Economy

ORLANDO, Florida (Reuters) -President-elect Donald Trump’s latest threat to slap huge tariffs on countries that try to move away from the “mighty U.S. dollar” inadvertently highlights the intractable contradiction at the heart of U.S. trade and economic policy. Trump has repeatedly stated that he wants to boost U.S. competitiveness and reduce its yawning trade deficit, which he blames on other countries’ unfair economic practices. But how can he do that while simultaneously preserving the dollar’s strength and unrivaled status as the world’s reserve currency, which has for decades helped fuel American consumers’ purchasing power?His “America First” goals of expanding domestic energy production and deepening the country’s status as the world’s leading tech hub could, all else being equal, lead to an appreciating exchange rate. But this would be at odds with his other “America First” goal: boosting U.S. manufacturing.This isn’t a partisan conundrum. President Joe Biden has spent trillions of dollars over the last four years in an effort to boost U.S. manufacturing, green energy production, and other key sectors. Meanwhile, the greenback has continued to strengthen, which hasn’t made U.S. exports more attractive. Vice President Kamala Harris would be facing the same dilemma had she won last month’s presidential election. But it’s especially tricky for Trump, who has been more vocal in his criticism of countries like China, Mexico and Canada which run huge trade surpluses with the U.S., and more bombastic about his ability to fix those imbalances.A weaker dollar and lower interest rates would be two of the most obvious tools to do that. But as he made clear in his social media post on Saturday, he also wants to protect the dollar’s global hegemony and preserve its relative value. Something has to give.    ‘DIAMETRICALLY OPPOSED’The U.S. has run a trade deficit for nearly 50 years, consistently sucking in more imports than it exports. Manufacturing has been declining as a share of the economy for almost as long, notably since China was admitted into the World Trade Organization in 2001. The U.S. trade deficit last year was around 3.0% of GDP, much smaller than the record 5.7% of GDP reached in the mid-2000s, but still large. And in nominal terms, which Trump focuses on more, it is an even bigger at $773 billion. The deficit is consistent with the dollar’s status as the preeminent currency in global trade, financial market trading and international foreign exchange reserves. No other currency comes close to being as dominant, even as the dollar’s share of global FX reserves has eroded in recent years.The trade deficit is offset by a surplus in the U.S. capital account, as China and others have plowed their surpluses back into U.S. bonds and stocks. If the trade deficit were reduced, so too would the capital account surplus and attendant demand for U.S. assets from abroad. All else being equal, this would put upward pressure on bond yields and interest rates.Nodding to the symbiotic relationship between the U.S. trade deficit and capital account surplus, Michael Pettis, a senior fellow at Carnegie China, pointed out on the platform X on Saturday that the U.S. cannot simultaneously cut its trade deficit and increase the global dominance of the dollar, because these impose “diametrically opposed” conditions.Rebalancing the global economy so that the U.S. runs smaller trade deficits and has a stronger manufacturing sector, while China and other large net exporters increase domestic consumption and cut their trade surpluses, would ultimately require major global FX adjustments.And U.S. consumers might not be pleased with this outcome, having benefited enormously in recent decades as the trade deficit has sucked in cheap goods from abroad, from clothes to electrical appliances and everything in between. “You are implicitly asking U.S. consumers to accept a loss of purchasing power and a willingness to pay more for imported goods in order to give support to the manufacturing sector,” says Joe Brusuelas, principal and chief economist at RSM. That’s a tall ask. And given the role purchasing power played in the recent election, it’s likely one the president-elect won’t actually want to make.    (The opinions expressed here are those of the author, a columnist for Reuters.)(By Jamie McGeever; Editing by Paul Simao) More

WASHINGTON (Reuters) – A U.S. House of Representatives committee will hold a Dec. 10 hearing on the U.S. Postal Service, which warned last month that it must continue to cut costs or will remain on the path to either a “government bailout or the end of this great organization as we know it.”The House Oversight Committee will hold a hearing with Postmaster General Louis DeJoy, which said “many families and small businesses around the country are still experiencing poor USPS service, resulting in unacceptable delays.” Last month, USPS reported a net loss of $9.5 billion for its fiscal year ending Sept. 30, a $3 billion bigger loss than last year. More

SEOUL (Reuters) – A Bank of Korea official on Wednesday said the bank’s monetary policy board will convene an extraordinary board meeting at around 9 a.m. KST after President Yoon Suk Yeol lifted a surprise martial law declaration overnight.The nation’s finance ministry said separately that the country’s stock markets will open normally at 9 a.m. KST. More

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Job openings totaled 7.74 million on the month, up 372,000 from September.
Hiring tailed off at a time when the labor market was disrupted by violent storms in the Southeast as well as two major labor strikes involving dockworkers and Boeing.

Available jobs rose in October while hiring fell during a month in which payrolls growth hit its lowest level in nearly four years, the Bureau of Labor Statistics reported Tuesday.
Job openings totaled 7.74 million on the month, up 372,000 from September and more than the Dow Jones estimate for 7.5 million, the BLS said in its Job Openings and Labor Turnover Survey. The rate of openings as a share of the labor force rose to 4.6% from 4.4%.

That brought the ratio of available positions to unemployed workers up to 1.1, about half of where it was during the peak of a massive gap between supply and demand in 2022.
Hiring also tailed off at a time when the labor market was disrupted by violent storms in the Southeast as well as two major labor strikes involving dockworkers and Boeing. Hires totaled 5.31 million, down 269,000 on the month, lowering the hiring rate to 3.3%. That’s also a decline of 0.2 percentage point.
Layoffs, though, fell to 1.63 million, a decrease of 169,000 from September. Also, voluntary job quitters increased to 3.33 million, up 228,000 from September.
The data comes for a month in which the BLS reported nonfarm payroll growth of just 12,000, the worst month since December 2020.
The Federal Reserve watches the JOLTS report closely for signs of tightness or slack in the labor market. Markets expect the Fed to lower its benchmark borrowing rate by a quarter percentage point when it meets later this month, in part an effort to head off any potential weakness in the labor market.

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