Aurelia Butler

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldThe first Trump administration reversed America’s stance on global trade. Joe Biden then doubled down on Donald Trump’s tariffs, while adding industrial policy to the mix. Now his parting gift to Trump is a new trade verdict that argues for US government support for the maritime, logistics and shipbuilding sectors in the face of Chinese competition. It will be the first big test of whether Trump’s second term will be focused on the economic desires of his base, or the “tech-industrial complex” decried by Biden in his parting speech.The timing is no accident. The investigation, issued by the US trade representative under Section 301 of the Trade Act, lays out how China has used non-market practices to dominate the global maritime industry. While Biden has supported pushing back against such practices, not everyone in the Democratic party has been eager to make the shift. By releasing the case four days before Trump’s inauguration, the departing administration has made sure it didn’t get derailed by Democrats who would prefer to tip-toe away from the issue of Chinese mercantilism. It also threw down a gauntlet for Trump. Will tariffs be his only tool? Or will he support industrial policy and US workers in more effective and durable ways?Whether or not you support Section 301 action, it’s tough to read the case and argue that China’s behaviour in shipbuilding isn’t discriminatory. There are the usual problems, like massive state loans and access to non-market excess capacity in raw materials. Then there are the distortions in the Chinese labour market that make it nearly impossible for market economies to compete in the maritime sector, where China now has a market share of more than 50 per cent.One of the most interesting sections of the report dives deep into the hukou system. In this, Chinese citizens are classified as rural or urban residents, and can’t receive state benefits such as education, housing, or healthcare outside the jurisdiction in which they were born. Since many rural residents migrate to coastal areas to work, the result is that half of the population resides in urban areas, but only a third have an urban classification.That has a hugely distorting effect on Chinese and global labour markets. As one scholar quoted in the report notes, the hukou system creates a “huge class of super-exploitable, yet highly mobile or flexible industrial workers for China’s new economy, now closely integrated into global trade networks”. It is essentially a massive state transfer from labour to the owners of capital, which is one of the reasons why Chinese economists concerned about bolstering domestic consumption would like to get rid of it (hukou reform is happening, though not as fast as many would like).It’s also one of many ways in which China’s system is incompatible with the Bretton Woods trading system as it exists today. “There’s no question that China’s very different economic model makes it difficult to have a system of globalisation based on WTO rules,” notes economist and Nobel laureate Michael Spence. Indeed, that’s the reason that Biden’s trade representative, Katherine Tai, pushed (albeit unsuccessfully) for a new model of trade based on setting a floor, rather than a ceiling, on environmental and labour standards.Trump certainly won’t care much about the former, but politically, he will need to care about the latter. The fractures between the Maga base and billionaire class populating the top ranks of his administration are already showing. If he chooses not to take on the shipbuilding support recommendations left by his predecessor, unions and Maga hardliners alike will pitch a fit, which could sow major discontent in his first 100 days.But I’m betting that the Trump administration will take up the issue, and perhaps even offer up more vigorous support than Democrats might have done. Trump loves bright shiny objects, and nothing is brighter and shinier than a new aircraft carrier.More importantly, there are legitimate national security and commercial supply chain reasons to build more non-Chinese maritime capacity. Nearly half of US goods and 80 per cent of global trade is transported by ship. China can significantly influence the pricing and availability of ships given its share of the market. It’s hard to imagine that this power wouldn’t be weaponised in the event of any US-China conflict. Trump has already suggested the US build ships with allies like South Korea.Of course, increasing maritime capacity is a long-term, heavy lift. And yet, the success of the Chips Act, which has rebooted US semiconductor production in less than two and a half years, shows that it is possible to create more resiliency and redundancy in critical industries when there is political will. The question is whether Trump will have any. Slapping tariffs on adversaries and allies alike is much easier than actually crafting a multifaceted industrial policy.That said, the political pull towards it will be pressing. Much of the Biden administration’s stimulus went into red states. The Chips Act is supporting construction of new semiconductor plants in Ohio, Texas and Arizona, all of which voted for Trump. The bipartisan Ships Act introduced last month provides a road map for maritime industrial policy. Whether Trump follows it will say much about the direction of his second term.rana.foroohar@ft.com  More

The PBOC left its one-year loan prime rate at 3.1%, while the five-year rate, which is used to set mortgage rates, was left at 3.60%. A hold was widely expected by markets, with both rates remaining at record lows after being lowered through 2024.The LPR is determined by the PBOC based on considerations from 18 designated commercial banks, and is used as a benchmark for lending rates in the country.The central bank was seen having limited headroom to lower rates, given recent weakness in the yuan. The Chinese currency traded close to its weakest levels since September 2023. Still, interest rates are expected to fall further this year, as China ramps up its stimulus measures, especially in the face of increased U.S. trade tariffs.Particular focus will be on Beijing’s plans for increased fiscal stimulus this year, with the government widely expected to dole out targeted measures to support personal spending and the property market. Trump has vowed to impose up to 60% in trade duties on China when he takes office later on Monday, which could bode poorly for the country’s trade-reliant economy.Still, recent data showed Chinese economic growth picked up in the fourth quarter of 2024, amid support from recent stimulus measures.  More

The one-year loan prime rate (LPR) was kept at 3.1%, while the five-year LPR was unchanged at 3.6%.Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages.In October 2024, Chinese lenders slashed lending benchmarks by bigger-than-expected margins to revive economic activity. More

The comprehensive measures will address a broad range of policy areas including border security, energy production, federal bureaucracy, and cost-of-living reductions for Americans, the report stated.Trump will sign multiple omnibus executive orders containing dozens of actions. These include declaring a national border emergency, directing the military and the Department of Homeland Security to secure the southern border, and targeting criminal cartels operating within the U.S. by designating them as foreign terrorist organizations, the Fox report said.He plans to reinstate policies like “Remain in Mexico” and “Catch and Release” while initiating new phases of border wall construction, it added.In energy policy, the President-elect will declare a national energy emergency, ending offshore wind leases and repealing Biden-era restrictions on oil, gas, and pipeline projects. The administration aims to fully leverage Alaskan energy resources and withdraw the U.S. from agreements such as the Paris Climate Accord, the report stated.The sweeping reforms will include federal hiring freezes, merit-based staffing, and eliminating Diversity, Equity, and Inclusion (DEI) programs across the government. Trump also intends to suspend security clearances for officials tied to controversial actions before the 2020 election, according to the report.Trump’s extensive actions will mark an unprecedented beginning to a U.S. presidency, reaffirming his campaign promise of restoring American greatness, the Fox report said. More

TOKYO (Reuters) – Japan’s core machinery orders rose 3.4% in November from the previous month to beat analysts’ forecast, government data showed on Monday, signalling a recovery in capital expenditure ahead of a central bank interest rate review later this week.The reading was stronger than a 0.4% decline estimated in a Reuters poll and marked a second consecutive month of increase. Orders from manufacturers rose 6.0%, while those from “core” non-manufacturers excluding the ship and electricity sectors rose 1.2%.”Demand for capital investment in response to labour shortages and digitalisation remains strong,” said Masato Koike, senior economist at Sompo Institute Plus.Manufacturers’ business sentiment improved over the past month, though their outlook is clouded by uncertainties including the incoming U.S. Trump presidency, the Reuters Tankan survey showed last week.Moreover, any direct impact of a central bank rate hike on capital investment seems “minor at the moment”, Koike said.The Bank of Japan is likely to raise interest rates at its Jan. 23-24 policy meeting, barring any market shocks after Donald Trump takes office, sources have told Reuters.On a year-on-year basis, core machinery orders – a highly volatile data series regarded as a leading indicator of capital spending in the coming six to nine months – increased 10.3%, better than a forecast for 5.6% growth, Monday’s data showed.The Cabinet Office raised its assessment of machinery orders, saying it sees signs of improvement. More

Trump reiterated several of his campaign promises, most notably his harsh rhetoric on illegal immigration, as marked a victory lap rally ahead of his inauguration on Monday. It was also Trump’s first major address in Washington since 2021. “We will expel every single illegal alien, gang member and migrant criminal operating on American soil,” Trump said, speaking at the “Make America Great Again Victory Rally” at the Capital One (NYSE:COF) Arena. He vowed to withdraw all executive orders issued by President Joe Biden, and said he was preparing for a landmark first day in office. Fox News Digital reported Trump plans to sign over 200 executive orders when he takes office on Monday. Trump also vowed to lessen regulations on the American energy industry, reiterating his plans to reduce government oversight. He also flagged plans to cut government spending in an effort led by Tesla (NASDAQ:TSLA) CEO Elon Musk and Vivek Ramaswamy, under the Department of Government Efficiency. Missing from Trump’s remarks were his plans to impose trade tariffs, particularly on China. The President-elect had maintained a harsh rhetoric against China during his campaigning efforts, and had vowed to impose an up to 60% import tariff on all goods from China. Trump’s plans for tariffs have been a major point of concern, amid fears that they could underpin inflation and keep interest rates high in the long term. But Trump on Sunday vowed to bring down inflation and cut taxes. Despite his hawkish stance against China, Trump had earlier on Sunday vowed to delay a ban on popular social media app TikTok with an executive order on day one of his presidency. TikTok began restoring some of its services in the U.S. after Trump’s comments, with the President-elect calling for a joint venture with TikTok owner Bytedance to keep the app in the U.S.Sunday’s rally was marked by appearances and performances by several celebrities, including popular actor Sylvester Stallone and musician Kid Rock. Tesla’s Musk also made an appearance at the rally.  More

(Reuters) – A look at the day ahead in Asian markets. Signs of life being breathed back into China’s economy and a strong rally on Wall Street on Friday bode well for Asian markets on Monday, although nervousness around President-elect Donald Trump’s inauguration could temper the optimism.U.S. markets will be closed for Martin Luther King Jr. Day, so global liquidity will be lighter than usual, and U.S. debt ceiling jitters are back in sharp focus. Further reason, perhaps, for investors in Asia to tread lightly.Investors have broadly welcomed the ‘market-friendly’ parts of Trump’s expected agenda like tax cuts and deregulation. But other parts, like tariffs and mass deportations, could rekindle inflation and slow the pace of Fed rate cuts.Furthermore, higher-for-longer rates could damage growth and stoke ‘stagflation’ concerns, making the Fed’s job even more difficult. His inauguration speech could be laden with market-moving policy pledges, directives and executive orders.In that context, the saga surrounding TikTok is being closely watched for clues on Trump’s policymaking and approach to China. His latest position is he will revive the China-owned social media app’s access in the U.S. by executive order after he is sworn in, but wants it to be at least half owned by U.S. investors.Back in the markets, the dollar and Treasury yields eased off Monday’s historic highs and ended last week lower, providing a welcome easing of financial conditions for Asian and emerging markets.The 10-year yield clocked a 16-month high of 4.80% but fell 17 basis points on the week and the dollar index hit a 27-month high to register only its second weekly loss in 16 weeks.The catalyst seems to have been relatively tame U.S. inflation data and dovish remarks from Fed Governor Christopher Waller, who floated the idea of three or four quarter-point rate cuts this year.The S&P 500 rose 3% last week – its best week in 10 – the Nasdaq climbed 2.4% and the MSCI World rose 1.7%. Asian stocks underperformed though – the MSCI Asia ex-Japan index rose 0.8%, Chinese stocks edged up only 0.3%, while Japan’s Nikkei 225 fell. China’s ‘data dump’ last week was more encouraging than analysts had expected. Overall growth in the fourth quarter was 5.4%, meaning Beijing met its annual GDP growth goal of around 5%.The People’s Bank of China sets interest rates on Monday. It is expected to ease policy slowly and cautiously in the first quarter of this year, but not necessarily starting on Monday. Investors in Japan, meanwhile, are gearing up for a possible rate hike from the Bank of Japan on Friday. The latest signals from BOJ officials are pointing firmly in that direction, and markets have reacted accordingly – the yen has rallied, and Japanese stocks have fallen.Here are key developments that could provide more direction to markets on Monday:- China interest rate decision- Japan machinery orders (November)- Malaysia trade (December) More