures of SVB and Signature Bank, he argued, had little to do with banks bypassing regulations. He said that SVB’s high Interest rate exposure and large amount of uninsured deposits were already well-known to both regulators and to the marketplace at large.

    Current regulations, he argued, could actually lull banks into complacency without actually addressing real system-wide banking issues. Abiding by these regulations, he wrote, has just “become an enormous, mind-numbingly complex task about crossing t’s and dotting i’s.”

    And while regulatory change will almost certainly follow the recent banking crisis, Dimon argued that, “it is extremely important that we avoid knee-jerk, whack-a-mole or politically motivated responses that often result in achieving the opposite of what people intended.” Regulations, he said, are often put in place in one part of the framework but have adverse effects on other areas and just make things more complicated.

    The Federal Deposit Insurance Corporation has said it will propose new rule changes in May, while the Federal Reserve is currently conducting an internal review to assess what changes should be made. Lawmakers in Congress, including Democratic Sen. Sherrod Brown of Ohio, have suggested that new legislation meant to regulate banks is in the works.

    But, wrote Dimon, “the debate should not always be about more or less regulation but about what mix of regulations will keep America’s banking system the best in the world.”

    Source link

  • Oil prices surge after OPEC+ producers announce surprise cuts | CNN Business

    Oil prices surge after OPEC+ producers announce surprise cuts | CNN Business


    Hong Kong/Atlanta
    CNN
     — 

    Oil prices spiked during Asian trade Monday after OPEC+ producers said they would cut production in a surprise move.

    Brent crude, the global benchmark, jumped 4.8% to $83.73 a barrel, while WTI, the US benchmark, rose 4.9% to $79.36.

    Rising oil prices could mean inflation remains higher for longer, adding pressure to a hot-button issue for consumers around the world.

    On Sunday, Saudi Arabia announced that it would start “a voluntary reduction” in its production of crude oil, alongside other members or allies of the Organization of the Petroleum Exporting Countries (OPEC).

    The cuts will start in May and last through the end of the year, an official with the Saudi Ministry of Energy was quoted as saying by Saudi state-run news agency SPA.

    The reductions are on top of those announced by OPEC+ in October, according to SPA.

    That month, oil producers had agreed to slash output by 2 million barrels a day, the largest cut since the start of the pandemic and equivalent to about 2% of global oil demand.

    Saudi Arabia now says it will cut oil production by another half a million barrels a day.

    Meanwhile, Iraq will slash production by 200,000 barrels per day, and the United Arab Emirates will decrease output by 144,000 barrels per day.

    Kuwait, Algeria and Oman will also lower production by 128,000, 48,000 and 40,000 barrels per day, respectively.

    In a Sunday note, Goldman Sachs analysts said the move was unexpected but “consistent with the new OPEC+ doctrine to act pre-emptively because they can without significant losses in market share.”

    The collective output cut by the nine members of OPEC+ totals 1.66 million barrels per day, said the analysts, who hiked their price forecast for Brent this year to $95 per barrel.

    Saudi Arabia’s energy ministry described its latest reduction as a precautionary measure aimed at supporting the stability of the oil markets, according to SPA.

    The White House pushed back on that notion — as well as the latest cuts by OPEC+.

    “We don’t think cuts are advisable at this moment given market uncertainty — and we’ve made that clear,” a spokesperson for the National Security Council said. “We’re focused on prices for American consumers, not barrels.”

    In October, OPEC+’s decision to cut production had already rankled the White House.

    US President Joe Biden pledged at the time that Saudi Arabia would suffer “consequences.” But so far, his administration appears to have back off on its vows to punish the Middle East kingdom.

    Russia, a member of OPEC+, also said Sunday that it would extend a voluntary reduction of 500,000 barrels per day until the end of 2023. The move was announced by Russian Deputy Prime Minister Alexander Novak, as cited by state-run news agency TASS.

    That decision was less surprising. Goldman analysts said they had forecast the cut would last into the second half of the year.

    — CNN’s Hanna Ziady and Arlette Saenz contributed to this report.

    Source link

  • This is one of the worst times to buy a car in decades. 3 charts explain why | CNN Business

    This is one of the worst times to buy a car in decades. 3 charts explain why | CNN Business



    CNN
     — 

    It has almost never been as hard to buy a new or used car in the United States as it is today, despite improving supply issues and inflation beginning to steady.

    Vehicle transaction prices — the price you actually end up paying after any dealer discounts or markups — have been climbing higher and faster since 2020 than any other point in more than 35 years, according to recent data from the Bureau of Labor Statistics.

    The consumer price indexes for both new and used cars — the average changes in vehicle transaction price over time — are much higher than they were four years ago in 2019.

    There is a silver lining. BLS data shows inflation for used cars has been cooling down just as dramatically since December 2022 as it increased in the months before that. But used cars have a long way to go before approaching 2019 sales prices and new car prices have yet to slow down.

    The average transaction price of a new car has jumped nearly $12,000 in the past five years, according to data from auto website Edmunds.com. For used cars, the average transaction price is still nearly $9,000 higher than it was in February 2018.

    “[Prices are] coming down a bit, but not coming down nearly as fast as one would hope,” said Ivan Drury, the director of insights at Edmunds.com. “If you look back, or if you’ve ever done a transaction before in your life, all of these numbers are bad.”

    Car buyers haven’t seen price hikes like these since the 1970s and 80s. What makes the 2020s unique is how much car prices rose in a short period of time. Over the used car market’s worst 12 months of the pandemic, the index rose 45%. There’s never been a 12-month period since the BLS began keeping records in 1947 when used car prices have inflated more.

    Recent trends in prices have been similar across regions of the United States, though in some areas, the starting prices may be higher than others. Preferences for more expensive vehicles in some areas drive these regional differences, Drury said.

    There’s a large market for pickup trucks and SUVs in the south, he said, where BLS data shows new car transaction prices have risen the most since 1987.

    The average price of a large pickup truck nationwide was $62,430 in 2022, according to Edmunds.com. The average midsize car price was only $31,381.

    The road to more reasonable prices for new and used cars remains littered with potholes.

    Consumer tastes have shifted towards larger and more expensive pickup trucks and SUVs. New car buyers are loading up on options, compared to more stripped-down models available a few years ago. Both of these trends drive up prices and also create incentive for automakers to produce pricier rides. The used market is still affected by the decline in leasing trade-ins and rental car companies competing with consumers for the same limited supply of three to five-year-old vehicles.

    “We’ve got a few things that are really hindering the US market,” Drury said. “I don’t see those going away anytime soon.”

    Source link

  • Key inflation gauge in Europe hits record high even as overall price rises slow sharply | CNN Business

    Key inflation gauge in Europe hits record high even as overall price rises slow sharply | CNN Business


    London
    CNN
     — 

    Inflation in Europe has fallen to its slowest pace in more than a year, though stark signs of persistent underlying pressure on prices will complicate policymakers’ next move on borrowing costs.

    Prices in the 20 countries that use the euro rose 6.9% this month compared with a year ago, the European Union’s statistics agency said Friday.

    That’s a sharp decline from 8.5% in February and the lowest inflation rate since February 2022, when Russia launched its full-scale invasion of Ukraine, sending energy prices soaring. The pullback in inflation this month was driven by a 0.9% year-on-year fall in energy prices.

    But the latest data includes evidence of lingering upward pressure on prices. The price of food, alcohol and tobacco climbed 15.4% year over year, up from 15% in February. And prices for services rose 5%, up from 4.8%.

    More worryingly, core inflation — a measure that strips out volatile food and energy prices — ticked up to 5.7% in March from 5.6% in February, reaching a new record high.

    That is likely to create a headache for policymakers at the European Central Bank, who have been hiking borrowing costs aggressively. They have had to balance the need to tame inflation with limiting stress to the economy. The recent turmoil in the banking sector has also underscored the dangers that rapid interest rate rises pose to some lenders and to the wider financial system.

    Europe’s economic growth is also at risk from emerging efforts by banks to conserve cash following the failure of Silicon Valley Bank in the United States and the downfall of Credit Suisse, which could make it more expensive to take out loans.

    Stubbornly high core inflation makes it harder for the ECB to judge whether it has done enough to rein in inflation.

    “Descending headline inflation thanks to cooling energy prices will not be enough for the ECB to stop tightening, as policymakers are looking for clear signs of core inflation easing,” Riccardo Marcelli Fabiani of Oxford Economics said in a note to clients.

    Source link

  • Who will end up paying for the banking crisis: You | CNN Business

    Who will end up paying for the banking crisis: You | CNN Business

    A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.


    New York
    CNN
     — 

    It cost the Federal Deposit Insurance Corporation about $23 billion to clean up the mess that Silicon Valley Bank and Signature Bank left in the wake of their collapses earlier this month.

    Now, as the dust clears and the US banking system steadies, the FDIC needs to figure out where to send its invoice. While regional and mid-sized banks are behind the recent turmoil, it appears that large banks may be footing the bill.

    Ultimately, that means higher fees for bank customers and lower rates on their savings accounts.

    What’s happening: The FDIC maintains a $128 billion deposit insurance fund to insure bank deposits and protect depositors. That fund is typically supplied by quarterly payments from insured banks in the United States. But when a big, expensive event happens — like the FDIC making uninsured customers whole at Silicon Valley Bank — the agency is able to assess a special charge on the banking industry to recover the cost.

    The law also gives the FDIC the authority to decide which banks shoulder the brunt of that assessment fee. FDIC Chairman Martin Gruenberg said this week that he plans to make the details of the latest assessment public in May. He has also hinted that he would protect community banks from having to shell out too much money.

    The fees that the FDIC assesses on banks tend to vary. Historically, they were fixed, but 2010’s Dodd-Frank act required that the agency needed to consider the size of a bank when setting rates. It also takes into consideration the “economic conditions, the effects on the industry, and such other factors as the FDIC deems appropriate and relevant,” according to Gruenberg.

    On Tuesday and Wednesday, members of the Senate Banking Committee and the House Financial Services Committee grilled Gruenberg about his plans to charge banks for the damage done by SVB and others, and repeatedly implored him to leave small banks alone.

    Gruenberg appeared receptive.

    “Will you commit to using your authority…to establish separate risk-based assessment systems for large and small members of the Deposit Insurance Fund so that these well-managed banks don’t have to bail out Silicon Valley Bank?” asked the US Rep. Andy Barr, a Republican who represents of Kentucky’s 6th district.

    “I’m certainly willing to consider that,” replied Gruenberg.

    “if smaller community banks in Texas will be left responsible for bailing out the failed banks in California and New York?” asked US Rep. Roger Williams, a Republican who represents Texas’ 25th district.

    “Let me just say, without forecasting what our board is going to vote, we’re going to be keenly sensitive to the impact on community banks,” replied Gruenberg.

    Representatives Frank Lucas, John Rose, Ayanna Pressley, Dan Meuser, Nikema Williams, Zach Nunn and Andy Ogles all asked similar questions and received similar responses. As did US Sens. Sherrod Brown and Cynthia Lummis.

    “I don’t doubt he’s still fielding a lot of phone calls,” from politicians pressuring him to place the burden on large banks, former FDIC chairman Bill Isaac told CNN.

    Smaller banks are saying that they’re unable to pick up this tab and didn’t have anything to do with the failure of “these two wild and crazy banks,” said Isaac. “They’re arguing to put the assessment on larger banks and as I understand it, the FDIC is thinking seriously about it,” he added.

    A spokesperson from the FDIC told CNN that the agency “will issue in May 2023 a proposed rulemaking for the special assessment for public comment.” In regard to Greunberg’s testimony they added that “when the boss says something, we defer to the boss.”

    Big banks: “We need to think hard about liquidity risk and concentrations of uninsured deposits and how that’s evaluated in terms of deposit insurance assessments,” said Gruenberg to the Senate Banking Committee, indicating that smaller banks that are operating carefully could be asked to bear less of the assessment.

    A larger assessment on big banks would add to what will already be a multi-billion dollar payment from the nation’s largest banks like JPMorgan Chase

    (JPM)    , Citigroup

    (C)    , Bank of America

    (BAC)     and Wells Fargo

    (WFC)    .

    The argument is that the largest US banks will be able to shoulder extra payments without collapsing under it. Those large banks also benefited greatly from the collapse of SVB and Signature Bank as wary customers sought safety by moving billions of dollars worth of money to big banks. 

    Passing it on: Regardless of who’s charged, the fees will eventually get passed on to bank customers in the end, said Isaac. “It’s going to be passed on to all customers. I have no doubts that banks will make up for these extra costs in their pricing — higher fees for services, higher prices for loans and less compensation for deposits.”

    It’s hard out there for a Wall Street banker. Or harder than it was.

    The average annual Wall Street bonus fell to $176,700 last year, a 26% drop from the previous year’s average of $240,400, according to estimates released Thursday by New York State Comptroller Thomas DiNapoli.

    While that’s a big decrease, the 2022 bonus figure is still more than twice the median annual income for US households, reports CNN’s Jeanne Sahadi.

    All in, Wall Street firms had a $33.7 billion bonus pool for 2022, which is 21% smaller than the previous year’s record of $42.7 billion — and the largest drop since the Great Recession.

    For New York City and New York State coffers, bonus season means a welcome infusion of revenue, since employees in the securities industry make up 5% of private sector employees in NYC and their pay accounts for 22% of the city’s private sector wages. In 2021, Wall Street was estimated to be responsible for 16% of all economic activity in the city.

    DiNapoli’s office projects the lower bonuses will bring in $457 million less in state income tax revenue and $208 million less for the city compared to the year before.

    Beleaguered retailed Bed Bath & Beyond will attempt to $300 million of its stock to repay creditors and fund its business as it struggles to avoid bankruptcy, reports CNN’s Nathaniel Meyersohn.

    If it’s not able to raise sufficient money from the offering, the home furnishings giant said Thursday it expects to “likely file for bankruptcy.”

    Bed Bath & Beyond was able to initially avoid bankruptcy in February by completing a complex stock offering that gave it both an immediate injection of cash and a pledge for more funding in the future to pay down its debt. That offering was backed by private equity group Hudson Bay Capital.

    But on Thursday, Bed Bath & Beyond said it was terminating the deal with Hudson Bay Capital for future funding and is turning to the public market.

    Shares of Bed Bath & Beyond dropped more than 26% Thursday. The stock was trading around 60 cents a share.

    Source link

  • ‘It’s not zero.’ Wall Street is pricing in a small but growing risk of a disastrous US default | CNN Business

    ‘It’s not zero.’ Wall Street is pricing in a small but growing risk of a disastrous US default | CNN Business


    New York
    CNN
     — 

    A US default would have such devastating economic and financial consequences that many observers dismiss the possibility out of hand. But investors are not ruling out such a nightmare scenario.

    Even though a default could wipe out millions of jobs and wreak havoc on Wall Street, the White House and Republican leaders in Washington are nowhere near a deal to avert disaster that could strike as soon as July.

    As politicians sleepwalk toward a potential debt ceiling crisis, financial markets have begun pricing in a small — but growing — chance of a disastrous default.

    The implied probability of a US government default has increased to approximately 2%, according to modeling by research provider MSCI shared exclusively with CNN. That calculation is based on the cost to insure US debt in the market for credit default swaps.

    Although the probability of default is tiny, it has increased roughly fivefold since January 2, MSCI said.

    Since then, chaos in Congress, underlined by the historic dysfunction leading up to the election of House Speaker Kevin McCarthy, have raised concerns about how lawmakers will reach a compromise on much thornier issues such as the debt ceiling.

    “The probability of default has gone up noticeably,” Andy Sparks, head of portfolio management research at MSCI, told CNN in an interview. “It is small, but it’s not zero. And it has gone up in a very significant way.”

    An actual default would be terrible — for both Wall Street and Main Street. Moody’s Analytics chief economist Mark Zandi has described a default as “financial Armageddon.”

    “I don’t think anyone should be complacent about this,” said Sparks. “Turmoil in the banking system shows how things can change very quickly.”

    The federal government hit the $31.4 trillion debt ceiling in January, forcing Treasury Secretary Janet Yellen to take accounting moves known as “extraordinary measures” to avoid default.

    Yellen has used unusually strong language for a former central banker to warn Congress against messing with the debt ceiling. On Thursday, Yellen said a breach of the debt ceiling could spark a “prolonged downturn and a global financial crisis.”

    “It could upend the lives of millions of Americans and those around the world,” Yellen said in a speech.

    Goldman Sachs chief economist Jan Hatzius told CNN in January that even a near-default could cause a recession as well as turmoil in financial markets. Moody’s estimates that even a brief breach of the debt limit would kill almost a million jobs.

    All of this explains why many believe Washington will get a deal done before disaster strikes, as it has in the past.

    Even though leaders in Washington are not seriously negotiating on a debt ceiling deal, there is still time.

    The Congressional Budget Office has estimated that even without addressing the debt ceiling, the government will have enough cash to avoid a default until sometime between July and September. The exact timing for the so-called X-date will depend in large part on 2022 tax collections in April.

    Tom Barkin, president of the Federal Reserve Bank of Richmond, told CNN last week that it’s “hard to imagine” the government would breach the debt ceiling.

    Still, Barkin conceded if it happened the Fed would be forced to react, much like it did after the Sept. 11 terror attacks.

    Others are more pessimistic about the debt ceiling.

    Greg Valliere, chief US policy strategist at AGF Investments, only sees a 60% chance that Congress reaches a deal to address the debt ceiling.

    “I think we’ll come right up to the precipice,” Valliere, who is based in Washington, told CNN. “Most people in this city feel it’s inconceivable we could default on our debt. I agree it’s unlikely but it’ll be much closer than people thought.”

    He pointed to the more radical makeup of the Republican caucus and the reluctance among some lawmakers to vote for a debt ceiling hike.

    Even McCarthy, the Republican House Speaker, told CNBC this week there has been “no progress” in negotiations. “Time is ticking. Now I’m very concerned about where we are,” McCarthy said.

    “I worry there are just enough House radicals who might not accept anything. And it doesn’t take many of them to make this a crisis,” Valliere said.

    Asked about MSCI’s estimate of a 2% implied probability of a default, Valliere said that number is low.

    “The markets are too sanguine,” he said. “The market has felt for months that this is like the little boy who cries wolf. But this is not a typical debt ceiling debate.”

    There are some early indicators of concern popping up in the bond market.

    Morgan Stanley wrote in a report on Thursday that “kinks” have emerged in the Treasury bill market around bonds that mature around the X-date.

    “Market attention could swing back to this issue soon” Morgan Stanley advised clients.

    Or maybe not.

    McCarthy and his top lieutenants say they are prepared to push ahead with a fallback plan: A party-line bill to raise the debt ceiling, CNN’s Manu Raju reports.

    But such a move could be risky. Republicans can only afford to lose four of their own members in any party-line vote.

    There is also a possibility that Congress punts, reaching a short-term agreement to delay the issue by a few months.

    Eurasia Group analyst Jon Lieber said in a report Thursday there is a growing chance that lawmakers put off a debt ceiling solution until the end of the year.

    “A short-term punt would merely delay and not eliminate the disruption risks of the debt limit,” Lieber said.

    Source link

  • UK reaches its biggest trade deal since Brexit, joining trans-Pacific partnership | CNN Business

    UK reaches its biggest trade deal since Brexit, joining trans-Pacific partnership | CNN Business


    Atlanta/Hong Kong
    CNN
     — 

    Britain has reached an agreement to join a major trans-Pacific partnership, calling it its biggest trade deal since Brexit.

    The country will become the first new member, and the first in Europe, to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) since it came into force in 2018.

    British Prime Minister Rishi Sunak announced the move early Friday, hailing it as a historic move that could help lift economic growth in the country by £1.8 billion ($2.2 billion) in the long run.

    “The bloc is home to more 500 million people and will be worth 15% of global GDP once the UK joins,” Sunak’s office said.

    The CPTPP is a free trade agreement with 11 members: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore and Vietnam. It succeeded the Trans-Pacific Partnership after the United States withdrew under former President Donald Trump in 2017.

    The UK agreement comes almost two years after it began talks to join the pact.

    As a member, more than 99% of UK exports to those 11 countries will now be eligible for tariff-free trade. That includes major exports, such as cheese, cars, chocolate, machinery, gin and whisky.

    In the year through September 2022, the United Kingdom exported £60.5 billion ($75 billion) worth of goods to CPTPP countries, Sunak’s office said in a statement.

    Dairy farmers, for example, sent £23.9 million ($29.6 million) worth of products such as cheese and butter to Canada, Chile, Japan and Mexico last year, and were set to “benefit from lower tariffs,” it added.

    The deal also aims to lift red tape for British businesses, which will no longer be required to set up local offices or be residents of the pact’s member countries to provide services there.

    Services made up a huge chunk — 43% — of overall UK trade with CPTPP members last year, according to Sunak’s office.

    “We are at our heart an open and free-trading nation,” the prime minister said in the statement, seeking to cast the deal as an example of the “economic benefits of our post-Brexit freedoms.”

    “As part of CPTPP, the UK is now in a prime position in the global economy to seize opportunities for new jobs, growth and innovation,” Sunak added.

    Several businesses expressed their support for the deal in the government statement, including global bank Standard Chartered

    (SCBFF)     and spirits maker Pernod Ricard

    (PDRDF)    .

    Joining the pact “is a big opportunity for our Scotch whisky business,” said Anishka Jelicich, Pernod Ricard’s UK director of public affairs.

    “Five of our top 20 export markets are CPTPP members. We expect tariff cuts and smoother access to some of the world’s fastest growing economies to increase exports and secure jobs and investment in the UK, with sales doubling in some markets.”

    Source link

  • Putin admits sanctions could hurt Russia’s economy | CNN Business

    Putin admits sanctions could hurt Russia’s economy | CNN Business


    London
    CNN
     — 

    President Vladimir Putin has conceded that Western sanctions designed to starve the Kremlin of funds for its invasion of Ukraine could deal a blow to Russia’s economy.

    “The illegitimate restrictions imposed on the Russian economy may indeed have a negative impact on it in the medium term,” Putin said in televised remarks Wednesday reported by state news agency TASS.

    It is a rare admission by the Russian leader, who has repeatedly insisted that Russia’s economy remains resilient and that sanctions have hurt Western countries by driving up inflation and energy prices.

    Putin said Russia’s economy had been growing since July, thanks in part to stronger ties with “countries of the East and South,” likely referring to China and some African countries. He also stressed the importance of domestic demand to the economy, saying it was becoming the leading driver of growth.

    Russia’s economy has showed surprising resilience to unprecedented sanctions imposed by the West, including an EU ban on most imports of oil products. Preliminary estimates from the Russian government show that economic output shrank by 2.1% last year — a contraction more limited than many economists initially predicted.

    Yet while China has thrown the Kremlin an economic lifeline by buying Russian energy and providing an alternative to the US dollar, cracks are starting to appear.

    The Russian government’s revenue plunged 35% in January compared with a year ago, while expenditures jumped 59%, leading to a budget deficit of about 1,761 billion rubles ($23.3 billion).

    The World Bank and the Organization for Economic Cooperation and Development are forecasting contractions of 3.3% and 5.6%, respectively, in 2023. The International Monetary Fund expects Russia’s growth to remain flat this year, but for the economy to shrink by at least 7% in the medium term.

    In response to Russia’s aggression in Ukraine, Western countries have announced more than 11,300 sanctions since the February 2022 invasion, and frozen some $300 billion of Russia’s foreign reserves.

    An outspoken Russian oligarch, Oleg Deripaska, said earlier this month that Russia could find itself with no money as soon as next year.

    Separately, Austrian bank Raiffeisen Bank International said Thursday it was looking to sell or spin off its Russian business. In a statement, the bank called market conditions in the country “highly complex” and said it was “committing to further reducing business activity” there.

    Raiffeisenbank Russia made just over $2 billion in profit last year. But due to strict local rules, Raiffeisen is unable to take any profits from its Russian business out of the country.

    — Rob North and Livvy Doherty contributed reporting.

    Source link

  • The US economy grew 2.6% during the fourth quarter, slower than previously estimated | CNN Business

    The US economy grew 2.6% during the fourth quarter, slower than previously estimated | CNN Business


    Minneapolis
    CNN
     — 

    The US economy grew at a slower pace in the fourth quarter than previously estimated.

    Inflation-adjusted gross domestic product — the broadest measure of economic activity — increased 2.6% for the final three months of 2022, according to the Commerce Department’s third and final reading for the quarter.

    Growth was initially estimated at 2.9%, then revised down last month to 2.7%.

    Economists were expecting GDP growth to hold steady at 2.7%, according to Refinitiv.

    This story is developing and will be updated.

    Source link

  • China ‘confident and capable’ of hitting 2023 growth targets, new premier says at gathering of business leaders | CNN Business

    China ‘confident and capable’ of hitting 2023 growth targets, new premier says at gathering of business leaders | CNN Business


    Hong Kong
    CNN
     — 

    China’s newly minted Premier Li Qiang painted a bullish picture of his country’s economic recovery at a key business forum this week, as Beijing seeks to win the hearts of global investors and economic leaders after emerging from its long pandemic isolation.
    “The dynamism and momentum of China’s economic growth is strong,” Li said Thursday in a keynote speech at the Boao Forum for Asia, a four-day gathering of international business leaders and politicians on the Chinese island of Hainan.

    The forum often promotes itself as “Asian Davos” and Li is tasked with reviving the world’s second largest economy at a time of sluggish growth.

    “The [economic] performance in March is even better than January and February’s,” Li said, adding that major indicators such as consumption and investment are improving.

    China, he said, will roll out new measures to boost domestic consumption and increase market access for foreign business while ensuring the stability of the financial sector.

    “You are all welcome to visit China and take a look,” Li told attendees.

    A day earlier, Li met IMF President Kristalina Georgieva in Boao, saying that the country is “confident and capable” of hitting this year’s GDP growth target, which is “around 5%.”

    The Boao Forum for Asia has been held annually since 2001, but was suspended in 2020 because of the pandemic. This year’s meeting is the first fully offline session in three years.

    Prominent attendees this year include Singapore’s Prime Minister Lee Hsien Loong, Malaysia’s Prime Minister Anwar Ibrahim, and Spain’s Prime Minister Pedro Sánchez.

    Li’s efforts to paint an optimistic picture about China’s outlook come as he rolled out intensive measures to lift foreign confidence and repair fraught international ties at a time of unimpressive growth.

    The new premier, a trusted ally of Chinese leader Xi Jinping, took office earlier this month as Xi cemented his grip on power.

    The slowdown was caused, in part, by systemic issues that have haunted the economy for years, such as massive debt levels and a shrinking work force. But the problems have been exacerbated by the Communist Party’s erratic and draconian zero-Covid policy, which ended late last year, and a sweeping crackdown on private business.

    The measures have resulted in weak business confidence, a slump in investment and surging unemployment. The youth jobless rate, in particular, hit more than 18% last month.

    Concerns about foreign capital leaving China have grown.

    For the first time in 25 years, the American Chamber of Commerce in China found in its annual survey of members that fewer than half of the respondents regarded China as one of their top three investment destinations.

    The AmCham in Hong Kong also found in a separate survey that the number of business saying they plan to leave in the next three years has nearly doubled.

    To boost business confidence, China’s new economic leadership is trying to reassure both foreign business and the domestic private sector.

    This week, Alibaba’s co-founder Jack Ma, seen as a symbol of China’s tech industry and a barometer of the Chinese government’s support for private business, returned to mainland China in a rare public appearance.

    Shortly after his return, Alibaba announced a landmark restructuring to split its business into six separate units. Both may be part of Beijing’s plan intended to boost market sentiment at a critical moment, analysts said.

    Source link

  • Alibaba’s restructuring and Jack Ma’s homecoming are all part of China’s plan | CNN Business

    Alibaba’s restructuring and Jack Ma’s homecoming are all part of China’s plan | CNN Business


    Hong Kong
    CNN
     — 

    Alibaba’s landmark restructuring has sent its shares soaring in New York and Hong Kong, as investors bet on the return of regulatory support for China’s tech industry and private businesses after more than two years of a brutal crackdown.

    But the nature of the overhaul, in which the internet conglomerate will split its business into six separate units, is a sign that Beijing’s campaign against Big Tech hasn’t fundamentally changed. Regulators still intend to reduce the monopolistic nature of tech giants and limit their power, even as they urge private companies to do their part to create jobs and boost a flagging economy.

    The news of the restructuring came shortly after the return of co-founder Jack Ma to mainland China. Ma had been spending time overseas and otherwise keeping a low profile since the Chinese government began a fierce crackdown on the tech sector in late 2020.

    “It appears that Alibaba’s break-up has been orchestrated by Beijing,” said Brock Silvers, chief investment officer for Kaiyuan Capital.

    “This idea is reinforced by Jack Ma’s sudden reappearance, which now seems like a planned media event intended to boost market sentiment at a critical moment.”

    It worked. Shares in Alibaba

    (BABA)    , which has a market capitalization of $260 billion, soared 13% in Hong Kong on Wednesday, following a 14% surge on Wall Street overnight, leading the tech sector’s gains in the Asia Pacific.

    Ma is seen as a symbol of China’s tech industry and a barometer of the Chinese government’s support for private business. His presence is perceived as evidence of a more supportive approach to the private sector, at a time when China’s economy badly needs growth.

    In October 2020, the once high-profile entrepreneur criticized the country’s financial regulatory system for being too rigid and unfriendly to small business. As a result, the authorities shelved Ant Group’s planned $35 billion IPO at the last minute.

    A sweeping regulatory crackdown on Big Tech followed, which later engulfed China’s most powerful private companies, wiping huge sums off their market value. Alibaba’s stock is still down 70% from its peak just days before regulators abruptly pulled the Ant Group IPO.

    But almost three years on, the dynamics have changed.

    The Chinese government is now facing significant economic challenges. It’s eager to shore up growth and reinvigorate confidence in the tech sector following its emergence from three years of strict Covid-19 controls.

    Alibaba’s restructuring is “part of [Beijing’s] strategy to shore up confidence in the private sector,” said Hong Hao, chief economist for Grow Investment Group.

    In a policy shift, Chinese leader Xi Jinping recently urged the government to support private businesses, while calling on entrepreneurs to play a role in boosting growth and tech innovation, so that China can better counter what he called “containment” and “suppression” from the West led by the United States.

    Premier Li Qiang, a trusted ally of Xi who was confirmed as the country’s No 2 official this month, followed up by rolling out a series of measures intended to repair ties between the government and the private sector.

    “For a period of time last year, there were some incorrect discussions and comments in the society, which made some private entrepreneurs feel worried,” Premier Li said at his first news conference earlier this month.

    China may need Alibaba now, but it’s not nearly as powerful as it was, according to analysts.

    The breakup appears to “curb the influence of tech titans,” Silvers said. “It would serve as a stark reminder of Beijing’s uncomfortable relationship with the private sector, despite recent reassurances.”

    Beijing’s major concern is that private tech firms have become too big and powerful. During its years-long clampdowns, the government sought to reduce the monopolistic nature of many prominent tech companies, slapping them with big fines, banning apps from stores and demanding that some firms completely overhaul their businesses.

    “[Alibaba’s restructuring plan] offers a way to limit monopoly power and platform sway,” Hong said.

    It could serve as a model for other Chinese tech giants going forward.

    “Tencent is the obvious [one] next,” Hong said, adding that the social media and gaming giant has already started reducing its stake in portfolio companies, including food delivery company Meituan.

    Investors and analysts have cheered Alibaba’s restructuring.

    The move marks the most significant overhaul in the company’s 24-year history and will “unlock the value” of its various businesses, it said on Tuesday.

    Alibaba’s business will be split into six units: domestic e-commerce, international e-commerce, cloud computing, local services, logistics, and media and entertainment.

    The domestic e-commerce group, which includes Taobao and contributes to a majority of the company’s revenues, will remain a wholly-owned unit. The other five, meanwhile, will have their own CEOs and can pursue separate public listings.

    “The market is the best litmus test, and each business group and company can pursue independent fundraising and IPOs when they are ready,” Alibaba CEO Daniel Zhang said in an email to employees.

    Some analysts welcomed the move, believing it will lead investors to reassess the valuation of Alibaba.

    Citi analysts said Tuesday their target price for Alibaba’s US-listed stock was $156 per share, which is nearly 60% higher than Tuesday’s closing level.

    -— CNN’s Riley Zhang contributed reporting.

    Source link

  • McCarthy sends letter to Biden urging more robust negotiations on the debt ceiling | CNN Politics

    McCarthy sends letter to Biden urging more robust negotiations on the debt ceiling | CNN Politics



    CNN
     — 

    House Speaker Kevin McCarthy urged the White House in a letter sent Tuesday to start more robust negotiations over raising the nation’s borrowing limit, the first major action in weeks on either side of the debt ceiling issue.

    McCarthy writes “with each passing day, I am incredibly concerned that you are putting an already fragile economy in jeopardy by insisting upon your extreme position of refusing to negotiate any meaningful changes to out of control government spending.”

    McCarthy also proposed a series of places to start saving money including reclaiming unspent Covid-19 relief funds and strengthening work requirements for social programs.

    However, there are limited relief funds left to draw upon. As of the end of January, some $90.5 billion in federal Covid-19 pandemic funding has not been obligated and has not expired, according to the US Government Accountability Office.

    That’s out of the roughly $4.6 trillion in pandemic relief and recovery funding that Congress approved in six packages since early 2020.

    The largest chunk of unexpired, unobligated money is in the Public Health and Social Services Emergency Fund, with smaller amounts left in the Pension Benefit Guaranty Corporation Fund, the Emergency Rental Assistance, Veterans Medical Care and Health Fund and other programs, according to the GAO.

    Republicans have also long been eager to add or enhance work requirements in public assistance programs, which will limit enrollment and reduce the amount of federal funding needed. Already, one GOP lawmaker has proposed broadening the work mandate in the food stamps program.

    McCarthy walked his members through his letter during their GOP conference meeting. He said that the White House is doing everything it can to not negotiate in an attempt to extract maximum leverage in these talks when the deadline approaches.

    McCarthy, shortly after the letter went out, criticized Biden for refusing to sit down with him.

    “I’m concerned more than I’ve ever been about getting this debt ceiling done,” the California Republican said on CNBC, due to the lack of conversations and negotiations.

    The White House, however, said it does not want to continue negotiations until Republicans are ready to offer a counter proposal to the White House’s budget request, which the Biden administration unveiled earlier this month.

    In a statement, the White House said, “It’s time for Republicans to stop playing games, agree to a pass a clean debt ceiling bill, and quit threatening to wreak havoc on our economy. And if they want to have a conversation about our nation’s economic and fiscal future, it’s time for them to put out a Budget – as the President has done with his detailed plan to grow the economy, lower costs, and reduce the deficit by nearly $3 trillion.”

    Republicans have yet to release their plan, as they continue struggle to find an agreement between the different factions in their narrowly divided majority.

    However, McCarthy told CNBC that House Republicans are prepared to lay out $4 trillion in cuts in his next meeting with Biden.

    “If the president would have a meeting I would have all the $4 trillion sitting there and provided to you … the difference, is he wants to play politics and I do not. I think we should be adults here,” he said.

    McCarthy and his team still believe that they have the upper hand on the debt ceiling in the sphere of public opinion if they continue to show a pattern of trying to get Biden to sit down and he refuses to do so. It’s why McCarthy publicly said last week he’d asked Biden when they’d talk at the Friends of Ireland lunch – they want to show they are making the effort.

    Republicans believe that if this does go to the brink, they need to show that they’ve tried repeatedly to talk.

    Rep. Richard Hudson, the head of the campaign committee for Republicans, told CNN that while the politics should be secondary on debt ceiling, he does think McCarthy repeatedly asking for negotiations only to be rebuffed helps Republicans.

    This story has been updated with additional developments.

    Source link

  • The US case against Binance calls out one of the worst-kept secrets in crypto | CNN Business

    The US case against Binance calls out one of the worst-kept secrets in crypto | CNN Business

    Editor’s Note: A version of this story appeared in CNN Business’ Nightcap newsletter. To get it in your inbox, sign up for free, here.


    New York
    CNN
     — 

    If you live in America, you’re not allowed to trade crypto derivatives. And if you’re a big international platform for trading crypto derivatives, you can’t let Americans trade those products if you haven’t registered with the boring-sounding but not-to-be-trifled-with federal regulator known as the Commodity Futures Trading Commission, or CFTC.

    Today, that regulator sued Binance, the world’s largest cryptocurrency exchange, for allegedly doing just that. (And if that name sounds familiar, it may because back in November, Binance briefly flirted with bailing out its smaller rival, FTX. Obviously, Binance took one look under the hood at FTX, now at the center of a massive federal fraud investigation, and promptly bailed.)

    Here’s the deal: The CFTC alleges that Binance and its CEO violated US trading laws by, among other things, secretly coaching “VIP” customers within the United States on how to evade compliance controls.

    The commission, which regulates US derivatives trading, said the company and its CEO, Changpeng Zhao, “instructed its employees and customers to circumvent compliance controls in order to maximize corporate profits.”

    Which, you know, isn’t something you want to be caught doing. The CFTC can’t bring criminal charges, but it can seek heavy fines and potentially ban Binance from registering in the US in the future.

    Binance said the lawsuit was “unexpected and disappointing,” adding that it has made “significant investments” in the past two years to ensure that US-based investors are not active on the platform.

    As news of the lawsuit broke Monday, Zhao, known as “CZ,” tweeted the number 4, pointing to a part of a previous statement: “Ignore FUD, fake news, attacks, etc.” (FUD is a commonly used acronym among crypto folks that stands for “fear, uncertainty, doubt.”)

    Binance has long argued that it isn’t subject to US laws because it doesn’t have a physical headquarters in America. Or anywhere, really — CZ claims that the company’s headquarters are wherever he is at any point in time, “reflecting a deliberate approach to attempt to avoid regulation,” according to the CFTC’s lawsuit.

    The CFTC’s lawsuit is certainly not great news for Binance, or for crypto more broadly. But it’s not quite the seismic event that was FTX’s collapse, or even the Terra/Luna meltdown. (You can read more about those here and here but, tl;dr: Those 2022 events were, to use a technical term, holy-crap-sell-everything-call-your-dad-and-cry moments for crypto investors.)

    Prices of bitcoin and ethereum, the two most popular cryptocurrencies, fell more than 3% Monday. Which is to say, it was just another day trading virtual currencies.

    Perhaps the most significant part of the lawsuit is the way the CFTC loudly calls out one of the worst-kept secrets in all of crypto: That not only are US customers gaining access to risky offshore crypto derivatives they shouldn’t be allowed to access, but it’s also pretty darn easy to do so. All anyone needs is a VPN and an iron stomach, because crypto derivatives are leveraged bets on wildly unstable assets. (And like everything in this newsletter, that shouldn’t be taken as any kind of advice.)

    The likely outcome, said Timothy Cradle, a crypto compliance and regulation expert at Blockchain Intelligence Group, will be that Binance ends up paying “hundreds of millions of dollars” in fines and will be prevented from registering a derivatives exchange in the future. That’s “a terminal blow for users of their service located in the US and a significant hit to Binance’s revenue” as the suit alleges US users make up 16% of the revenue for Binance’s derivatives product.

    Monday’s news adds yet another layer of regulatory scrutiny on crypto’s biggest players. The Internal Revenue Service and Securities and Exchange Commission are also reportedly also investigating Binance, per Bloomberg.

    Meanwhile, Coinbase, the largest US-listed crypto exchange, received a so-called Wells notice (typically a precursor to enforcement action) last week from the SEC for possible securities law violations.

    And just to pile on: The crypto industry earlier this month lost two of its biggest connections to the mainstream finance world — Silvergate and Signature Bank.

    All in all, not a great month for the industry that is perpetually straining credibility even when it’s hot. And right now, it is decidedly not.

    Enjoying Nightcap? Sign up and you’ll get all of this, plus some other funny stuff we liked on the internet, in your inbox every night. (OK, most nights — we believe in a four-day work week around here.)

    Source link

  • IMF chief warns of ‘risks’ to global financial stability, but China showing signs of recovery | CNN Business

    IMF chief warns of ‘risks’ to global financial stability, but China showing signs of recovery | CNN Business


    Hong Kong
    CNN
     — 

    The head of the International Monetary Fund called for greater vigilance over the global financial system during a speech in China on Sunday in which she also pointed to “green shoots” emerging in the world’s second-largest economy.

    “Risks to financial stability have increased,” IMF Managing Director Kristalina Georgieva said during remarks at the China Development Forum in Beijing.

    Georgieva lauded how policy-makers had acted swiftly in response to the banking crisis, citing the recent collaboration by major central banks to boost the flow of US dollars around the world.

    “These actions have eased market stress to some extent,” she said. “But uncertainty is high, which underscores the need for vigilance.”

    Global investors have been on high alert about the health of the banking sector following the sudden downfalls of Credit Suisse, Silicon Valley Bank and US regional lender Signature Bank.

    Last week, concerns about Deutsche Bank and speculation over one of its bond payments also weighed on markets, prompting EU leaders to reassure the public over the resilience of Europe’s banking system.

    Georgieva said Sunday that the IMF was continuing to watch the situation, and assess potential implications for the global economic outlook.

    Meanwhile, she reiterated an IMF projection that the world economy will see growth slow to just under 3% this year, due to continued fallout from the pandemic, the war in Ukraine and tighter monetary policies.

    That’s compared to the historic average of 3.8%, according to Georgieva, and down from 3.2% in 2022.

    But she also pointed to the emergence of “green shoots” in China, where the IMF expects the recently reopened economy to expand by 5.2% this year. That’s roughly in line with Beijing’s official target of 5%.

    Such growth would mark a historic low. But it would still be a significant improvement on the 3% logged by the world’s second-largest economy last year — and help prop up the global economy.

    China’s rebound this year will allow it to contribute roughly one third of global growth, according to Georgieva. Any 1% increase in Chinese GDP growth would also help lift other Asian economies’ growth by an average of 0.3%, she added.

    But the IMF chief urged Chinese policymakers to take steps to shift its economy and “rebalance” it toward more consumption-driven growth.

    Leaning toward that model would be “more durable, less reliant on debt, and will also help address climate challenges,” Georgieva said.

    “To get there, the social protection system will need to play a central role through higher health and unemployment insurance benefits to cushion households against shocks.”

    Georgieva also called for reforms to help “level the playing field between the private sector and state-owned enterprises, together with investments in education.”

    “The combined impact of these policies could be significant,” she said.

    Source link

  • After TikTok chief’s grilling in Washington, Apple’s Tim Cook is all smiles in Beijing | CNN Business

    After TikTok chief’s grilling in Washington, Apple’s Tim Cook is all smiles in Beijing | CNN Business


    Hong Kong
    CNN
     — 

    Apple

    (AAPL)     CEO Tim Cook gave a show of support for China as a market and manufacturing base during a visit to Beijing Saturday, even as trade and tech sector tensions escalate between the United States and the world’s second-largest economy.

    Apple and China had “grown together” over the past three decades, Cook told the government-organized China Development Forum, adding that he was thrilled to be back in the country, which only reopened its borders this year after abandoning its strict zero-Covid policy. The last time Cook visited China was in 2019.

    “We have a very large supply chain in China. We also have a thriving App Store,” the Apple chief was quoted as saying in state-run China Daily.

    Cook’s visit has raised eyebrows in some quarters, given the ongoing tech battle between the United States and China and reports that Apple has been looking to India as a potential alternative production base.

    On Friday, Cook had posted a picture of himself smiling with customers and staff at the Apple store in the shopping district of Sanlitun on China’s Twitter-like social media site Weibo.

    That post came just a day after Shou Zi Chew, the CEO of TikTok was grilled in a five-hour hearing before a Congressional committee in Washington, where US lawmakers remain convinced the Chinese-made social media app represents an urgent threat to national security.

    China’s state media was quick to seize on the apparent contrast between the two CEO’s experiences.

    “TikTok CEO was under siege at the US hearing, while Apple CEO was enthusiastically welcomed by people at its flagship Chinese store. This shows that China is the one that is actually practicing fair and free trade,” the state-run Global Times quoted one netizen as saying.

    The Biden administration has demanded that the Chinese owners of TikTok sell their share of the company or face a ban from the United States, the app’s most important market. China’s commerce ministry said Thursday that a forced sale of TikTok would “seriously damage” global investors’ confidence in the United States.

    The US has concerns about the company’s data collection practices, and these have been exacerbated by the popularity of TikTok and other Chinese apps. Of the 10 most popular free apps on Apple’s US store, four were developed with Chinese technology: TikTok, shopping app Temu, fast fashion retailer Shein and video editing app CapCut, which like TikTok is also owned by ByteDance.

    Apple meanwhile has reportedly been rethinking the extent of its ties with China.

    The company’s supply chains were disrupted by China’s harsh coronavirus rules and there have been violent protests over wages at the world’s largest iPhone assembly factory at Foxconn’s campus in China’s Henan province.

    Amid these problems, and wider trade disagreements between Washington and Beijing, Apple has reportedly been looking at India as a potential alternative manufacturing hub for the iPhone 14.

    However, many analysts say that even if Apple can add diversity to its supply base it is likely to continue to depend on China for a long time yet.

    Cook said in an earnings call last year that India was a “hugely exciting market” and “a major focus” for Apple that recorded “very strong double digits year over year,” indicating its high interest to expand production in the South Asian country.

    While the rising US-China tensions have led to suggestions the world’s two largest economies could “decouple,” recent data shows trade between them hit a record high in 2022.

    Bilateral goods trade between the countries rose to $690.6 billion last year, according to official US data.

    Exports to China increased by $2.4 billion to $153.8 billion, while imports of Chinese products rose by $31.8 billion to $536.8 billion according to the US Bureau of Economic Analysis.

    The data suggests that the idea of “decoupling,” or reducing mutual reliance in a range of areas, is much more evident in policy discussions in Washington rather than on-the-ground trade reality.

    Source link