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Compiled Analysis for Article 1 (Overall)

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Compiled Analysis for Article 1 (Overall)

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1. Measure of economic vitality

⇒ Income growth

⇒ Consumer spending

⇒ Inflation

⇒ Growing rate at 1.7% in Oct, Nov & Dec 2016 (expects 1.9% growth in 2016 & 2.1% in 2017)

2. Weakened consumer spending, income growth and inflation (after a short-lived spurt last month)

⇒ Weakened demand for goods = more businesses investing lesser = more suppliers supplying less amount & variety of goods

⇒ Keynesian & Classical Theory

⇒ Uncertain global economy

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Compiled Analysis for Article 1 (Measure to counter)

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Compiled Analysis for Article 1 (Measure to counter)

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1. DT's election of tax cuts & deregulation

⇒ Possibility of boosting businesses, consumers & economic growth (tbc - implementation, response of businesses & households)

⇒ Currently have some optimism being developed

2. Relatively conservative planning on market outcomes & aggression on restricting costs

⇒ Spending on mining exploration doubled as high oil prices and new investment spurred investments

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1. Income growth - flatlined (not much change)

⇒ Wage & Salary income

→ Rose 3.5% in Nov from Oct (Slowest year-over-year gain since Dec 2013 despite 3.5% annual pace in 3rd quarter - the best quarterly increase in 2 years)

⇒ Economy is growth at rate of 1.7% for 3 months, however foretasted rate was 1.9% which means growth rate is lesser than expected, next year expected growth rate is 2.1%

2. Consumer spending

⇒ Domestic -  2/3 of Total US output

⇒ Soft Demand (for factory-made goods)

⇒ Smaller share of adults holding jobs = Smaller labour force = Smaller employment rate

⇒ Increased housing & health-care expenses = spend less

⇒ Consumer wage gain is at minimum

2.1 Household spending

⇒ 0.2% in Nov

⇒ Slowdown from Aug and Oct

⇒ When consumers cut back on spending, tax revenue reduce, which cause demand to slip. Suppliers will cut back which results in lower wages and higher unemployment that can lead to a recession. In extreme cases, the lack of tax revenue can cause government defaults and the slowdown of banks lending money can create panicked bank runs.

3. Price inflation

⇒ Measured by personal-consumption expenditures index (can copy graph)

⇒ Rose by 1.4% from Nov 2015 = reflected stabilizing energy prices & firmer consumer demand that allows businesses to pass = Raise benchmark interest rate along price increases

⇒ Inflation readings now are below central bank's 2% target despite support from Fed’s move

⇒ Could be temporary such as gasoline & oil costs which slumped in Nov but rebounded in Dec due to oil-producing countries agreeing to cut production = very disastrous

4. Meager economic output

⇒ Mining exploration, shafts & wells doubled from mid-2009 to end of 2014 = high oil prices & new technologies that spur investment

⇒ Fell by 2/3 since that point, dragged down output

5. Strength of US dollar

⇒ Challenge to manufacturers seeking to sell products into foreign markets (orders for long-lasting durable goods are down slightly in 2016 compared with 2015 despite overall economic growth) = foreign goods in local market is limited

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1. Stock prices soar since Nov election

⇒ When stock prices soar, despite the stock value being high or low, consumers will not be willing and able to purchase or invest in the stock unless they have raised wages. Therefore, demand may slip, especially luxury items, leading to businesses closing down in extreme cases.

⇒ Despite the soar in stock prices, according to <name of law>, the economy will adjust itself as <what the law does>.

2. Steady job creation

⇒ More jobs created signifies more jobs available for the labour force, thus increasing the employment rate

⇒ With more jobs, more people are able to work, resulting in more profits generated, thus more investments will be made, causing consumers to spend more, which in turn increase tax revenue and increase demand. Thus, suppliers are more inclined to raise wages and employ more workers.

3. Increase employment in commercial, health-care & hospital sectors

⇒ More people in the labour force will be employed, decreasing the unemployment rate, hence working towards full employment to achieve a stable economy

4. Strengthening of US dollar

⇒ citizens can take advantage of the currency exchange rate

⇒ can travel more frequently

⇒ more PRs and foreigners will want to take up US citizenship to enjoy the benefit

5. Perked up Investment in commercial and healthcare building

⇒ Employment growth in these sectors such as healthcare and hospitality

6. Slow rising rate of inflation

⇒ Inflation remains below target of 2%, (disinflation)

⇒ Gasoline and oil prices have dropping November as compared to October but slowly increased again in December when oil producing countries decided to cut production

7. Rise in Household Spending

⇒ Rose just by 0.2% in nov from the month before = higher demand = more consumers are able and willing to purchase products = more goods being manufactured = more suppliers increase variety of goods & expand to other markets = better economy

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From the graphs in this article, i have found out that US has been struggling to increase their inflation rate since it had dropped during the end of year 2011. despite their several tries in the previous years, they managed to increase a little but it is still not to what their expecting at their inflation target.

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In the article, US wants to manage a full employment in the country. Measures such as reducing taxes (income and corporate taxes) are implemented. As the economy is near to full employment, real GDP is at the highest and profits are at its maximum. Capacity utilization will also be the highest as all the resources such as machines are fully used. Household income will also be at the highest. As such, when consumers have more disposable income, their ability to purchase will also increase. Demand increases and prices of goods also increase. Inflation rate will also be at its highest point.

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This article mentioned about inflation, GDP, unemployment and fiscal policy which is under Keynesian.

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We've always waited until the first week of January to issue our outlook for the new year. The extra time usually allows us to digest additional data and identify emerging trends, with the hope of enhancing the accuracy of our forecast.

We can't say this year that the past few weeks have been very accretive to our understanding. Rarely have we looked ahead to a period with so many uncertainties, many of which are rooted in the global transformational election results of last year. It will no doubt be an interesting year to write about, but is currently a difficult year to anticipate.

Here are the main themes that will likely drive international economic outcomes in 2017:

The New Sheriff(s) in Town

The incoming U.S. administration and Congress have mapped out some ambitious plans for steering the economy. New governments in several other key countries will be taking their seats and making their marks this year. Fiscal stimulus will likely be stressed over monetary accommodation for the first time in many years, and borders may become less open to goods and people.

How will all of this affect growth and inflation? Will current indebtedness limit the scale of any stimulus? And how will measures taken in one country affect economic policy elsewhere?

Euro-anxiety

Already reeling from the Brexit vote and the fall of the Italian government, the fabric of the European Union (EU) will be stretched further in 2017. Preparations for Brexit negotiations will continue to elevate uncertainty. Dutch elections will take place in March, and the French presidential campaign will follow soon thereafter. Germans go to the polls in the fall. In all three countries, there is significant anti-European sentiment.

Our central outlook does not call for populist governments to emerge from any of the three key eurozone elections in 2017, and the context for constructive negotiations between the United Kingdom and the EU may be greater than some think. But "headline risk" is high.

The Fed's Delicate Dance

The U.S. Federal Reserve (Fed) has been extraordinarily cautious thus far and would like to continue a slow normalization of monetary policy. Yet the risk for inflation may be on the upside for the first time since 2007.

Will the Fed lean aggressively against escalating inflation? Political pressure (not to mention new appointees to the Board of Governors) may lead them to hold back. The consequences of hesitation could be heightened inflation expectations and higher long-term interest rates, which could have international repercussions. The finances of several emerging markets appear tenuous, and China continues its efforts to address an overhang of domestic debt.

The following are specific summaries covering the world's major centers.

The United States - Managing at Full Employment

The incoming administration in the United States will be working with Congress to formulate a new economic strategy. Reductions in both personal income tax rates and corporate tax rates appear likely. In addition, a national infrastructure program is slated to be considered. Yet given Congressional concerns about the size of the U.S. national debt, the size of the programs will likely be smaller than proposed by the president-elect during the 2016 campaign. Further, it may take time for passage and implementation. We are therefore not expecting significant economic growth in 2017 stemming from changes in fiscal policy.

Our baseline forecast anticipates that modifications will be made to the Affordable Care Act, but we are not expecting it to be repealed. No new trade arrangements are likely to be passed, but existing trade agreements should remain in place. Our assumption is that the U.S. government will not enact punitive tariffs against China or any other trading partner. While changes to immigration policy are likely to be proposed, their scale should not affect long-term population estimates for the U.S.

Under these conditions, we predict that U.S. real economic growth will advance at a 2.0% pace during 2017. Consumer spending and housing market activity should continue to advance nicely. Business spending has been weak in 2016, but energy-related investments should show an improvement as oil prices recover.

As the economy is operating close to full employment, further strengthening of employment conditions could kindle wage pressures. Inflation expectations rose significantly in the final months of 2016, and in 2017, inflation is predicted to match the Fed's 2.0% target.

In this economic environment, we expect the Fed to proceed in a gradual manner. We are expecting two interest rate hikes in 2017: at mid-year and at year-end. We also expect the Fed's balance sheet to be allowed to start declining sometime in 2017 as the policy of reinvesting maturities is brought to a close.

Uncertainty about the scale and scope of fiscal policy changes is the main risk element for the U.S. forecast. We'll be watching events in Washington more closely than usual.

Eurozone - Tiptoeing Through the Political Minefield

The core of Europe has performed remarkably well in spite of political headwinds. We expect the Continent's expansion to continue at a tepid pace. The banking sector's woes, stimulus tapering from the European Central Bank (ECB) and the uncertainty surrounding key elections are weighing down expectations.

The outlook for headline inflation in the euro area is stronger, as oil prices have almost doubled from their lows of last January. We expect inflation to average 1.2% in 2017. This will diminish real incomes in the euro area and could impair consumption. With unemployment in many countries still high, compensating increases in wages seem unlikely.

At the ECB's latest meeting, it committed to continue its bond buying until the end of 2017 - albeit at €60 billion per month versus the current €80 billion. It also changed the technical criteria around the eligibility of bonds for purchase to deal with scarcity of eligible assets. Since we expect core inflation to remain subdued, and with lending growth improving only very slowly, the ECB may not be done with quantitative easing.

Eurozone countries seem to have a little more latitude to use fiscal policy to boost growth. Unfortunately, the countries in the best position to take this step need it the least, while the neediest countries have the most severe budget problems. Expect Greece to be back in the headlines during the early portion of the year, once again testing the harmony of its supporters.

Our forecast for 1.5% growth in 2017 assumes that anti-EU parties will not prevail in national elections in the Netherlands, France, Italy, and Germany. Both the Netherlands and Italy have a fractious political system that is unlikely to give anti-EU parties sufficient power to rock the boat, while support for the anti-EU Alternative for Germany (AfD) party has yet to reach a critical mass. France, on the other hand, needs to be watched closely as the anti-EU National Front's Marine Le Pen is almost certain to reach the second round of the presidential elections. Any credible signs of a major European capital deciding to exit from the union would be enough to plunge the eurozone into a full blown crisis.

United Kingdom - A Slow Separation

The shape, size, and schedule of Brexit will dictate the direction of the British economy in the years to come. While Article 50 will almost certainly be triggered in March of this year, the actual exit from the EU is likely to take much longer than the prescribed two years. This will be a long-running economic drama.

The key question for the U.K. outlook is how the uncertainty introduced by Brexit discussions will affect economic activity. Will firms downsize their presence in the U.K. and relocate to the Continent? Will there be an outflow of European migrant workers? Will companies and consumers hold onto their wallets until the contours of a new relationship between Britain and the EU become clear?

To date, Brexit has not hindered the U.K. economy. Consumption, the largest contributor to U.K gross domestic product (GDP), has been buoyant, indicating that imported inflation (which has diminished real earnings growth) hasn't bitten yet. However, spending habits take time to adjust, and it is only a matter of time before the decline in purchasing power starts dampening household consumption.

While the weaker sterling has given a terms-of-trade boost, we expect the impact on exports to be limited. Investment hasn't yet declined amid the incipient uncertainty, but it is not expected to accelerate. Prime Minister Theresa May promised some additional fiscal support, but austerity still seems to be winning the day. Overall, we expect growth to slow down to 1.5% in 2017, with risks on the downside.

The Bank of England has been vocal about its willingness raise rates if currency-induced inflation gets out of hand. However, we see these communications as part of a strategy to anchor inflationary expectations rather than a statement of policy intent. We believe that weak economic activity will force the Bank of England to keep policy rates unchanged.

China - The Challenge of Controlling Capital

The Chinese are moving cautiously to rebalance its economy away from exports and manufacturing and towards household consumption and services. Counter to this long-run objective, an activist fiscal policy focused at public investment was essential to meeting the Chinese government's annual growth target last year.

In 2017, we expect the fiscal impulse to remain strongly positive and the Chinese economy to grow at 6.5%. Price pressures are expected to remain neutral, with the inflationary impact from a weaker currency and stronger global commodity prices likely to be offset by softness in the domestic economy.

Our forecast assumes there will be no material change in the U.S.-China trade relationship, hawkish rhetoric notwithstanding. At the same time, even a slow burning trade war might force the Chinese policy makers to prioritize the much delayed domestic reform process. For the time being, financial stability is the top concern for policy makers. Debt levels in the country continue to escalate; the People's Bank of China will likely have to apply further macro-prudential measures to mitigate financial risks.

The decline of the Chinese RMB accelerated in 2016 and gained momentum after the U.S. presidential elections. However, we do not see this as part of a deliberate strategy to gain export competitiveness but as a result of the steady outflow of capital.

The sustained weakness in currency and capital outflows are mutually self-reinforcing, and the People's Bank of China (PBOC) would rather rein in the outflow and live with a stronger RMB than have a weaker currency that could imperil financial stability. (In fact, the PBOC took steps toward that outcome this week.) The rapid decline in official reserves has prompted a number of restrictions on capital outflows, and we would expect this policy to extend into the new year. The balancing act on this front should test even the best of Chinese gymnasts.

Japan - The Same Old Story

Unfortunately, the Japanese economy is likely to grow at an uninspiring pace in 2017. Though the weaker yen will boost export revenues, there will be some negative impact on real disposable incomes, and therefore consumption. While some marginal fiscal support would be welcome, the fundamental issue of low potential growth lingers. For the time being, we expect the economy to expand by 0.8% in 2017.

Structural reforms, the so-called third arrow of 'Abenomics', are essential to lift Japan out of its current path. But these measures have yet to be deployed wholeheartedly. For example, the government's welcome focus on boosting incomes for non-regular employees has not been matched by enthusiasm for broader changes in the Japanese labor market. Labor force participation among women, a focus for policy makers, remains low relative to other industrialized countries.

Inflation in Japan will likely trend marginally higher (though still below the 2 percent target), reflecting a slight improvement in business expectations, a weaker yen, and higher global commodity prices. We expect some technical adjustments in the Bank of Japan's (BoJ) asset purchase program and negative interest rate regime - rising global yields would make BoJ's yield curve control policy more onerous to execute. But we do not foresee any fundamental shift in the monetary policy framework or stance.

Japan's fundamental problem-unfavorable demographics-remains a severe limitation.

Emerging Markets - A Year of Caution

When America sneezes, the world catches a cold - or so the saying goes. This time around though, the recovery of the U.S. economy and the accompanying rise in U.S. yields appears to be one of the key risks to emerging markets (EMs).

Cheap dollar funding costs prompted a debt binge in some EMs during the post crisis years, something that is becoming increasingly difficult to sustain. Narrowing interest rate differentials between the U.S. and EMs would make it difficult to finance large current account deficits in many EMs. We expect the fallout to be much smaller than "taper tantrum" since the U.S. monetary policy normalization has been priced in for a while now.

Countries with significant trade exposure to the U.S. could be hit by a double whammy of restricted inflows and a decline in exports if the new U.S. administration delivers on its anti-trade rhetoric. This would complicate the task for EM central banks as they try to balance a slowing economy with capital outflows. We believe most central banks would prioritize the former, as tight monetary policy to limit capital outflows has proved to be a failed strategy in previous crises.

However, the much beleaguered commodity-producing EMs in Latin America, Russia, Middle East and Africa can look at 2017 with some hope as the expectations of U.S. "reflation," along with the recent Organization of the Petroleum Exporting Countries (OPEC) agreement, has pushed global commodity prices higher.

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We've always waited until the first week of January to issue our outlook for the new year. The extra time usually allows us to digest additional data and identify emerging trends, with the hope of enhancing the accuracy of our forecast. We can't say this year that the past few weeks have been very accretive to our understanding.

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-China expected to face downward pressure in 2017
-further depreciation in currency
-china trying to stabilise the economy to prevent other countries from exploiting its currency exchange rate
-DT slapping china goods = costs jobs
-china in a stronger position than in 1990s, DT by opening past debates of using China as a labourer market(?) is harder, therefore America may face losses instead

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Comments on Prelim Analysis  for Article 

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Comments on Prelim Analysis  for Article 

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This is not so much of a news article but rather, a commentary, akin to reading someone's US country report already. However, I'm fine for your group to continue to use this given that there's still opportunities from this article for you to explain and apply economic concepts learn in class.

Suggestions:
- Expand your point on 'Keynesian Fiscal Stimulus', using what you have learn in class.
- As you learn monetary policy, explain how Trump is going to finance the fiscal spending.
- We didn't cover supply-side policies but if you like, you could read up further and try to apply. Otherwise, it is okay to leave that out.
- Trade as a zero-sum game. What does that mean? What is the impact on GDP if Trump views that way and restrict trade? Which component of the GDP will fall?
- What type of inflation can you inferred from the article? Is it demand-pull or cost-push inflation?
- In terms of currency appreciation, why would it be a bad thing for the US? I noticed that your group has examined in terms of the impact on other countries. Good! Relate it back to your chosen country.

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Comments on Prelim Analysis for Article 3 (reference)

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Comments on Prelim Analysis for Article 3 (reference)

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Team is solely focusing the impact of China on USA's GDP and Unemployment. In that case, further research is required to justify team's focus on just one country on the economy of another.

For example, how high a percentage is China contributing to the USA's GDP?
How significant is China in terms of unemployment situation in the USA? This argument would most likely be weak to justify since we can't solely 'blame' any single country for the unemployment of a nation, especially a huge one like U.S.A.
Suggest if you have difficulty justifying, please re-select another article.

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I can't read the full WSJ article without subscribing and pay for it.
Could team please copy the article and send me for reading please?
Thank you!

10 Jan 2017
Thanks for the screenshot. Team might find it a bit challenging to comprehend the stock prices as an indicator on the economy. Stock prices rises might signal positivity in the economy. Household wealth increase if they hold such stocks.

Noted prelim analysis. Suggest to bring in how sentiments from consumers and businesses affect GDP. Suggest also to bring in economic model to explain this. Article also mentioned about tax cuts. What kind of policy is this? Expansionary or contractionary policy? What is the intend of trump. Will this backfire?

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I almost fell off my chair laughing at both your pictures.
Thanks for being so 'into' researching on USA report. LOL.

I see good team work here and finding joy in completing this assignment is really commendable. Thumbs up for the team U.S.A!

Please refer to the specific comments I've given below each of your article prelim analysis. The suggestions mentioned are for your team to consider including a few brief points in your final padlet for submission and or to a greater extent, in your country report.

Do note that these are merely a few suggestions. Please continue to apply even more concepts in your country report. Consider all topics and concepts we have learn so far and also consider illustrations for some of the happenings stated in the articles.

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-stock prices soared since the election
-consumer spending, income growth and inflation weakened last month following a short-lived spurt
-household spending rose just 0.2% in nov from the month before
-demand for goods and services also is soft, consumer wage gain is at the minimum ( not much increase in real income)
-economy is growth at rate of 1.7% for 3 months however foretasted rate was 1.9% which means growth rate is lesser than expected , next year expected growth rate is 2.1%
-tax cuts deregulation by Donald trump hopefully would be able to boost businesses,consumer and economic growth
-spending on mining exploration doubled as high oil prices and new investment spurred investments
-US dollars continue to strengthen since the election which poses as a challenge for manufacturers seeking to sell products into the foreign market
-investment in commercial and healthcare building has perked up, employment growth in these sectors such as healthcare and hospitality
-inflation remains below target of 2%, (disinflation), gasoline and oil prices have dropping November as compared to October but slowly increased again in December when oil producing countries decided to cut production

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-China is America's largest creditor,America take advantage of  China's bountiful labor force to fuel an export-oriented country, Chinese government began investing heavily in U.S treasuries, China form a new export market for american products

-trade deficit in USA
-The gap trade deficit widens with China from 343.1 billion to 365.7 billion as USA import more than they export meaning that Americans consumer more foreign goods as compared to the country shipping their locals goods overseas
-the increase is due to US companies taking advantage of China's cheap labor, US exports to China are growing as China increase in wages and residents consume more

-china put high tariffs on many american product while US tariffs on Chinese products are low, US goods more expensive for Chinese consumers while Chinese goods cheaper for Americans
-Trump could negotiate to broaden local market access for American companies, restrict its theft of U.S. intellectual property and continue Chinese investment in U.S. real estate and universities. “I think he wants China to consume more of our exports,” Kahn says. “He wants more American success there.”

- since goods from china is cheaper due to US outsourcing labor in Chna for production of goods, factories producing goods in america will thus instead reduce labor since it is cheaper in China, thus reduce labor and rises in unemployment also due to automation --> cheaper consumer goods

-higher tariffs on imports of Chinese products, to reduce imports of Chinese products which also causes the higher prices for U.S exports
-this in turn may cause the US manufacturers to move their operations to other countries with low costs which may not regenerate manufacturing jobs in the U.S
-this may also result the Chinese market making it difficult for american companies to access the Chinese market, restrict the market, lead to inflation with higher prices on imports from china
-a slower china economy, lower demand for oil steel and food or basically other commodities (cost-push inflation?), as well as fewer purchases of american real estate and luxury goods
-China faces competition from low-cost labour countries such as Vietnam  thus instead of focusing on export-driven economy, they focus on domestic consumption instead
-cannot take place since most of the people in china are aggressive savers instead of spenders

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Economic consequences of DT
1)US growth above 2.2% which is the average annual rate during Barack obama's terms
-he will be able to apply the Keynesian fiscal stimulus
-something related about being a democrat/ republican LOL
-i found out that that with DT as president who is a republican who believes the importance public spendings thus spend more and relax debt limits
-more of the classical theory since it focus more on the supply side
-same effect: growth & inflation increases
-as the economy reaches full employment, additional growth will push inflation higher

2)Tax reforms/ tax cuts
-higher tax cuts aka lower taxes means more people will likely borrow from the bank, increase in spendings
-will have budget deficit though as government spend more than they earn : expenditure > revenue which will cause more economic growth & inflation
-as bank loosens lending standards aka lowering the interest rate so that people will borrow more
-downside: people borrow more thus they will have debt-financed consumption and residential construction meaning more houses will be built is it because ppl have more money thus they will want to buy houses of their own so government will build more house

3)Geopolitical (International) stability
-stronger relations with other countries aka Russia or China

4)US economy shift away from free trade, globalisation and open markets

5)with large tax cuts to boost public spendings, accelerates inflation, higher interest rates
-excessive strengthening of the US dollars - over valued

6)Triggering a euro crisis
-breakup of the EU

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Trump has threatened to slap Chinese imports to the U.S. with 45% tariffs. Would that be effective in narrowing the trade deficit and bringing jobs back to the U.S.?

Unlikely, economists say. Any measures to lower imports of Chinese products — say, a tariff on a specific industry — will likely result in a tit-for-tat response from China, resulting in higher prices for U.S. exports.

Many U.S. manufacturers then will simply move operations to other countries with low costs, such as Vietnam. Raising tariffs is not a guaranteed remedy for regenerating U.S. manufacturing jobs, Prasad says.

China could seek to make accessing the Chinese market difficult for American companies. That could mean unforeseen licensing requirements and administrative procedures. Chinese students could be held back from attending American universities. Airbus’ planes could be favored over Boeing. Intellectual property laws may not be enforced as aggressively. China “can start to restrict its market even more," Prasad says. "There’s a lot they can do.”

Meanwhile, higher prices on Chinese imports to the U.S. will affect working-class Americans disproportionately, possibly leading to concerns about inflation

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Add-on to article 3 (reference) analysis

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Add-on to article 3 (reference) analysis

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-Since American companies "fully exploited the opportunities" by "rushing to outsource manufacturing" at China, the employment rate in America will decrease as more labour opportunities will go to China instead, therefore, China is able to become "America's largest creditor" with the "largest international student group at prestigious universities" in America.
-With China being their "largest creditor", it is no wonder that America trades more with them in addition to the cheap labour there.
-Despite the high tariffs imposed on many American products, consumption and demand of  Chinese goods are still relatively higher due to the strong US dollar, enabling its residents to afford China's goods, thus more able and willing to purchase their items such as electronics and clothing. Similarly, suppliers in America will generate some profits since US goods such as industrial supplies, foods, airplanes and car parts and machineries will then be more expensive to Chinese customers.
-Since most labour jobs has been transferred to China, DT resonates with his voters by vowing to bring back these jobs back to America so as to boost its employment rate, ensuring economic stability in the long run. On top of that, DT is planning to export more of US products to the big China market by ensuring that demand of US goods in China is high so that market access for American companies will be easier, thus able to boost America's profit in the long term. He believes that easier market access is made possible by continuing Chinese investment in US real estate and universities whereby students in China are able to enter America's prestigious universities more easily.
-The accusation of China deliberately devaluing its currency to help the US raise some concerns to the extent that China's central bank and other state-owned banks have to slow down the depreciation of the Chinese Yuan. To most buyers, this means that exports from China are cheaper, raising demand for Chinese goods. However, by doing the "reverse of currency manipulation", China is robbing Americans of billions of dollars of capital and millions of jobs due to having too many barriers for trade and investment, over favouring local companies as well as weak protection of intellectual property.
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Analysis for Article 3 (reference) - Summary

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Analysis for Article 3 (reference) - Summary

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-ve:
-Unemployment rate in USA increases as more jobs such as factory workers are disappearing
-This is most likely to be a structural unemployment as there is a relocation of business operation in the USA. Many companies relocate their factories to lower cost countries which has lower labor and land costs. In this article, China is the country that USA is heavily investing on in terms of production of goods.
-Structural Unemployment is theoretically inevitable as the economy is dynamic and man will always resort to cheaper solutions.
-Despite the efforts made by Mr Donald Trump such as "threatening to slap Chinese imports to the U.S. with 45% tariffs", this strategy will not be effective to bring back the factory jobs back to the country.
- This can be seen from the article, "Many U.S. manufacturers then will simply move operations to other countries with low costs such as Vietnam." Hence,  the government strategies is not effective to deal with bringing back factory jobs back to their country as there is always alternatives for manufacturers to set up their factories in low cost labor countries.
- This "strategy" however will cause negative impacts as both countries will make "life difficult for each other" whereby consumers in both countries will suffer.
-Inflation might also occur as a result. It can be in the case of Demand-Pull inflation as consumer's demand and income of consumer increase. This can be seen from "Meanwhile, U.S. exports to China are growing as wages in that country increase and residents consume more, but not nearly as quickly as imports."

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+ve:
->US growth most likely accelerate above 2.2% average annual rate
==>With a Republican president & party, public spending will be boosted & debt limits relaxed
==>Therefore, DT can implement the Keynesian fiscal stimulus
->Sensible Tax reforms will become law
Eg. Amnesty for multinational companies that repatriate foreign profits
==>Dominance of Republicans = easy agreement on tax cuts financed mainly by higher public borrowing (consumer spending) = bigger budget deficits = stimulate more growth & inflation
*as compared to special interest lobbies' resistance to the elimination of exemptions & loopholes
->Deregulation boost economic growth
==>Reversing bank regulations = banks encouraged to loosen lending standards (esp middle income households) = upswing in residential construction & debt financed consumption = add further growth more quickly
==>Excessive deregulation = re-run of 2007 financial crisis (future problem)
->Good geopolitical stability in the short term
==>Preference for transactional realpolitik over liberal interventionism stabilise relations with Russia & China (spheres of influence) - Russia: Free rein in Ukraine & Syria in exchange for restraint in central Europe and the Baltics, China: accepted inevitable dominance in Asia if it avoids outright wars with Japan, Taiwan & other countries whose security is guaranteed by treaties with the US = Restore a degree of stability at the cost of human rights
->Force Americans to recognise flaws in their own democracy
==>Reenergise efforts to reform the electoral college
==>Encourage voters to elect legislatures to counteract federal conservatism with progressive state laws on issues ranging from air quality & health care to abortion, treatment of immigrants, and gun control

-ve:
->Effect of resulting deficits (supply-side economics)
==>US economy's full employment is almost maxed = additional growth push inflation higher - Future problem
->Views trade as a zero-sum game
==>May suffer a backlash due to unable to deliver promised trade curbs = voters declining in industries & regions
==>US global leadership to shift away from free trade, globalisation & open markets
==>-ve for emerging economies & multinational companies whose development models & business strategies have assumed free trade & open capital flows
->Accelerating inflation due to enacting large tax cuts & boosting public spending in an economy already near full employment
==>Full interest rates as well
==>Disruptive impact on financial markets (regardless of tightening monetary policy to preempt rising prices)
->Excessive strengthening of the US dollar
==>Overvalued dollar moves into a self-reinforcing upward spiral due to accumulated dollar debts in emerging markets by governments & companies tempted by near-zero interest rates
->Combination of dollar squeeze & protectionism
==>Big trouble for developing countries except relatively closed economies such as Brazil, Russia & India, whose development strategies are less reliant on free trade & foreign financing
==>Countries that heavily depend on exports such as Singapore will be affected greatly, therefore their economic growth may slow down
->Contagion effect on Europe
==>May trigger another euro crisis
==>Threaten the breakup of the European Union

Overall:
-Short-term: Economic growth
-Long-term: Currency of dollar may strengthen which leads to inflation

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+ve:
->Stock prices soar since Nov election
->Household spending - 0.2% in Nov
==>Slowdown from Aug and Oct
->Steady job creation
->Increase employment in commercial, health-care & hospital sectors

-ve:
->Income growth - flatlined (not much change)
==>Wage & Salary income - rose 3.5% in Nov from Oct (Slowest year-over-year gain since Dec 2013 despite 3.5% annual pace in 3rd quarter - the best quarterly increase in 2 years)
->Consumer spending
==>Domestic: 2/3 of Total US output
==> Demand: Soft (for factory-made goods)
==>Smaller share of adults holding jobs = Smaller employment rate
==>Increased housing & health-care expenses = spend less
->Price inflation
->Measured by personal-consumption expenditures index (can copy graph)
==>Rose by 1.4% from Nov 2015 = reflected stabilizing energy prices & firmer consumer demand that allows businesses to pass = Raise benchmark interest rate along price increases - support Fed's move
==>BUT inflation readings now are below central bank's 2% target
==>Could be temporary such as gasoline & oil costs which slumped in Nov but rebounded in Dec due to oil-producing countries agreeing to cut production
->Meager economic output
==>Mining exploration, shafts & wells doubled from mid-2009 to end of 2014 = high oil prices & new technologies that spur investment
==>Fell by 2/3 since that point, dragged down output
->Strength of US dollar
==>Challenge to manufacturers seeking to sell products into foreign markets (orders for long-lasting durable goods are down slightly in 2016 compared with 2015 despite overall economic growth)

Measure to counter:
->DT's election of tax cuts & deregulation
==>Possibility of boosting businesses, consumers & economic growth (tbc - implementation, response of businesses & households)
==>Currently have some optimism being developed
->Relatively conservative planning on market outcomes & aggression on restricting costs

Overall:
-Measure of economic vitality are income growth, consumer spending & inflation
-Growing rate at 1.7% in Oct, Nov & Dec 2016 (expects 1.9% growth in 2016 & 2.1% in 2017)
-Uncertain global economy

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Article 3 (reference

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CLOSE

President-elect Donald Trump's threats to impose big tariffs on China have put that country in the global spotlight. Trump says he wants to bring back American factory jobs but economists say his tactics could result in a trade war that ultimately hurts the United States. Economics reporters Roger Yu and Paul Davidson try to sort it all out.
Q: How did China become the second-largest economy in the world and so intertwined with the U.S.?
With a population of nearly 1.4 billion, China is the world's largest country. It has taken advantage of its bountiful labor force to fuel an export-oriented economy. In short, it became richer by transforming itself into the world's factory. American companies fully exploited the opportunities, rushing to outsource manufacturing there.

The result was a burgeoning middle class in China that formed a new export market for American products. More Chinese students can now afford to study in the U.S., often forming the largest international student group at prestigious universities. Chinese tourists pack American hotels in major cities. And the Chinese government began investing heavily in U.S. Treasuries. China is now America's largest creditor.
Q: What is a trade deficit and why has our trade deficit with China widened?
A trade deficit occurs when a country's imports of goods and services exceed its exports, or goods and services shipped "abroad." The U.S. trade deficit across the globe totaled $531.5 billion in 2015, up from $508.3 billion a year earlier. In other words, Americans consume more foreign goods and services than the country ships overseas.

The vast majority of the U.S. deficit derives from trade with China. The gap with China rose to $365.7 billion in 2015 from $343.1 billion a year earlier. That's because more U.S. companies continue to outsource to China to take advantage of cheap labor, and those goods are then shipped to the U.S. Meanwhile, U.S. exports to China are growing as wages in that country increase and residents consume more, but not nearly as quickly as imports. The standard of living in China is still relatively low.

Also, China puts high tariffs on many American products while U.S. tariffs on Chinese products are low. And the dollar is strong, particularly in relation to the Chinese yuan. That makes U.S. goods more expensive for Chinese customers, and Chinese goods cheaper for Americans.
Q: What U.S. goods are exported to China and which Chinese goods are imported to the U.S.?
Some of the goods exported by the U.S. include industrial supplies, foods, airplanes and car parts and machinery. Goods imported to the U.S. from China include consumer electronics and clothing.
Q: Why has Trump made China such a big issue?
Politics plays a huge role. The Rust Belt states were very much in play for Trump, and he knew that the message of bringing jobs back from China would resonate with voters. It worked. "There's certainly a sense in heartland America that trade has not worked well for average workers, especially in the manufacturing sector," says Eswar Prasad, an economics professor at Cornell University. "It's a lot easier to blame the external boogeyman as the main culprit for the job losses. It presented a fat and juicy target."
Q: What does Trump want from China?
As seen in his recent negotiations with Carrier to keep operations in the U.S.,Trump has shown that the appearance of victory matters to him. So he's looking for concessions, says Mauro Guillen, an economics professor at the University of Pennsylvania. "What he wants is to score some kind of victory, at least symbolic," he says.

He may also have more substantive goals in mind, says Matthew Kahn, an economics professor at the University of Southern California. Trump could negotiate to broaden local market access for American companies, restrict its theft of U.S. intellectual property and continue Chinese investment in U.S. real estate and universities. "I think he wants China to consume more of our exports," Kahn says. "He wants more American success there."
Q: China has been accused of currency manipulation. Does this continue? How does it affect our trade policy and American companies' operations?
China pegs the yuan to the dollar, giving the government much control over its value. Most advanced economies let their currencies "float," allowing market forces to dictate their currency value.

For years, China has deliberately devalued its currency, which made its exports cheaper. But the practice has faded in the past two years, Prasad says. With the Chinese economy cooling, market forces have driven the yuan to an eight-year low against the dollar in November. And China's central bank and other state-owned banks have been intervening to ensure it's not depreciating too far," Prasad says. "Right now, it's doing the reverse of currency manipulating," he says. "It's helping the U.S."
Q: How does the trade deficit with China affect the U.S. economy?
For most Americans, the trade deficit is manifested on the shelves of stores like Walmart. Consumer goods have gotten cheaper because companies can make them at low cost in China. "The U.S. is a stronger nation because of trades with China," Khan says. "I don't think it's a bad thing that we have a deficit with China."

But don't tell that to factory workers in Michigan and Ohio. Many factors have contributed to the exodus of jobs in those regions, including automation. But there's no denying that American manufacturing jobs have been lost due to offshoring. Free trade "may come at the expense of some jobs in the U.S. But Americans have developed a taste for cheap consumer goods," Guillen says.
Q: Trump has threatened to slap Chinese imports to the U.S. with 45% tariffs. Would that be effective in narrowing the trade deficit and bringing jobs back to the U.S.?
Unlikely, economists say. Any measures to lower imports of Chinese products - say, a tariff on a specific industry - will likely result in a tit-for-tat response from China, resulting in higher prices for U.S. exports.

Many U.S. manufacturers then will simply move operations to other countries with low costs, such as Vietnam. Raising tariffs is not a guaranteed remedy for regenerating U.S. manufacturing jobs, Prasad says.

China could seek to make accessing the Chinese market difficult for American companies. That could mean unforeseen licensing requirements and administrative procedures. Chinese students could be held back from attending American universities. Airbus' planes could be favored over Boeing. Intellectual property laws may not be enforced as aggressively. China "can start to restrict its market even more," Prasad says. "There's a lot they can do."

Meanwhile, higher prices on Chinese imports to the U.S. will affect working-class Americans disproportionately, possibly leading to concerns about inflation.

Q: What is Trump's endgame?

Despite Trump's tweets that were antagonistic toward China, few economists expect him to risk a full trade war. But if he followed through on some campaign promises - such as tariffs or formally declaring China a currency manipulator - "that'd signal an opening salvo," Prasad says.

Economists say Trump may be approaching the issue as a business dealer, bluffing and stretching boundaries to extract better deals. But the United States' need for access to the Chinese market isn't waning, and Trump must tread carefully in his dealings, they say.
Q: China's economy is slowing down. Why is this worrisome to Americans?
The Chinese economy continues to grow, just not at the rate it once did a few years ago. A slowing Chinese economy would mean less global demand for oil, steel, food and other commodities as well as fewer purchases of American real estate and luxury goods, and perhaps even a slowdown in China's purchase of U.S. Treasuries.
Q: How is China trying to spark faster economic growth?
Facing more competition from countries with low-cost labor, such as Vietnam and Bangladesh, the Chinese government has started to shift from an export-driven economy to one fueled by domestic consumption. But the initiative has been slow to take effect as the Chinese are known to be aggressive savers. "They don't have Medicare or Social Security," Guillen says. "China has 400 million people still living in poverty in rural areas. They're not ready to move toward a consumer-oriented economy."

Read or Share this story: http://usat.ly/2iaKTkJ

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Why China matters in Trump's economic policy

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CLOSE President-elect Donald Trump's threats to impose big tariffs on China have put that country in the global spotlight. Trump says he wants to bring back American factory jobs but economists say his tactics could result in a trade war that ultimately hurts the United States.

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For those of us who were wrong about the US presidential election, it is worth suppressing emotional reactions, at least for a month or two, and attempting a dispassionate judgment about what Donald Trump's administration may mean for the world. So here are 10 likely consequences of the Trump presidency, divided equally between the good and the bad.

The good news starts with US growth, which will almost surely accelerate above the 2.2% average annual rate during Barack Obama's second term. This is because the Republican aversion to public spending and debt applies only when a Democrat like Obama occupies the White House. With a Republican president, the party has always been glad to boost public spending and relax debt limits, as it was under Presidents Ronald Reagan and George W Bush. Thus, Trump will be able to implement the Keynesian fiscal stimulus that Obama often proposed but was unable to deliver.

The resulting deficits may be described as "supply-side economics", rather than Keynesian stimulus, but the effect will be the same: growth and inflation will both increase. As the US economy runs into the limits of full employment, additional growth will push inflation higher, but that bad news can wait until 2018 and beyond.

Second, sensible tax reforms, such as an amnesty for multinational companies that repatriate foreign profits, will finally become law. The Republicans' hegemony will enable easy agreement on tax cuts financed mainly by higher public borrowing, rather than by facing down special interest lobbies' resistance to the elimination of exemptions and loopholes. These tax reforms will create even bigger budget deficits, which in turn will stimulate more growth and inflation.

A third boost to economic growth will come from deregulation. While battles over energy and environmental laws may dominate the headlines, the biggest economic impact will come from reversing bank regulations. As banks are encouraged to loosen lending standards, especially for middle-income households, an upswing in residential construction and debt-financed consumption should add further growth impetus. Excessive deregulation could cause a re-run of the 2007 financial crisis, but that, too, is a risk for 2018 and beyond.

Fourth, Trump could be good for geopolitical stability, at least in the short term. Trump's preference for transactional realpolitik over Obama's liberal interventionism should stabilise relations with Russia and China as the world is divided into spheres of influence. Trump could give Russia freer rein in Ukraine and Syria in exchange for restraint in central Europe and the Baltics. China's inevitable dominance in Asia could be accepted, provided it avoids outright wars with Japan, Taiwan, and other countries whose security is, in theory, guaranteed by treaties with the US. The Middle East is bound to remain a cauldron of geopolitical unrest; but, even here, Trump's preference for local strongmen over "democracy promotion" could restore a degree of stability (at the cost of human rights).

Finally, Trump's election could force Americans to recognise flaws in their own democracy, even as they abandon global "democracy promotion." The fact that Trump lost the popular vote by more than 2 million could re-energise efforts to reform the electoral college - efforts that already have resulted in the necessary legislation in states representing 61% of the required votes. And the overwhelming opposition to Trump in trend-setting states such as California and New York could encourage their voters to elect legislatures to counteract federal conservatism with progressive state laws on issues ranging from air quality and health care to abortion, treatment of immigrants, and gun control.

Now for the bad news. For the first time since the 1930s, the US has a president who views trade as a zero-sum game. Trump's protectionist campaign rhetoric may not have been meant literally, but if he fails to deliver any of the trade curbs that he promised, Republicans will suffer a backlash from what is now their core voter constituency, voters in declining industries and regions.

US global leadership is therefore bound to shift away from free trade, globalisation, and open markets. Nobody can predict the full effects of the biggest regime change in global economic management since the 1980s; but they will surely be negative for emerging economies and multinational companies, whose development models and business strategies have assumed free trade and open capital flows.

A second, more immediate, threat stems from enacting large tax cuts and boosting public spending in an economy already nearing full employment, which implies accelerating inflation, higher interest rates, or probably some combination of the two. Given the likelihood of additional trade protectionism and measures to remove immigrant workers, the increase in inflation and long-term interest rates could be quite dramatic. The impact on financial markets will be disruptive, regardless of whether the Fed aggressively tightens monetary policy to pre-empt rising prices or lets the economy "run hot" for a year or two, allowing inflation to accelerate.

With the US economy growing faster than expected and long-term interest rates rising, excessive strengthening of the dollar is a third major risk. Even though the dollar is already overvalued, it could move into a self-reinforcing upward spiral, as it did in the early 1980s and late 1990s, owing to dollar debts accumulated in emerging markets by governments and companies tempted by near-zero interest rates.

Fourth, the combination of a dollar squeeze and protectionism spells big trouble for developing countries, with the possible exception of some relatively closed economies such as Brazil, Russia, and India, whose development strategies are less reliant on free trade and foreign financing.

Finally, the most dangerous consequence of Trump's victory may be its contagion effect on Europe. Just as Britain's referendum proved uncannily predictive of Trump's win, Trump looks like a leading indicator of populist upheavals in Europe, which could trigger another euro crisis and threaten the breakup of the European Union. The next anti-establishment victories, according to opinion polls, will be in Italy's constitutional referendum and Austria's presidential election. Globalists can only hope that the polls again turn out to be wrong - but in the opposite direction.
* Anatole Kaletsky is chief economist and co-chair of Gavekal Dragonomics. A former columnist at the Times, the International New York Times and the Financial Times, he is the author of Capitalism 4.0, The Birth of a New Economy. Topics

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10 economic consequences of Donald Trump's election win

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For those of us who were wrong about the US presidential election, it is worth suppressing emotional reactions, at least for a month or two, and attempting a dispassionate judgment about what Donald Trump's administration may mean for the world. So here are 10 likely consequences of the Trump presidency, divided equally between the good and the bad.

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Analysts at Nomura, base din the Trump stimulus, explained that they expect better growth starting in 2017 owing to the strong likelihood of fiscal stimulus.
Key Quotes:
"But new trade and immigration policies could hurt growth.

Activity: In the wake of the US election we have updated our economic and monetary policy forecasts. We expect the Republican-led Congress and the Trump Administration to support a large fiscal stimulus. That stimulus is likely to include a sizable tax package for businesses and individuals that will likely be passed sometime in late summer/early fall. We also expect slightly higher federal spending on defense and infrastructure. By contrast, two sets of less conventional policies-trade reform and stricter immigration policy-have the potential to restrict growth.

The first will likely place increased restrictions on trade, lifting import prices (feeding higher inflation) which could incite retaliatory actions by other countries (hurting exporters). The second set will restrict the inflow of new immigrants and increase the outflow of existing immigrants. This could have a notable effect on labor force growth, causing a notable deceleration in total economic growth. At this point great uncertainty clouds the outlook for policy. But our preliminary assessment suggests that proposed tax cuts and federal spending should boost growth in late 2017 and into 2018 but then negative effects of restrictive trade and immigration policy start to take over and reduce growth in late 2018 and beyond.

Inflation: We expect the drag from lower oil prices to mostly dissipate by the end of this year and inflation to move higher by next year. We expect core CPI inflation to remain around 2%, while core PCE inflation should trend gradually higher. With steadily increasing pressure induced by fiscal policy and trade policy, core inflation should grow somewhat faster in 2018 than previously expected. Policy: After years of the Federal Reserve being "the only game in town," fiscal support is coming. The Fed will likely be more aggressive in response to major fiscal stimulus as the economy is close to full employment. We forecast that the Fed will conduct two hikes in 2017 and three in 2018.

Risks: There remains significant uncertainty surrounding our forecast as there is little concrete information on which fiscal policies will be enacted. It could take many months for that uncertainty to clear. Also, geopolitical uncertainty, slower global growth, the strong dollar, low oil prices and tight financial conditions remain key risks to our outlook."

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Analysts at Nomura, base din the Trump stimulus, explained that they expect better growth starting in 2017 owing to the strong likelihood of fiscal stimulus. Key Quotes: "But new trade and immigration policies could hurt growth. Activity: In the wake of the US election we have updated our economic and monetary policy forecasts.

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Another one mind me man so many articles

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Another one mind me man so many articles

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Good News: US Economy Growing, Bad News: Very Slowly

$DIA, $SPY, $QQQ, $VXX

More Americans sought unemployment aid last week, but the number of applications remains at a low level that suggests companies are still hiring.

The surge in jobless claims is not worrisome, but trying to seasonally adjust weekly data is a pretty much impossible task, so even a few weeks of increases really mean little to the economy.

The US Labor Department says weekly applications for unemployment aid rose 21,000 to a seasonally adjusted 275,000. That is the most since June.

Applications are a proxy for layoffs, and have been below 300,000 for 94 weeks running. That is the longest streak since Y 1970. And last month, the unemployment rate fell to a 9-year low of 4.6%.

Layoffs typically rise in Winter when construction sites close and hotels and restaurants at tourist sites cut back on their staffing. The government seasonally adjusts for those trends but does not always do so perfectly.

The US economy is growing, consumers and business are spending, but strong economic growth it is not.

Lots of data were dumped Thursday and they tell largely the same story.

Consumer spending was up in November, but if you adjust for inflation, it was not special. The Key factor was a major slowdown in durable goods consumption, driven by a softening in vehicle sales.

It looks like consumption will be up moderately in Q-4 this year, and that will likely keep overall growth from getting anywhere near what happened in Q-3.

Looking forward, household incomes went nowhere. Workers are hoping that wage and salary gains will accelerate, but they actually went backward in November.

Why that happened in anyone's guess and it will be interesting to see what the December numbers look like. At least inflation remains well contained.

On the business side, demand for big-ticket items, excluding the aircraft sector, was up solidly in November, as business capital expenditures rose sharply.

Thursday, the major US stock market indexes finished at: DJIA-23.08 at 19918.88, NAS Comp-24.01 at 5447.42, S&P 500 -4.22 at 2260.96

Volume: Trade was below average with 882.6-B/shares exchanged on the NYSE.

Russell 2000 +20.1% YTD

DJIA +14.3% YTD

S&P 500 +10.6% YTD

NAS Comp +8.8% YTD

Stay tuned...

The following two tabs change content below.

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Good News: US Economy Growing, Bad News: Very Slowly - Live Trading News

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Good News: US Economy Growing, Bad News: Very Slowly $DIA, $SPY, $QQQ, $VXX More Americans sought unemployment aid last week, but the number of applications remains at a low level that suggests companies are still hiring. The surge in jobless claims is not worrisome, but trying to seasonally adjust weekly data is a pretty much ...

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On Thursday, CNN reported that President-elect Donald Trump's administration is considering imposing a 5% tariff on all imports into the United States.

While the decision is not final, sources told CNN the tariff could be implemented through an executive order in the early days of the Trump presidency.

The move is not surprising, given that Trump made free trade one of the central topics of his campaign after criticizing China, Mexico, and Japan.

He suggested putting a 45% tariff on Chinese imports, said he would declare China a currency manipulator on his first day in office, proposed taxing imports from Mexico, said he'd " rip up" trade deals, and called the Trans-Pacific Partnership, or TPP, " a rape of our country."

Trump has said in victory rallies since the election that for trade, "we have to look at it almost as a war," asking "who the hell cares if there's a trade war?"

Trump said China specifically is committing "the greatest jobs theft in the history of the world."

Willem Buiter, chief economist at Citi, wrote in a note to clients before the report of the new tariff that protectionist trade policies might spark a global trade war, "which could easily trigger a global recession."

Deutsche Bank has also addressed the negative risks of the Trump trade agenda. A team from the firm wrote in a note on Friday that "the biggest threat to growth is a possible protectionist turn, which could depress global trade and even trigger trade wars."

In addition to the tariff talk, Trump appointed Peter Navarro head of the new National Trade Council on Wednesday. Navarro has been a longtime critic of China - he wrote a book titled "Death By China."

While these moves do not signal a coming collapse in international trade, they suggest that Trump's more protectionist tendencies will come out during his time in office.

Additionally, a tariff of any kind is likely to spark a reaction from major US trading partners such as China. Chinese officials are reportedly weighing options for how to respond to hostile trade moves by Trump.

Given the moves by Trump, we've broken down just how a protectionist trade scenario could affect the US economy and the geopolitical order.

A macroeconomic drag

A 5% tariff may affect the US economy - higher costs, a slight drag to GDP growth - but economists are worried about what it signals going forward.

Michael Gapen, a chief US economist at Barclays, has estimated the economic drag that tariffs on imports from China and Mexico may have on US GDP growth.

Assuming a 15% tariff on Chinese imports and a 7% tariff on Mexican imports - modestly above their current levels of 2-10%, depending on the good - Gapen estimated that the US would see a 0.5% reduction in annual GDP growth in just the next year.

Meanwhile, Buiter said Citi estimates trade and other policy uncertainties could be a 1% drag on US GDP over the next year.

And should the president-elect eventually follow through with any of these policies, the US risks retaliatory measures from other countries.

"If tariffs are more punitive and lead to a public trade spat with China, markets will get nervous, especially if a sharp, retaliatory, [Chinese yuan] depreciation looks like a realistic response," said Ajay Rajadhyaksha, head of macro research at Barclays.

If other countries follow this pattern, it could lead to a downward spiral or litigation at the World Trade Organization.

"Depending on the specific measures, retaliatory action from elsewhere could be expected, while the risk of trade and currency wars could grow," said Janet Henry, chief global economist at HSBC.

Making it more expensive for consumers

An increase in tariffs could be passed through to individual Americans by companies in the form of higher prices.

Parts for consumer items are made abroad, so increasing tariffs could make it more expensive to import these parts for goods. To protect corporate profits and margins, companies could hike prices - which is not ideal for consumers.

source

Aaron P. Bernstein/Getty Images

A crucial thing to consider here is that this type of price increase is not caused by the virtuous wage and price increase cycle, but rather by an exogenous shock to prices without a boost to the labor market. In plain English, that means that while parts manufactured in China instantly become more expensive for Americans under tariffs, wages do not necessarily go up the corresponding amount to offset this cost increase.

Theoretically, companies could avoid tariffs by increasing production in the US. However, the problem is that labor is more expensive in America, so even if companies brought production to the US, the increased labor costs could push prices up, too.

A 'nail in the coffin' of the post-World War II economic order

Not only could Trump's moves affect everyday consumers in the US, they also could upend macroeconomic policies that have been in place for more than half a century. As Buiter notes, these policies have increased worldwide prosperity and been positive developments for the US.

From the Citi economist's note (emphasis added):

"We stress the potential multipliers of changes in the US position on international trade: the US has been the champion of free trade and open borders for decades. A retreat from globalization by the US would likely lead to reciprocal actions from other countries, and reinforce the latest shift towards de- globalization and could be another nail in the coffin of the liberal global economic world order that has supported prosperity since 1948."

Taking it a step further, now that Trump has been elected president, the possibility of passing the TPP - the landmark free trade agreement that aims to slash tariffs and promote economic growth among 12 nations in the Pacific Rim excluding China - has effectively dropped to nil.

(President Barack Obama's administration has already suspended its efforts to win congressional approval for the deal before Trump takes office, saying that its fate is up to the president-elect and Republican lawmakers.)

And that could have major implications for the future of the economic and geopolitical order in Asia Pacific, given that the deal is arguably more about the US's long-term position in Asia than about the near-term financial advantages.

Americans want jobs

Mainstream economists generally agree that free trade is good for an economy in the long run - even though within an economy there will be some people who benefit less, particularly in the short term - while trade-restrictive measures hurt consumers.

However, some voters across developed economies believe free trade hurts their countries, which is likely a reflection of their personal experiences.

In the US, 89% of Americans said they think the loss of US jobs to China is a somewhat or very serious issue, according to Pew Research statistics previously cited by Bank of America Merrill Lynch's Ethan Harris and Lisa Berlin.

Moreover, only 46% of Americans said they think NAFTA was good for the economy. But it's not just Americans dreaming of a manufacturing comeback - Japanese farmers, for example, have been staunchly against the TPP.

There's some empirical evidence to back up those grievances. In January, labor economists David Autor, David Dorn, and Gordon Hanson published a paper showing that increased trade with China caused some big problems for US workers.

From the paper's meaty abstract (emphasis ours):

"China's emergence as a great economic power has induced an epochal shift in patterns of world trade. Simultaneously, it has challenged much of the received empirical wisdom about how labor markets adjust to trade shocks. Alongside the heralded consumer benefits of expanded trade are substantial adjustment costs and distributional consequences. ...

"Adjustment in local labor markets is remarkably slow, with wages and labor-force participation rates remaining depressed and unemployment rates remaining elevated for at least a full decade after the China trade shock commences.

"Exposed workers experience greater job churning and reduced lifetime income. At the national level, employment has fallen in US industries more exposed to import competition, as expected, but offsetting employment gains in other industries have yet to materialize."

Moreover, most of the economic gains from globalization have been for the middle class in emerging markets - not the middle class in developed markets such as the US.

Below is one of the more popular charts illustrating this, from the economist Branko Milanovic, via BAML's Ajay Singh Kapur and Ritesh Samadhiya in June.

Although both Trump and Hillary Clinton zeroed in during their campaigns on workers' anxieties over job losses, it's important to note that at least some of America's job losses are not due to trade, but rather due to automation. And crucially, automation not only hits manufacturing, but also affects jobs that require advanced degrees, such as neuroradiology.

"From a political perspective, I don't think the focus on trade is misplaced. It's effective because it has an 'other,'" Alexander Kazan, a strategist at Eurasia Group, said in a video for the Eurasia Group Foundation. "When you talk about technology, it's much more amorphous. It's this sense that we all lose. So I think politically it's less effective."

Depends on how much is done

Ultimately, a lot will depend on how much protectionist policy Trump is able to pass when he steps into the Oval Office.

Some observers say it's unclear how much anti-trade rhetoric Trump genuinely intends to carry out. Additionally, there is a strong contingent within Trump's own party that is supportive of free trade.

The possible tariff and the appointment of Navarro, however, are signs that protectionist trade could play a major factor in the Trump policy agenda.

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Bob Bryan, Elena Holodny, Business Insider US

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Trump's new tariff proposal could put the economy on a path to 'global recession'

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On Thursday, CNN reported that President-elect Donald Trump's administration is considering imposing a 5% tariff on all imports into the United States. While the decision is not final, sources told CNN the tariff could be implemented through an executive order in the early days of the Trump presidency.

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source

Win McNamee/Getty Images; Spencer Platt/Getty Images

After the election of Donald Trump, it appears that various measures of the US economy - from consumer confidence to bond markets to inflation expectations - have zoomed in extreme directions.

The latest example of these extreme reactions in the US economy came from Friday's University of Michigan consumer confidence survey. While the index jumped to the highest level in almost two years, it also showed that the mood of the country is extremely bifurcated.

From Richard Curtin, the chief economist of the UMich Survey, in the release:

"When asked what news they had heard of recent economic developments, more consumers spontaneously mentioned the expected positive impact of new economic policies than ever before recorded in the long history of the surveys. To be sure, an equal number volunteered negative judgments about prospective economic policies, but the frequency of those negative references was less than half its prior peak levels whereas positive references were about twice its prior peak."

Put another way, although an equal number of people were optimistic as pessimistic, the rate of positive responses was around twice as high as the previous record. Also of interest, the groups that were the most negative on the new economic policies were those with college degrees and people living in the Northeast, both demographics that exit polls show voted more for Hillary Clinton.

In Gallup's tracking poll of Americans' outlook on the economy, there was a massive post-election swing in confidence and optimism between Republicans and Democrats, with the former reporting much more confidence than they had before the election and the latter becoming much less optimistic.

This makes sense: If you support one candidate you're likely to be enthusiastic when they win and vice versa. But, the extreme reaction haven't been limited to consumers, as markets have also had their own massive swings.

On the one hand you have the stock market, which has set new all-time highs seemingly every day since the election. In fact, the Dow Jones Industrial Average has hit a new record closing high 13 out of 21 trading days since Trump's win.

Investors seem to be looking at potential positives such as the fact that Trump may roll back regulations of businesses and lower the corporate tax rate by a much as 20 percentage points.

Within stocks there have also been significant winners and losers. Financials have surged after lagging behind most other sectors all year, while tech went from one of the best-performing sectors to underperforming the S&P 500 index in a matter of weeks.

On the other hand, you have the bond market, which has sold off after the election. Yields for US Treasury bonds have set multi-year highs during the violent selling. These markets have focused on the probability of increased inflation and more Federal Reserve rate hikes, leading to the selling.

Even the volatility of these two markets has gone in totally different directions. The VIX index, which tracks volatility in stocks, sits at roughly 12 on Friday, maintaining its year-long stay below its long-term average. The MOVE index - which looks at the volatility of bonds - surged after the election, as the sell-off and shakiness in fixed income came to a head.

source

Business Insider/Andy Kiersz, data from Bloomberg

As noted by Curtin, it is likely that some of this mania will subside. Much of the shift in mood has been due to expected policies rather than actual ones, meaning that there could be shifts after Trump is inaugurated in January.

"President-elect Trump must provide early evidence of positive economic growth as well as act to keep positive consumer expectations aligned with performance," said Curtin. "Either too slow growth or too high expectations represent barriers to maintaining high levels of consumer confidence."

Add on the jumps in market-based measures of inflation expectations, the chances of more Federal Reserve hikes, and other macro-economic data points and the moves for the economy have been dramatic.

Additionally, the level of policy uncertainty under Trump is high, so the first reaction may not be a right one.

For instance, Trump's pick for Treasury Secretary Steven Mnuchin said the priority on day one would be tax reform and downplayed possible trade arguments with China during an interview with CNBC. Trump, by contrast, said that "trade is like war" and has repeatedly attacked China since his election, stoking a possible trade war that would be a huge negative for stocks.

The final results will probably be somewhere in between the extreme scenarios of a trade war or an unprecedented era of corporate wealth, but that hasn't seemed to mitigate the wild responses so far.

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Bob Bryan, Business Insider US

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Trump's election is causing extreme swings in the US economy

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source Win McNamee/Getty Images; Spencer Platt/Getty Images After the election of Donald Trump, it appears that various measures of the US economy - from consumer confidence to bond markets to inflation expectations - have zoomed in extreme directions. The latest example of these extreme reactions in the US economy came from Friday's University of Michigan consumer confidence survey.

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Another comment about Donald trump's impact on the economy i find it a bit chim to read @xiaokid help me read see if it can be a main article we can use thx

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Not worthy to be main but i think got some useful info like the optimism of like some Canadian executives towards the US economy growth because of Donald trump

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Canadian business executives are confident Donald Trump becoming the next President of the United States will boost the U.S. economy, the latest C-Suite Survey shows, yet they doubt whether he will be able to "Make America Great Again."

Telephone interviews with 155 Canadians in leadership positions at the country's largest 1,000 companies were conducted between mid-November and early December on behalf of KPMG. While the vast majority of respondents - 83 per cent - said the transition to a Republican Trump administration will have a positive impact on the U.S. economy over the next two years, executives were divided over whether the real estate mogul turned reality TV star turned Oval Office occupant really can make America's future as bright as its past.

Nearly half of respondents - 44 per cent - either somewhat or strongly disagreed with the statement "The best days of the United States are ahead". Only a slim majority - 52 per cent - either somewhat or strongly agreed with that statement.

Executives were much more optimistic about the future of their own country. More than two thirds of respondents - 69 per cent - either somewhat or strongly agreed with the statement "Canada's best days are ahead".

Such optimism, however, appears to be at least partially contingent on Canadian executives' ability to do more business in the United States. Asked if the result of the U.S. election changed their short-term business strategy, 30 per cent of Canadian executives who said yes specified plans to "increase business and investment in the U.S." That was by far the most popular response, more than doubling the 15 per cent of respondents citing more generic plans to prepare for growth.

Despite so many Canadian executives hoping to expand trade with the United States, they also acknowledge Trump is likely to make even the current Canada-U.S. trade relationship more difficult. Eighty-seven per cent of respondents said it was either somewhat or very likely Trump will attempt to renegotiate the North American Free Trade Agreement and a slim majority - 55 per cent - said the incoming American president was somewhat or very likely to increase tariffs on Canadian goods.

More broadly, 60 per cent of Canadian executives either somewhat or strongly agreed with the statement "Donald Trump's Administration will likely lead to a decline in global trade levels." Nearly two thirds - 65 per cent - said Trump will have an overall negative impact on Canada-U.S. trade over the next two years.

It is on that point of concern where Canadian executives want a little help from the federal government. Asked what issues the Canadian government should be prioritizing in its relations with the Trump White House, "preserving free trade, tariff levels and market access" was most popular by a massive margin: 64 per cent of respondents chose that priority, comparing to 18 per cent selecting the second most popular option: "security".

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Corporate Canada split on Trump's ability to 'Make America Great Again' - Article - BNN

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Canadian business executives are confident Donald Trump becoming the next President of the United States will boost the U.S. economy, the latest C-Suite Survey shows, yet they doubt whether he will be able to "Make America Great Again."

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I feel this article quite good sia like cover almost all the topics we learn

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U.S. Economy Approaches Year's End on Lackluster Note

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Measures of economic vitality including income growth, consumer spending and inflation weakened in November.