Finance

Credit card interest rates are at all-time highs.
Consumers who carry a balance paid an average annual percentage rate of 22.8% at the end of 2023, according to federal data.
APRs have jumped as the Federal Reserve has raised borrowing costs.
Issuers have also been increasing their profit margins, according to the Consumer Financial Protection Bureau.

Runstudio | The Image Bank | Getty Images

Credit card interest rates have ballooned to record highs in recent years — and the growing portion of the formula that generates profit for card issuers is partly to blame, according to a new analysis by the Consumer Financial Protection Bureau.
The average consumer paid a 22.8% interest rate on their credit card balance at the end of 2023, the highest since the Federal Reserve began tracking data in 1994.

Interest charges, expressed as an annual percentage rate, are up about 10 points in the past decade, from 12.9%. Total credit card debt and average balances are also at record highs.
“By some measures, credit cards have never been this expensive,” wrote CFPB’s Dan Martinez, senior credit card program manager, and financial analyst Margaret Seikel.
More from Personal Finance:Here are some ways to maximize your financial aid for collegeWith mortgage rates high, renting is less expensive than buyingHere’s how to avoid unexpected fees with payment apps

Credit card issuers have raised ‘APR margins’

Credit card APRs began moving sharply higher in 2022 as the Fed raised its benchmark interest rate to tame inflation. Interest rates on credit cards — and other consumer loans — generally move in tandem with Fed policy, according to a barometer known as the “prime rate.”
However, credit card companies have also simultaneously raised their average “APR margin,” according to the CFPB.

APR margin is the difference between the total APR and the “prime rate.” It’s a proxy for card issuers’ profits commensurate with their lending risk, the CFPB said.
Those margins are at record highs. They averaged 14.3% in 2023, up from 9.6% in 2013, according to the watchdog’s analysis, issued Thursday.
Almost half the increase in total credit card interest rates in the past decade is due to issuers raising their APR margins, the analysis said.

However, the CFPB authors questioned if those higher profits were justified since issuers don’t seem to be taking more risk by extending credit to more consumers with lower credit scores, for example.
The share of consumers with “subprime” credit scores who hold a credit card has been “relatively stable,” they said.
Major credit card issuers got $25 billion in extra interest by raising their average APR margin over the past 10 years, the CFPB estimated. The average consumer with a $5,300 balance across credit cards would have paid an extra $250 in 2023 due to this increase, the agency said.
“Increases to the average APR margin … have fueled issuers’ profitability for the past decade,” Martinez and Seikel wrote. “Higher APR margins have allowed credit card companies to generate returns that are significantly higher than other bank activities.”

Risk may be a factor, too

The Consumer Bankers Association, a trade group that represents credit card and other financial companies, disputed the CFPB’s characterization of margins and profits.
“The CFPB claims that rising credit card interest rates over the past decade have been against a background of a ‘relatively stable share of cardholders with subprime credit scores,'” CBA president and CEO Lindsey Johnson said in a written statement. “This simply isn’t true.”
For example, about 42% of “deep subprime” borrowers had a credit card as of year-end 2022, its highest point since at least 2013, according to CFPB data. “Deep subprime” borrowers have the worst credit relative to other groups. Their credit scores are below 580.

“Lenders will only lend at a rate at which they’re compensated for the risk they’re taking,” said Greg McBride, chief financial analyst at Bankrate.
The shares of other “below-prime” borrowers — “near-prime” and “subprime” consumers — holding a credit card have been relatively flat for the past several years, according to CFPB data. Their credit scores range between 580 and 659.
Credit card delinquencies may be an additional risk factor driving card issuers’ rationale to raise margins, McBride said.
For example, “serious” card delinquencies — payments that are 90 days or more overdue — have increased across all age groups, a signal of financial stress, according to the Federal Reserve Bank of New York.
About 9.7% of credit card balances were seriously delinquent in Q4 2023, up from 7.7% a year earlier. While up in recent months, the current share of seriously delinquent balances is flat relative to 2013.

Industry concentration may also play a role

However, industry concentration is another reason card companies may have raised APR margins, McBride said.
“A greater concentration of market share does tend to produce greater pricing power,” he said. That’s also generally the case for all sorts of industries, including airlines and cable companies, he added.
Large lenders account for most of the credit card market. The 10 biggest control 83% of it, according to CFPB data.
There may be additional consolidation soon. This week, Capital One Financial announced a $35.3 billion acquisition of Discover Financial. They’re among the nation’s biggest credit card issuers. The merger still requires regulator approval.

How to manage credit card interest

There’s a way consumers can sidestep higher interest rates entirely. For instance, consumers can pay credit card bills on time and in full each month, according to experts.
In other words, don’t carry a balance. Such cardholders won’t pay interest. Importantly, making a card’s minimum monthly payment doesn’t equate to paying one’s bill in full.
Paying in full and on time each month is also a good way to raise one’s credit score, which may make lower-interest-rate cards available to consumers, McBride said.
Consumers with good credit may also be able to transfer an existing balance to a new credit card with a 0% APR introductory offer, McBride said. Some issuers are currently extending such 0% offers for up to 21 months, which “gives you quite a runway to get the debt paid off without the headwind of high interest rates,” he said.Don’t miss these stories from CNBC PRO: More

The German central bank on Friday reported an annual distributable profit of zero, after it released 19.2 billion euros ($20.8 billion) — the entirety of its provisions for general risks — and 2.4 billion euros from its reserves.
The Bundesbank can bear the financial burdens, as its assets are significantly in excess of its obligations,” Bundesbank President Joachim Nagel said in a press conference.
The ECB on Thursday posted its first annual loss since 2004, of 1.3 billion euros, even as it also drew on its own risk provisions of 6.6 billion euros, as higher interest rates hit central banks’ securities holdings.

Joachim Nagel, president of Deutsche Bundesbank, during the central bank’s “Annual Report 2023” news conference in Frankfurt, Germany, on Friday, Feb. 23, 2024. 
Bloomberg | Bloomberg | Getty Images

Losses incurred by the German central bank rocketed into the tens of billions in 2023 due to higher interest rates, requiring it to draw on the entirety of its provisions to break even.
The Bundesbank on Friday reported an annual distributable profit of zero, after it released 19.2 billion euros ($20.8 billion) in provisions for general risks, and 2.4 billion euros from its reserves. That leaves it with just under 700 million euros in reserves, the central bank said.

Net interest income was negative for the first time in its 57-year history, declining by 17.9 billion euros year-on-year to -13.9 billion euros.
“We expect the burdens to be considerable again for the current year. They are likely to exceed the remaining reserves,” Bundesbank President Joachim Nagel said in a press conference.
The central bank will report a loss carryforward that will be offset through future profits, he said.
Nagel added: “The Bundesbank’s balance sheet is sound. The Bundesbank can bear the financial burdens, as its assets are significantly in excess of its obligations.”

The German central bank — and many of its peers — have significant securities holdings exposed to interest rate risk, which have been significantly impacted by the European Central Bank’s unprecedented run of rate hikes.

The ECB on Thursday posted its first annual loss since 2004, of 1.3 billion euros, even as it also drew on its own risk provisions of 6.6 billion euros. It follows the euro zone central bank’s near-decade of financial stimulus, printing money and buying large amounts of government bonds to boost growth, which are now requiring hefty payouts.
The central bank of the Netherlands on Friday reported a 3.5 billion euro loss for 2023.
Central banks stress that annual profits and losses do not impact their ability to enact monetary policy and control price stability. However, they are watched as a potential threat to credibility, particularly if a bailout becomes a risk, and they impact central banks’ payouts to other sources.
In the case of the Bundesbank, there have been no payments to the Federal budget for several years and, it said Friday, there are unlikely to be for a “longer” period of time. The ECB, meanwhile, will not make profit distributions to euro zone national central banks for 2023.
Nagel further said Friday that raising interest rates had been the right thing to do to curb high inflation, and that the ECB’s Governing Council will only be able to consider rate cuts when it is convinced inflation is back to target based on data.
On the struggling German economy, he said: “Our experts expect the German economy to gradually regain its footing during the course of the year and embark onto a growth path. First, foreign sales markets are expected to provide tailwinds. Second, private consumption should benefit from an improvement in households’ purchasing power.” More

Block reported strong revenue growth in Cash App and Square revenue.
The company saw $5.77 billion in revenue for the fourth quarter.

Jack Dorsey, co-founder and chief executive officer of Twitter Inc. and Square Inc., listens during the Bitcoin 2021 conference in Miami, Florida, on Friday, June 4, 2021.
Eva Marie Uzcategui | Bloomberg | Getty Images

Block stock rose as much as 14% in extended trading Thursday after the payments company reported fourth-quarter earnings that beat analyst estimates on gross profit and showed strong growth in its Square and Cash App revenue.
Here’s how the company did, compared to an analyst consensus from LSEG, formerly Refinitiv:

Earnings per share: 45 cents, adjusted. Not comparable to estimates.
Revenue: $5.77 billion vs. $5.70 billion expected

Block posted $2.03 billion in gross profit, up 22% from a year ago. Analysts tend to focus on gross profit as a more accurate measurement of the company’s core transactional businesses.
The company raised its adjusted EBITDA forecast to at least $2.63 billion from $2.40 billion.
Block, formerly known as Square, ended the year with 56 million monthly transacting actives for Cash App in December, with most of those customers using it for either peer-to-peer payments or the Cash App Card.
Its Cash App business reported $1.18 billion in gross profit, a 25% year-over-year rise.
The company, which is run by Jack Dorsey, said its Cash App Card has 23 million monthly actives in December, up 20%. That is more than two times the growth rate of total monthly actives.

“We believe this strategy will enable us to build the largest network in the long run, with a highly engaged customer base using Cash App as their primary banking solution,” Dorsey said in a note to shareholders.
The payments firm has focused on slimming down operations in recent months. In January, the Block CEO reportedly said in a note to staffers that the company had laid off a “large number” of workers. This followed another round of layoffs in December. More

In this photo illustration, the logo for the US tech firm “Block” is displayed and reflected in a number of digital screens on March 03, 2023 in London, England. 
Leon Neal | Getty Images

Check out the companies making headlines in extended trading.
Intuit — Shares pulled back roughly 1% after the financial software company posted revenue of $3.39 billion in its fiscal second quarter. The result was in line with what analysts polled by LSEG had expected. Adjusted earnings came in ahead of Wall Street’s estimate at $2.63 per share, compared to $2.30 per share anticipated by analysts.

Live Nation Entertainment — Shares added about 1% in extended trading. Live Nation reported revenue of $5.84 billion, surpassing analysts’ estimates of $4.79 billion, per LSEG. The entertainment company also posted fourth-quarter operating income that was slightly below consensus.
Booking Holdings — The online travel company fell more than 4% even after reporting a fourth-quarter earnings and revenue beat, while room nights booked increased by 9%. Booking Holdings also announced it would initiate a quarterly cash dividend of $8.75 per share.
Insulet — The medical device company fell more than 5% after issuing a lower-than-expected revenue growth forecast. Insulet expects revenue to increase by 17% to 20% on a year-over-year basis in the first quarter, while analysts polled by FactSet expected 24.3%.
Block — Shares of the payment company soared nearly 11% on the heels of a fourth-quarter revenue beat. Block reported $5.77 billion in revenue while analysts surveyed by LSEG expected $5.70 billion. The company is calling for gross profit of at least $8.65 billion in 2024, up at least 15% year over year.
Carvana — Shares climbed more than 20% after the car resale company said it expects to grow the number of retail units sold for 2024, but did not offer specific numbers. Carvana posted a fourth-quarter loss of $1 per share on revenue of $2.42 billion, missing the estimates of analysts polled by LSEG.
MercadoLibre — The e-commerce company tumbled 8% after it posted fourth quarter earnings of $3.25 per share, flat from the year-ago period. Operating income, excluding items, came in at $572 million, while analysts polled by FactSet called for $668.5 million. More

Capital One’s blockbuster takeover proposal for Discover Financial includes a $1.38 billion breakup fee if Discover decides to go with another buyer, people with knowledge of the matter told CNBC.
But there’s no such fee if regulators kill the deal, the people said.
While Discover can’t actively solicit alternative offers, it can entertain proposals from other deep-pocketed bidders.

Capital One headquarters in McLean, Virginia on February 20, 2024. 
Brendan Smialowski | AFP | Getty Images

Capital One’s blockbuster takeover proposal for Discover Financial includes a $1.38 billion breakup fee if Discover decides to go with another buyer, but no such fee if U.S. regulators kill the deal, people with knowledge of the matter told CNBC.
Capital One said late Monday it had an agreement to purchase rival credit card player Discover in an all-stock transaction valued at $35.3 billion.

While Discover can’t actively solicit alternative offers, it can entertain proposals from other deep-pocketed bidders before shareholders vote on the transaction.
In the unlikely event that Discover decides to go with another offer, it would owe Capital One $1.38 billion, which aligns with the typical breakup fee in bank deals of between 3% and 4% of the transaction’s value, said the people.
Breakup fees are an industry practice designed to motivate both sides of an acquisition to close the transaction. They can result in massive payouts when deals sour, like the estimated $6 billion AT&T paid to T-Mobile after giving up its 2011 takeover effort because of opposition from the U.S. Department of Justice.
Watchers of the Capital One agreement are taking particular interest in whether U.S. banking regulators will allow it to happen. Regulators have blocked deals across industries in recent years on antitrust grounds, and getting a transaction done during an election year in an environment considered hostile to bank mergers has been called uncertain.
Neither side will owe the other a breakup fee if regulators block the acquisition, which is said to be typical for bank deals. Still, last year Canadian lender TD Bank agreed to pay $225 million to First Horizon after its takeover collapsed amid regulatory scrutiny of the larger firm.

When asked about the “intense regulatory backdrop” for this deal during a conference call Tuesday, Capital One CEO Richard Fairbank said he believed he was “well-positioned for approval” and that the companies have kept their regulators informed.
Capital One needs to get approvals from the Federal Reserve and the Office of the Comptroller of the Currency for the deal to go through. The Justice Department also has the right to comment on the acquisition, and can litigate to block the transaction.
The deal happened after Capital One approached Discover, and didn’t include a wide search for all possible bidders, according to one of the people.
— CNBC’s Alex Sherman contributed reporting More

From the corner of Fifth Avenue and 57th Street the facade of Tiffany’s looks just as it did in 1961 when Audrey Hepburn, dressed in a long black dress and pearls, nibbled on a croissant outside it. Inside, however, things are rather different. After a four-year, $500m renovation, shoppers are greeted by a more modern experience.Everything shines: the rocks, the metal and marble display cases, the ceilings. What, at first glance, look like arched windows are really 7m-high LED screens showing a diamond bird flitting over Central Park. Lifts at the rear take shoppers to ten floors: one for silver, one for gold, one for “masterpieces”. A three-storey extension, with views over Fifth Avenue, now sits atop the building. These levels are appointment-only. “We call it the diamond on the roof,” quipped Alexandre Arnault, son of Bernard, who owns LVMH, a French conglomerate that bought Tiffany’s in 2021.It is the most glittering example of a luxury trend: huge bets on retail properties. LVMH has bought on Bond Street in London and the Champs-Elysées in Paris. There has been a flurry of deals on New York’s Fifth Avenue. In December Prada purchased its current store, 724 Fifth, and nabbed 720 Fifth, the shop next door, for a total of $835m. On January 22nd Kering, which owns Gucci, announced that it had bought the retail space in 715-717 Fifth for $963m. LVMH is rumoured to be eyeing up 745 Fifth, the space next to Louis Vuitton.These deals are being sorted at breakneck speeds and for record prices. From a handshake to completion, some come together in weeks. The Kering and Prada purchases were, unusually, both “sign and close” deals—entire cash payments were made on the day the contracts were signed. The Kering deal is America’s largest ever high-street retail-property deal.Why the rush? Tiffany has owned 727 Fifth for decades, but most brands have been happy to lease. Will Silverman of Eastdil Secured, an investment bank that advised Jeff Sutton, the developer who sold to both Kering and Prada, points to growth in luxury sales and shifts in interest rates to explain the change of approach.High-end goods began to fly off the shelves during the covid-19 pandemic, when people where flush with cash and had nowhere to go, and the frenzy has not abated since. Beautiful handbags that were once the privilege of the few are now bought by the many. Indeed, last year LVMH’s sales of fashion and leather goods were 40% higher than in 2021.Luxury goods still tend to be sold in person, meaning that retailers are spending eye-watering sums to tempt people into their stores. And the arrival of the masses means they need more space for plush private rooms in which to make sales to their old clientele. “Manhattan might be getting taller,” notes Mr Silverman, “but it’s not getting any wider.” There is a finite amount of truly high-end space.Alone this might be enough to tempt retailers to purchase rather than rent—and buying becomes the clear choice once interest rates are taken into account. Most property owners finance their buildings using a mixture of equity and mortgage debt. In America mortgage rates on commercial buildings are around 6-7%. The cost of equity is higher still. For an investor to buy a space and cover his costs, he might need to charge annual rent worth perhaps 8% of the building’s value.Paying these rates would be foolish for a luxury firm. Since they make so much money, they can issue debt at a yield only slightly above that on German government debt. LVMH’s most recent bonds were oversubscribed at 3.5%. Thus fancy retail spaces are a luxury it can easily afford. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

With vladimir putin issuing threats and Donald Trump musing about withdrawing support, everyone agrees that Europe needs to spend more on its armed forces. What is less widely recognised is how wrenching the shift will be for a continent that has grown used to outsourcing its defence to America. Over the past three decades, politicians have enthusiastically spent the peace dividend on everything bar pilots, sailors and soldiers (see chart).Some European leaders are already making commitments. Germany has created a fund of €100bn ($108bn) to bolster its armed forces and aims to meet the nato target of spending at least 2% of gdp on defence immediately. In France Emmanuel Macron has promised to reach the target this year. Compared with their pre-pandemic average, the continent’s NATO members (and Canada) have already increased defence spending by about 0.26 percentage points of GDP, together hitting a new average of 1.7% of gdp last year.image: The EconomistYet in most cases even 2% will not be enough. Decades of miserliness take a toll: many armed forces across Europe are in a sorry state. According to calculations by Marcel Schlepper and colleagues at the Ifo Institute, a think-tank, the EU’s NATO countries have accumulated underinvestment in equipment of about €550bn (or 4% of the bloc’s GDP) since 1991. Boris Pistorius, Germany’s defence minister, has said that his country’s spending might need to reach 3.5% of gdp in order for its armed forces to rebuild their fighting capabilities.Spending requirements would be lower were it not for fragmentation among the eu’s 27 armed forces, which all favour different kit, and different ways of buying it. Manufacturers will struggle to leap to attention. As Christian Mölling of the German Council on Foreign Relations, another think-tank, notes: “Europe‘s bonsai armies have nurtured bonsai industries.”How will countries meet their more ambitious commitments? Those currently failing to reach NATO’s 2% target, which include Belgium and Spain, as well as France and Germany, tend already to have higher taxes. Therefore they will have to reprioritise, moving spending from, say, health and welfare into defence. According to the Ifo Institute’s calculations, in order to spend 3% of GDP on defence, spending on everything else will have to fall by 3% in Germany and Italy, and 2% in Britain and France. Voters may object to having their pensions cut to buy more tanks.Another option is to borrow. Although few economists would normally support funding armed forces via debt, since it is just the sort of regular spending for which taxes are designed, the current shock may warrant bigger deficits. The euro zone’s fiscal rulebook might even make a modest allowance for them. In theory, borrowing would not be a problem in low-debt countries such as Germany and Netherlands. But there are obstacles: Dutch coalition talks have just collapsed over spending differences; German reformers run up against a constitutional debt brake. And additional borrowing would not be wise in much of southern Europe, including Italy and Spain, which last year both spent more on interest payments than their armed forces.That leaves a final option if spending is to rise: EU funding. Kaja Kallas, Estonia’s prime minister, is arguing that the bloc should establish a debt-funded defence budget along the lines of its covid-19 recovery fund. The logic that underpinned the fund—of common EU spending in return for mutually beneficial reforms—would seemingly also apply now, perhaps with reforms this time concerning defence procurement. Yet there is a problem. For the moment, finance ministers in Europe’s north and south remain to be convinced by a fund that would mostly benefit the east. The sad truth is that another shock might be required to prompt them into action. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

A few months before America’s presidential election in 1980, George H.W. Bush paid a visit to Beijing. He got a frosty reception. Days earlier, Bush’s running mate, Ronald Reagan, had angered China by saying that he wanted an official relationship with Taiwan, which China claims as its territory. America should stay out of China’s “internal affairs”, said its foreign minister—just as China would not meddle in America’s presidential race.The prospect of a Reagan victory worried not only China’s leaders but also its exporters. Under President Jimmy Carter, Reagan’s opponent, America had done them the favour of establishing “normal” trading relations, meaning that they faced the same low tariffs America charged most other trading partners. There was, however, a catch. Normal relations had to be approved each year by the president and Congress. Would Reagan revoke them?Chinese exporters, as well as the American companies that buy from them and invest in them, now face a similar threat from another loquacious and charismatic presidential contender: Donald Trump. If he wins in November, he has threatened to escalate the trade war he started in 2018 by imposing tariffs of 60% or more on Chinese goods. His allies have also advocated repealing normal trading relations with China, which became “permanent” in 2000. A new paper by George Alessandria of the University of Rochester and four co-authors suggests that the way exporters responded to the Reagan threat may hold lessons for new trade wars.Entering a foreign market is costly for any firm. It must first establish a “beachhead”, as Richard Baldwin of IMD Business School in Lausanne has written, building distribution channels, advertising itself to potential buyers and bringing products into conformity with local regulations. Many of these upfront costs are fixed (they must be paid even if sales are small) and sunk (they cannot be recovered if the firm packs up and leaves).This has two consequences. Exporting, even in an era of globalisation, is surprisingly rare. A study of French manufacturers in 1985 found that only 15% sold to foreign markets. The figure in a study of Colombian factories was 26%. Even in China in the mid-2000s, a time of hyper-globalisation, the prevalence of exporting varied from 59% (in furniture-making) to 12% (in paper and printing), according to Mr Alessandria and his colleagues. Another consequence is that exporting is persistent. Once a company has established a beachhead, it rarely evacuates from a country.Firms must believe that the rewards will be large enough and last for long enough to justify upfront costs. The prospect of tariff hikes and trade wars makes such calculations harder. Even after Mr Carter lowered tariffs on China, the country’s exporters had to weigh the chances that they would go back up. The fear was acute in industries like toys where the pre-1980 tariffs were much higher than the “normal” tariffs that applied thereafter. Likewise, even after Mr Trump raised tariffs on China in 2018, exporters had to weigh the chances that they would go back down.Exporting from China to America was and remains, in effect, a bet on American trade policy. The pattern of bets reflects firms’ beliefs about the tariffs they will face. Although economists cannot directly observe these beliefs, they can observe the export decisions that reflect them. By examining how trade between America and China has evolved over time and differed from product to product, Mr Alessandria and his co-authors can therefore infer what firms must have believed about future American tariff policy.They find that the tariff cuts in 1980 took time to become credible. For several years, exporters from China acted as if the chances of their reversal were 70% or more. The risks ebbed later in the decade after Reagan made his own visit to Beijing, Shanghai and Xi’an in 1984. (It was a “breathtaking experience”, he said, although it took him two stabs to snare a quail’s egg with his chopsticks.) By the time China joined the World Trade Organisation in 2001, the probability had fallen to about 5%.The dynamics of the trade war in 2018 look similar “but in reverse”, write Mr Alessandria and his co-authors. Despite Mr Trump’s fiery rhetoric, Chinese exporters did not act in anticipation of his tariffs. When the war arrived, they expected it to culminate quickly. Judging by their actions in 2019 and 2020, they perceived that the probability the war would soon end was over 90%. When Mr Trump left office and the tariffs did not go with him, their hopes evaporated. The probability of an end to the war fell to 46% in 2021 and to 24% by 2024. The results have a paradoxical implication: entrenchment of tariffs under President Joe Biden did more harm to trade than their imposition under Mr Trump.Bigger and worseWould a second trade war be as damaging? The sheer recklessness of Mr Trump’s latest threat is double-edged. On the one hand, a sweeping 60% tariff would be far more disruptive than the targeted 25% tariffs he imposed in 2018. But their vertiginous height may make them harder to sustain. If they annoy too many consumers, hurt too many American firms or exact too big a toll on the stockmarket, they may prove relatively short-lived. Chinese exporters did not take Mr Trump’s trade threats seriously before 2018. Although they will not want to make the same mistake again, the most damaging of Mr Trump’s policies are ones that outlive his time in office, becoming a permanent feature. And not everything Mr Trump says in his presidential campaigns comes to pass.The same was true of Reagan. He never followed through on his desire to restore official relations with Taiwan. In Beijing, Bush tried hard to quell the anger his remarks had caused. “I certainly respect your views on wanting to stay out of the American election,” he said in response to China’s foreign minister. “I’d like to stay out of it myself sometimes, because it gets pretty hot in the cross-fire.” For China’s exporters and the American firms that buy from them, this year’s election will be just as uncomfortable. ■Read more from Free exchange, our column on economics:In defence of a financial instrument that fails to do its job (Feb 15th)Universities are failing to boost economic growth (Feb 5th)Biden’s chances of re-election are better than they appear (Feb 1st)For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter More