Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. A shorter version appeared in Project Syndicate May 28th and The Guardian.
Category Archives: China
High Frequency Economic Indicators for China
Source: Hatzius/Struyven, “A viral global slowdown,” Top of Mind, Goldman Sachs, Feb 28, 2020.
Goldman Sachs now forecasts (nowcasts) -6% q/q AR growth in Q1, down from -0.5%.
“Global Spillovers of a China Hard Landing”
That’s the title of an October 2019 International Finance Discussion Paper (Fed) by Shaghil Ahmed, Ricardo Correa, Daniel A. Dias, Nils Gornemann, Jasper Hoek, Anil Jain, Edith Liu, and Anna Wong, which has taken on heightened relevance given current events. From the abstract:
Air Freight, Global Supply Chains, and Sensitivity to China
Some pictures to envision the impact of covid-19: (1) lots of US int’l trade goes by air, (2) and US sensitivity to disruption to air freight from China, by sector.
The Relative Price of Soybeans vs. Grains, 2014-2019
Reader Ed Hanson insists I plot soybean prices from 2014 onward, instead of 2016, to show how factors other than tariffs affect soybean prices. I am happy to accommodate his request. I wonder why soybean prices suddenly deviate from grains overall, starting in March 2018.
Have All Agricultural Commodity Prices Behaved As Did Soybean Prices?
That’s what reader sammy asserts, trying to support the proposition that Chinese retaliatory tariffs on imports of US soybeans had no impact on US soybean prices.
… chart of soybean prices there are a number of other commodity price charts, such as copper, wheat, coffee etc. They are unaffected by the tariff war yet are remarkably similar to the soybean chart.
What a Trump Trade Victory Looks Like: Soybeans
Back in July 2018, reader CoRev wrote:
…no one has denied the impact of tariffs on FUTURES prices. Those of us arguing against the constant anti-tariff, anti-Trump dialogs have noted this will probably be a price blip lasting until US/Chinese negotiations end. We are on record saying the prices will be back approaching last year’s harvest season prices.
Back on March 23rd, when Mr. Trump announced intent to launch Section 301 actions, nearest month soybean futures closed at 1028. Latest today is 902. Indeed, prices have been falling since Mr. Trump signed the much heralded (by some) Phase 1 deal. This is shown in Figure 1 below.
Figure 1: Front month soybean futures (black). Trump announces intent of Section 301 action against China (red), Section 301 tariffs and Chinese retaliation in effect (orange arrow), and Phase 1 deal signed (blue arrow). Source: barchart.com.
Front month futures prices are now 14% lower now, while the CPI is 2.2% higher (both in log terms). You can do the math. The “blip” is not over.
The US China Phase 1 Deal Interpreted: Break Thing, Claim to Fix Thing, Repeat
Through 2018M03, US exports to China were growing smartly. The Section 232 and Section 301 actions were announced. The “deal” essentially restores real exports to China to the pre-shock trend for 2020, above for 2021 (if you believe!).
The “Deal”: Much Ado About Nothing
Take a look at what exports to China will look like, with an additional $200 bn exports to China over two years, using the 2017 levels, as reported:
On the Eve of “The Deal – Phase 1” Signing
Currency manipulation or not? The Treasury’s semiannual foreign exchange report, released yesterday, says no, contra Mr. Trump’s statement a few months ago.