And finally, the Guardian points out that Donald Trump shouldn’t be solely blamed for the problems in global trade.
In an ideal world, trade would be governed by the doctrines of Adam Smith and David Ricardo. International specialisation and comparative advantage would lead to more efficient production, stronger growth and higher living standards. Countries would unilaterally tear down the barriers to trade.
But this is not the way the world actually works. Trade is managed rather than free. Politicians – Mr Trump excepted – talk the language of Smith and Ricardo but act like Alexander Hamilton, whose life has found fame in the hit musical today but is also the original 18th-century architect of US protectionism. Not everybody gains from trade, and some gain a lot more than others. So if there is a trade war Mr Trump will be not the only one to blame. Those who trumpeted the benefits of globalisation said the benefits would be fairly shared. They have not been. They said there would be help for those who lost well-paying jobs. It never arrived.
More here:
That’s all for today. Thanks for reading and commenting. GW
Fox: This is doubly absurd for Britain
Liam Fox, Britain’s secretary of state for trade, has also criticised Donald Trump’s steel tariffs.
Speaking on the BBC’s Question Time current affairs programme, Fox says the US is approaching the problems in the steel industry in the wrong way, by claiming it is a national security issue.
He explains that Britain sends 5% of its steel, by tonnage, to America - but it is equal to 15% by value.
That’s because Britain produces very high value steel, some of which can’t be sourced in the US. UK steel is also used in US military projects.
It is doubly absurd that we should be caught in an investigation in national security.
Protectionism and tariffs never really work, he adds.d
"The way that the United States is going about this is wrong"@LiamFox says it makes no sense for President Trump to impose heavy tariffs on steel and aluminium #bbcqt pic.twitter.com/22wu9OtiFR
— BBC Question Time (@bbcquestiontime) March 8, 2018
Here’s our US business editor Dominic Rushe on the tariffs news:
Donald Trump pushed forward with plans to impose tariffs on steel and aluminium imports on Thursday, arguing the levies were necessary for national security and to stop the “assault on our country”.
Flanked by steel and aluminium workers and key staff, Trump said he had to act to stop the “decimation of entire communities” and insisted there would be a very fair process as the administration used the next 15 days to negotiate exemptions with allies. Canada and Mexico will be exempted.
“Steel is steel,” said Trump. “Without steel you don’t have a country.”
More here:
Australia up, and Asia Pacific markets set to rise too
The first market reaction to the tariff announcement has come in Australia where the ASX200 benchmark is up 0.13%, or 8 points, to 5,946 in the first few minutes of trading.
Australia is one of the countries hoping to be granted an exemption from the levies, although US steel imports from the land down under accounts for only 1% of the total and are worth around US$200m.
There could be a stiffer test of investor resolve elsewhere in Asia Pacific. Japan supplies nearly 5% of US imports, for example, and South Korea nearly 10%. Both could claim to be equally sound allies of the US and may also hope to have the impact somehow watered down. Nikkei futures are pointing upwards.
With this in mind, Michael McCarthy of CMC Markets in Sydney reckons that:
Trading in the Asia Pacific region today will likely range from quiet to listless. Despite the announcement of new tariff protection for US industry the real intent of the sanctions, and their impact, is not clear. Markets will await further details and important data due tonight.
European Aluminium, a trade body, fear that Europe will suffer from these tariffs, even if European exports into America are ultimately excluded.
That’s because more excess capacity could be dumped on Europe’s r side of the Atlantic.
Gerd Götz, Director General of European Aluminium, explains:
“The US measures hit us where it hurts most. The European aluminium value chain is already under enormous pressure due to unsustainable Chinese overcapacities. The imposed tariff and influx of additional non-European aluminium could have severe economic consequences for SME’s in countries such as Germany, Italy, France, Spain, Sweden and Central and East European countries.”
“Unilateral measures such as the US tariffs will not effectively address Chinese overcapacities. This global challenge can only be managed effectively through a global and long-term solution based on multilateral rules and common enforcement like a Global Aluminium Forum within G20,”
I neglected to mention earlier, sorry, but Wall Street ended the day higher after Donald Trump’s announcement.
The Dow closed 93 points higher, or up 0.38%, at 24,895. The S&P 500 gained 0.45% while the Nasdaq rose by 0.5%.
So a modest set of gains, as investors expressed relief that Canada and Mexico weren’t included in the new tariffs.
These tariffs create a new test for Britain’s fabled Special Relationship. If Mexico and Canada can get a free pass, surely the UK deserves one too?
The Unite union is pushing Theresa May to act fast to protect jobs.
Their national officer for steel, Tony Brady, says:
“While Mexico and Canada have secured exemptions it appears the UK has not. Steel workers and manufacturing communities who have battled to save the British steel industry over recent years will be looking to prime minister Theresa May to vigorously fight their corner and ensure job destroying tariffs are not slapped on UK steel in the coming weeks. Anything less would be a betrayal to steel workers and their families and deprive US manufacturers of specialist UK steel.
France’s finance minister, Bruno Le Maire, says Europe will agree an ‘appropriate response’ to these tariffs.
Yesterday, the EC singled out US peanut butter, orange juice and bourbon as likely candidates for retaliatory tariffs....
France regrets announcements of @realDonaldTrump on steel & aluminum tariffs.
— Bruno Le Maire (@BrunoLeMaire) March 8, 2018
There are only losers in a trade war.
With our EU partners, we will assess consequences on our industries and agree appropriate response.
The proclamation on steel and aluminium tariffs makes the front page of Friday’s Financial Times.
They focus on the last-minute softening of the move, to exempt Mexico and Canada.
Donald Trump formally adopted new tariffs on steel and aluminium imports on Thursday while allowing US allies to apply for exemptions, a sign of growing concern in Washington that the president was alienating America’s closest international partners.
FT: Trump offers exemptions on steel tariffs to ‘real friends’ @tomorrowspaperstoday pic.twitter.com/ZPq0Gisv2q
— Neil Henderson (@hendopolis) March 8, 2018
US commerce secretary Wilbur Ross has told CNBC that America needs to impose broad tariffs, to prevent China circumventing them.
Ross claimed:
“China has been very clever at transshipping products through other countries and dislodging domestic demand in other countries, which causes their producers to dump on us.”
“So the reason we have to go on a broader basis is to deal with the problems of transshipment and the problems of displacement.”
ON NOW: U.S. Commerce Secretary Wilbur Ross pic.twitter.com/Nnhcoa0pAf
— CNBC's Closing Bell (@CNBCClosingBell) March 8, 2018
John McCain: This could hurt US defense
Senator John McCain has also criticised the tariffs, saying they will cost jobs, hurt the economy and damage relations with America’s allies.
McCain also disputes the ‘national security’ justification, saying it isn’t backed up by evidence.
He says it could actually backfire:
According to the Department of Defense, U.S. military requirements for steel and aluminum each represent only about three percent of U.S. production. The Department of Defense assesses that its programs are able to acquire all the steel and aluminum necessary to meet national defense requirements.
In fact, by potentially triggering significant increases in the price of steel and aluminum, President Trump’s new tariffs could harm our national defense by raising the cost of production for critical military systems needed to sustain the United States’ comparative military advantage against our adversaries, from ships, to armored vehicles, to fighter aircraft.
President Trump’s decision to impose steep tariffs on steel & aluminum imports will not protect America. They will harm the American economy, hurt American workers & damage relations with America’s allies & partners. https://t.co/ywBjMX9jKT
— John McCain (@SenJohnMcCain) March 8, 2018
There is some relief that Donald Trump has softened his stance on tariffs, by giving Canada and Mexico a free pass.
This could calm worries of a full-blown trade war breaking out.
Economist Shane Oliver of AMP Capital says:
Trump confirms tariffs of 10% on al, 25% on steel w Can & Mex excluded (pending NAFTA renegotiation) & scope for other allies to apply for exclusions. Lessens risk of global trade war.Another case of Trumps bark worse than his bite..but still more to go on this issue, eg China IP
— Shane Oliver (@ShaneOliverAMP) March 8, 2018
Ryan criticises tariffs
Top Republican Paul Ryan, the speaker of the House of Representatives, has criticised the decision to impose tariffs on US imports of steel and aluminum.
Ryan warns that it could have ‘unintended consequences’ (that’s code for cost jobs and hurt growth).
He welcomes the decision to exempt Canada and Mexico, but says other American allies should be included.
And on China, Ryan agrees that “bad trade practices” are occurring, but believes targeted measures would work better:
There are unquestionably bad trade practices by nations like China, but the better approach is targeted enforcement of those bad practices. Our economy and our national security are strengthened by fostering free trade with our allies. pic.twitter.com/Ne0S4glcCx
— Paul Ryan (@SpeakerRyan) March 8, 2018
Could Australia be spared from tariffs?
Donald Trump has given his strongest hint yet that Australia will be exempt from the US tariffs on steel and aluminium imports, but did not outline any details.
During the formal announcement of the tariffs, he made strong hints that Australia would be given special consideration.
“We’re are going to be very fair, we’re going to be very flexible, but we’re going to protect the American worker,” he said, adding:
“We’re negotiating with Mexico, we’re negotiating with Canada. We have a very close relationship with Australia. We have a trade surplus with Australia. Great country, long-term partner. We’ll be doing something with them. We’ll be doing something with some other countries.”
The US is not a major market for Australian steel – it accounts for only about 0.8% of Australia’s steel exports and about 1.5% of aluminium exports – but the tariffs have triggered wider fears of a trade war which could affect Australia’s trade-exposed economy and that of its largest trading partners, including China.
UK urged to seek exemption from metal tariffs
In the UK, union leaders are pushing the British government to ask for an exemptions to these tariffs.
Gareth Stace, UK Steel Director, says:
It is of course promising to note that flexibility may be provided by the US administration to grant national exemptions on national security grounds and it is vital that the EU and UK authorities now do all they can to deliver this.
Stace also worries that excess steel could now be dumped in Europe, rather than sold into America.
We must ensure our market is not now destabilised by millions of tonnes of steel diverted away from the US to the EU. We trust and hope that the UK Government will support such measures in due course.”
Now for the backlash!
Republican Senator Jeff Flake of Arizona has announced he will introduce a law to undo these tariffs.
Reuters has the details:
US Republican Senator Jeff Flake said on Thursday he would introduce a law to nullify President Donald Trump’s aluminum and steel tariffs, which Trump finalized in a proclamation earlier in the day.
The Republican chairman of the Senate Finance Committee, Orrin Hatch, also criticized the tariffs but said he would work with the White House to “mitigate the damage.”
President Trump has one last message for Beijing, as he leaves the room.
He says America will hopefully have a great relationship with China, but something has to be done about the trade deficit.
He seems to suggest this deficit is $500bn (
Trump then does the official signing...
Oops!
There’s a moment of levity, as the president of a local steel union, Scott Sarge, thanks president Trump for implementing these tariffs.
Trump, showing his people skills, tells Sarge that his father Herman will be looking down proudly.
Oh he’s still alive, Scott insists, as the room cracks up.
He’s even more proud of you then, replies the president quickly. Nice save....
"I thank you for the opportunity for what you are doing," president of local steelworker union tells Pres. Trump.
— CBS News (@CBSNews) March 8, 2018
"Your father, Herman, he's looking down and he's very proud of you right now," Pres. Trump replies.
"Oh, he's still alive." https://t.co/0imZ0NeDGE pic.twitter.com/dKWjXpiGsy
Steel workers welcome new tariffs
We’re now hearing from the US steel workers who are attending today’s proclamations.
Dustin Stephens from Kentucky explains that his factory is only running at 40% capacity. He’s confident that they can move back to full capacity.
Dustin Stevens, Superintendent at Century Aluminum Potline: "This gives us ability go back to 100 percent capacity" and bring back jobs.
— Steve Herman (@W7VOA) March 8, 2018
Some of the countries who treat America the worst on trade and military relationships like to say they are our allies, Trump says - a remark that might worry Europrean politicians.
President Trump cites this tweet from technology entrepreneur Elon Musk, showing how China currently has higher tariffs than America:
For example, an American car going to China pays 25% import duty, but a Chinese car coming to the US only pays 2.5%, a tenfold difference
— Elon Musk (@elonmusk) March 8, 2018
We are pushing for more reciprocal tax programs in future, Trump says.
Trump: Canada and Mexico get exemptions
Importantly, President Trump says he is open to modifying or removing the tariffs, as long as countries can prove that they don’t threaten America’s national security.
He also confirms that the tariffs don’t begin for 15 days, while the US checks who treats it fairly and who is paying their bills (a reference to military spending).
Trump also confirms that he’ll hold off on tariffs for Canada and Mexico.
And on China, he pledges that the trade deficit (which jumped last year) will fall.
Donald Trump says he is delivering on one of his most important campaign pledges.
Previous politicians have let people down, he says, by not protecting the US steel and aluminum industry. Factories were “left to rot and to rust”, communities turned into ghost towns.
That betrayal is now over, he adds.
Trump says that his tariffs are already having an effect.
He points out that US Steel yesterday announced it will reopen a steel furnace at its site at Granite City, Illinois.
That’s happening all over the country, he continues.
Trump says Century Aluminum will reopen a plant to create military-grade aluminum facility.
TRUMP ANNOUNCES TARIFFS
It’s official. Donald Trump confirms that the US is taking action to correct the “travesty” of unfair steel and aluminum dumping on the American market.
He is, as expected, imposing a 25% tariff on steel imports, and 10% on aluminum.
If you want to avoid these tariffs, Trump continues, you should set up your steel plant in America - and also benefit from his tax cuts.
‘Buy American’ says President Trump as he announces 25% tariffs on foreign steel #TradeWars
— Libby Wiener (@LibbyWienerITV) March 8, 2018
Donald Trump has arrived. He pays tribute to the steel workers, saying they are the backbone of the US...and one of the reasons he’s here in the White House.
Steel is steel, he continued. If you don’t have steel, you don’t have a country.
A group is assembling in the White House, ready for the proclamation to be signed.
Treasury secretary Stephen Mnuchin and Commerce secretary Wilbur Ross are there, along with a group of US steel workers.
Updated
A government official has confirmed to Reuters that Donald Trump’s import tariffs on steel and aluminum will start in 15 days with initial exemptions for Canada and Mexico and the possibility of alternatives for other nations
Updated
The Mexican stock market has jumped by almost 1% - on relief that Mexico will get an ‘indefinite exemption’ from the steel and aluminum tariffs (according to AP).
Canada’s market is also rising, up 0.5%.
Updated
UK MP Stephen Kinnock, whose constituency in South Wales includes Britain’s Port Talbot steel works, argues that Donald Trump’s tweets will hurt America’s economy (and the UK).
The 2002 tariffs (smaller than Trump ones) cost America 200,000 jobs - more jobs lost in first 8 months in connected industries than there were jobs in US steel ind as a whole. These new tariffs be bad for UK steel ind, but even worse for American jobs. Self defeating stupidity https://t.co/qJ8qRNq5cc
— Stephen Kinnock (@SKinnock) March 8, 2018
The US stock market is also pushing higher.
The Dow is up 73 points, or 0.3%, at 24,875, having fallen into the red earlier today.
The Canadian dollar has jumped against the US dollar, shrugging off its earlier losses.
Traders are welcoming AP’s report that Canada will be exempt from the tariffs.
AP are also reporting that other countries can make their case to be spared these tariffs.
BREAKING: AP sources: All countries invited to negotiate exclusions from new US tariffs on steel, aluminum imports.
— The Associated Press (@AP) March 8, 2018
Form an orderly queue....
Newsflash: Associated Press are reporting that Canada and Mexico have got an indefinite exemption on the new tariffs.
For other countries, they’ll start in 15 days, apparently.
BREAKING: AP sources: Trump tariffs on steel, aluminum to take effect in 15 days; Mexico and Canada exempted indefinitely.
— The Associated Press (@AP) March 8, 2018
At the today’s cabinet meeting, Donald Trump told reporters that his steel and aluminum tariffs would be flexible.
The president explaines:
“I’m sticking with 10 and 25 (percent) initially. I’ll have a right to go up or down, depending on the country, and I’ll have a right to drop out countries or add countries.”
That should keep everyone on their toes. It’s also the sort of unilateral approach that ECB president Mario Draghi criticised today.
The president has tweeted some photos from his cabinet meeting:
Great meeting with @Cabinet at the @WhiteHouse today! #MAGA pic.twitter.com/InWj0QTosz
— Donald J. Trump (@realDonaldTrump) March 8, 2018
Frankly, it’s too male for International Women’s Day. Fortunately the president has Melania on hand to redress the balance. She’ll be presenting the International Women of Courage Award to 120 women from more than 65 countries.
Happy #InternationalWomensDay
— Donald J. Trump (@realDonaldTrump) March 8, 2018
“First Lady Melania Trump to Present the 2018 International Women of Courage Award” https://t.co/EwYtFXGvn2
Trump will sign tariffs order today
It’s on!
The White House has updated President Trump’s daily schedule, adding that he “will sign the Section 232 Proclamations on Steel and Aluminum Imports at 3:30PM ET”.
That’s 8.30pm UK time.
It's happening people. pic.twitter.com/aBJ1cQu70H
— Kaitlan Collins (@kaitlancollins) March 8, 2018
Anticipation is building as we wait to see exactly what Donald Trump does in two and a half-hours time.
Despite the criticism, the president is expected to press on and announce new tariffs on steel and aluminum. metals imports. But he’s already hinted that ‘friends’ will get special treatment.
My colleague Dominic Rushe has the latest:
Donald Trump on Thursday looked set to push forward with plans to impose tariffs on steel and aluminium imports, a plan that threatens to undermine decades of detente in international trade.
The president will meet metal industry executives and workers at the White House on Thursday afternoon to discuss the controversial levies. Officials from China and Europe have threatened retaliation if Trump goes ahead with his plan.
“Looking forward to 3.30pm meeting today at the White House,” the president wrote on Twitter before the meeting. “We have to protect & build our Steel and Aluminum Industries while at the same time showing great flexibility and cooperation toward those that are real friends and treat us fairly on both trade and the military.”
Trump’s plan is to impose a 25% tariff on imports of steel, and a 10% tariff on aluminium. The initial plan was for a global levy, although it now appears that Australia, Canada and Mexico and other countries will be exempted. Other exceptions for some US companies may also be allowed.
The London stock market has closed higher, as investors cling to hopes that a trade war can be averted.
The FTSE 100 index of top shares ended 45 points higher at 7,203, up 0.6%.
Draghi on trade wars: What the experts say
Mario Draghi’s trenchant criticism of unilateral trade actions has caused a stir.
Paul Hannon of the Wall Street Journal says it was a remarkable blunt comment from a central banker:
Not sure I've previously heard someone in Draghi's position give an unprompted critique of US regulatory policy. The upcoming G-20 fin mins meeting in BA may be very interesting indeed if the gloves are off all around.
— Paul Hannon (@PaulHannon29) March 8, 2018
David Lamb, head of dealing at FEXCO Corporate Payments, says Draghi gave a clear warning of the dangers of trade wars:
“How very European. Mario Draghi’s retort to Donald Trump’s swaggering trade war rhetoric was a rhetorical question – if you slap tariffs on your friends, who are your enemies?
“The short answer, of course, is everyone. And the ECB chief was keen to stress that starting a trade war is a zero sum game. With no winners, only losers.
“He also aimed an economist’s barb at the US President – reminding Mr Trump that previous trade wars have typically led to a strengthening of the Dollar.
“With US exporters finally reaping the benefits of a softer Greenback, they need a resurgent Dollar like they need a hole in the head.
Katie Martin of the FT says Draghi brought some much-needed maturity to the debate.
"If you put tariffs against your allies, one wonders who the enemies are" - Draghi is the grown-up in the room.
— Katie Martin (@katie_martin_fx) March 8, 2018
Suggests the whole thing could hurt the dollar too.
I kinda like this. None of the usual airy fairy 'oh well it's their business, I couldn't possibly express an opinion' https://t.co/soJEOuJnYf
— Katie Martin (@katie_martin_fx) March 8, 2018
Euro falls after dovish Draghi
Mario Draghi ducked the question on what makes a good ECB president. But he could have cited the ability to talk down your currency.
The ECB president successfully downplayed the ECB’s decision to drop its pledge to boost its asset-purchase scheme if needed, calling it a ‘backward looking’ and ‘unanimous’ move.
This has persuaded the markets that the ECB hasn’t suddenly turned hawkish - so traders have sent the euro down against the dollar (down 0.5% to $1.235). That’s good for eurozone exports, and inflationary pressures.
#Draghi still got it... #ECB pic.twitter.com/n41thMKOdP
— jeroen blokland (@jsblokland) March 8, 2018
And finally...
Q: Should we throw away the old economics books and come up with a new way of measuring inflation?
Draghi says this was a popular idea a year ago [when inflation had been wallowing below zero]. Some people thought the ECB should either cut its inflation target to zero (admitting defeat), or raise it to 4% (to force a change in inflation expectations).
In what looks like another pop at Donald Trump, Mario Draghi has also warned that financial deregulation could be a threat to the world economy.
Draghi sees two risks for the economy - both coming from the US:
— Lisa Nienhaus (@lisakatharina) March 8, 2018
1) protectionism
2) financial deregulation
Wonder if @realDonaldTrump will react. Waiting for tweets.
Draghi: We've got work to do on gender equality
Q: As it’s International Women’s Day, isn’t it a shame that the ECB is appointing a man, Spain’s Luis de Guindos, as its new vice-president?
ECB chief Mario Draghi confirms that the governing council approved de Guindos’s appointment today, saying he’ll be a “very, very good colleague”.
But he also admits that the gender balance at the ECB should be improved “at all levels”.
Draghi says that the Bank is “working on improving our gender situation”, and reveal that progress has been slower than hoped.
In 2013, the Bank set explicit targets on gender balance for the first time - and it is currently falling short.
- At the end of last year, 27% of management position were held by women, compared to an interim target of 29%
- For the most senior roles, 17% were held by women against an interim target of 24%
Draghi says:
So we’ve got to do some work here.
The ECB is now asking headhunters to focus on gender in the recruitment process, and encouraging business managers to keep vacancies open until the objective is reached.
Recruiting panels will now have “a considerable presence of women”, he explains:
Often there are unconscious biases that play a role, and that’s why its necessary to ensure a much more significant presence of women on the recruitment panels.
Mario Draghi on #IWD: "The gender balance ought to be improved and this ought to happen at all levels"' As far as the ECB is concerned "we also are working on improving our gender situation." He says there will be a press release on targets... it's not 2 percent thankfully.
— Vonnie Quinn (@VonnieQuinn) March 8, 2018
Updated
Asked about support for eurosceptic parties in Italy, Draghi says that the euro is irreversible.
ECB president Draghi also criticises politicians around the world for not doing more to tackle inequality.
He says:
If there is one aspect where policies, all over the world, have been insufficient, it was to take care of distributional consequences of polices that were positive for growth but not necessarily for equity.
Asked about last Sunday’s Italian elections, Draghi warns “protracted instability” could undermine confidence, and thus growth.
Q: Should you make your guidance more explicit, to prevent a market panic similar to the one in the US recently?
Draghi says last month’s market turmoil was triggered by unexpectedly strong wage data - which made traders rethink the likely pace of US interest rate rises. We don’t have such robust wage growth in the eurozone, so there’s not the same risk.
Q: What has changed in the last seven weeks to lead the ECB to drop its easing bias today?
Draghi points to the latest (small) growth upgrade, which confirmed the ECB’s existing confidence.
Q: How could an ECB president with a different approach to QE take the central bank on a different path?
Your questions suggest I’m going to leave tomorrow, Draghi replies, mock-hurtly. I’ll be around for a while yet, he insists (until 31st October 2019, I think).
Q: After six years in the job, what do you think are the most important skills to be ECB president?
Easy question, Draghi smiles. “I let others judge”.
[Draghi’s term ends in late 2019, so speculation over his successor is building]
Asked about the Italian economy, Draghi says that fiscal consolidations is particularly important in countries which have high debts (such as Italy)
Mario Draghi says there are three questions when assessing the impact of Trump’s tariffs
- Will there be retaliations?
- How will the exchange rate react? In the past, the dollar has appreciated, but it could be different this time
- The effect on confidence - this can be very difficult to assess. If it’s negative, then that’s a negative impact on inflation and output.
Draghi: Unilateral decisions on trade are dangerous
Asked about trade, Mario Draghi explains that Donald Trump’s tariff plans are a concern, for two reasons.
Draghi says that the immediate spillover effects of the trade measures won’t be that big. But that’s not the problem.
Whatever convictions one has about trade.... we are convinced that disputes should be discussed and resolved in a multilateral framework.
Unilateral decisions are dangerous.
Also, there is a certain worry about the state of international relations, he continues.
If you put tariffs against your allies, one wonders who the enemies are.
Updated
Victory cannot be declared yet on inflation, says Draghi, in response to another question.
Q: Are the Latvian authorities infringing central bank independence, through their investigation into Latvia’s central bank chief Ilmars Rimsevics (who was detained under a bribery probe last month)?
Draghi says the ECB is sending a letter to the European Court of Justice about the issue.
We are asking for clarification on whether the security measures imposed on the Latvia central bank governor have had the effect of relieving him from office, and whether they comply with European law, he adds.
On to questions.
Q: Why has the ECB dropped its promise to expand its asset-purchase scheme if needed?
Draghi says that promise had been added to the ECB’s monthly statement back in 2016, when the situation was very different.
He also points out that the ECB has kept its other pledge -- to run its asset purchases until September 2018 ‘or beyond, if necessary’.
The decision to change the language was unanimous, Draghi reveals.
Updated
Draghi ends his statement by calling for the implementation of structural reforms in euro area countries to be substantially stepped up.
He also calls for ‘specific and decisive’ action to complete Europe’s banking union.
Draghi: Deepening Economic and Monetary Union remains a priority. The Governing Council urges specific and decisive steps to complete the banking union and the capital markets union.
— European Central Bank (@ecb) March 8, 2018
The ECB has revised down its forecast for inflation in 2019, from 1.5% to 1.4%.
It still expects inflation to be just 1.4% in 2018, rising to 1.7% in 2020.
#ECB: Expected #inflation lowered to 1.4% for 2019... #behindthecurve? pic.twitter.com/KD4kTOSWZ5
— jeroen blokland (@jsblokland) March 8, 2018
ECB raises growth forecast, but warns on protectionism
Encouragingly, Mario Draghi says that eurozone growth will growth will expand by a somewhat faster pace than earlier expected.
The ECB staff have revised up their growth forecasts for 2018, but they remain unchanged for 2019 and 2002.
Here are the new forecasts:
- 2.4% in 2018 (up from 2.3% in December)
- 1.9% in 2019 (unchanged)
- 1.7% in 2020 (unchanged)
But Draghi also warns that growth could be threatened by various downside risks, including protectionism.
That’s a clear warning that a trade war would hurt the eurozone’s recovery.
A timely warning, as Donald Trump is expected to sign off his steel and aluminium tariffs in a few hours time.
Updated
Watch Mario Draghi's press conference here
European Central Bank president Mario Draghi has arrived for his press conference to explain today’s monetary policy decisions.
He confirms that the ECB’s Governing Council left interest rates unchanged, and expects them to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases.
On non-standard monetary policy measures (the QE bond-buying scheme), Draghi says they will run until the end of September 2018, or beyond, and until the Governing Council sees a sustained adjustment in the path of inflation towards its inflation target.
But as already flagged up, Draghi does not mention the ECB’s previous pledge to expand QE if needed. It’s been dropped from the statement.
ECB changes its language: What the experts say
The European Central Bank is moving towards ending its stimulus programme altogether, in around a year’s time, says Danielle Haralambous of the Economist Intelligence Unit:
Streamlined monetary policy announcement from the #ECB today, which has chopped out the sentence on the possibility of expanding QE programme if the outlook worsens (the dovish bias). Edging towards ending monthly asset purchases, which we think will happen by early 2019. pic.twitter.com/5utY0stbLn
— Danielle Haralambous (@DHaralambous) March 8, 2018
Ranko Berich of Monex Europe says Europe’s economic recovery means the ECB didn’t need to promise to do more QE if needed.
Crisis language was originally there to suggest ECB had a hair trigger for further intervention - reassuring when EZ was flirting with deflation perhaps, but no longer needed.
— Ranko Berich (@monexeurope) March 8, 2018
ING’s Carsten Brzeski thinks the hawkish members of the governing council are gaining momentum (that includes Germany’s Jens Weidmann, a candidate to succeed Mario Draghi)
Seems hawks are gaining momentum or at least doves wanted to give impression that they care...#ECB
— Carsten Brzeski (@carstenbrzeski) March 8, 2018
Jon Ferro of Bloomberg points out that the ECB is still rather dovish, and will remain so until inflation gets back close to 2% (it’s just 1.2% today).
ECB guidance is still incredibly dovish
— Jonathan Ferro (@FerroTV) March 8, 2018
A. Who actually thought QE would increase this year?!
B. Guidance on rates is still exactly the same
C. QE will run as long as needed to hit inflation goal
Updated
This is the phrase which has vanished from the European Central Bank’s monetary policy statement:
If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the asset purchase programme (APP) in terms of size and/or duration.
By removing it today, the ECB is signalling to the markets that it won’t boost its bond-buying scheme - which is buying €30bn of bonds each month until September (at least).
Mike Bird of the Wall Street Journal has highlighted how the ECB has changed its position:
Full change comparison in ECB monetary policy language pic.twitter.com/btH5wwBuiJ
— Mike Bird (@Birdyword) March 8, 2018
Updated
The euro has jumped against the US dollar, clawing back its early losses:
EUR Intraday: pic.twitter.com/di4U2he14N
— Michael McDonough (@M_McDonough) March 8, 2018
ECB DROPS PLEDGE TO INCREASE SIZE OF QE PROGRAMME IF NEEDED
BREAKING: The European Central Bank has left interest rates across the eurozone unchanged, as expected.
That means the headline cost of borrowing stays at zero, a record low.
More importantly, it has dropped its pledge to enlarge its stimulus programme, if the eurozone economic outlook deteriorates.
Previously, the ECB has given an explicit pledge to extend its quantitative easing bond-buying programme, if needed. That language has now vanished from today’s statement from the governing council.
Instead, the ECB simply says:
Regarding non-standard monetary policy measures, the Governing Council confirms that the net asset purchases, at the current monthly pace of €30 billion, are intended to run until the end of September 2018, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.
This is a sign that the ECB is moving, slowly, towards ending its massive stimulus programme....
More to follow.
Updated
Trump: Tariffs meeting later today
Breaking: It looks like Donald Trump will be signing the order to implement steel and aluminium tariffs later today:
Looking forward to 3:30 P.M. meeting today at the White House. We have to protect & build our Steel and Aluminum Industries while at the same time showing great flexibility and cooperation toward those that are real friends and treat us fairly on both trade and the military.
— Donald J. Trump (@realDonaldTrump) March 8, 2018
(That’s 8.30pm UK time).
US media have reported that steel and aluminum workers are being flown to Washington for the event.
But what does “great flexibility” mean? It’s probably a hint that Canada and Mexico will be exempt (assuming a deal is reached over NAFTA).
Europe will be hoping that it also counts as a ‘real friend’ -- given the close ties between NATO members, for example.
Over in Westminster, the UK government’s confidential Brexit impact assessment reports have been published (this is the report that leaked recently).
It outlines various scenarios for the UK’s relationship with the EU and beyond after Brexit; worryingly, all scenarios shows an adverse effect on the UK economy, and damage to key industries.
Andy Sparrow has full details in his Politics liveblog.
From gvt confidential Brexit impact assessment - https://t.co/3d3eicURJ8 pic.twitter.com/VDWLlRaOIC
— AndrewSparrow (@AndrewSparrow) March 8, 2018
Sky News’s Faisal Islam has been tweeting the key charts:
Chemicals - should be titled “why we want to stay in the EUropean Chemicals Agency”... pic.twitter.com/ReaRAjqjEB
— Faisal Islam (@faisalislam) March 8, 2018
Regional impact, as reported on Sky News last month - north East, West Midlands and Northern Ireland... pic.twitter.com/s7J5DvlP1c
— Faisal Islam (@faisalislam) March 8, 2018
Updated
If Jamie Dimon is right about Trump’s tariffs creating a ‘Pandora’s box of problems’, what might crawl out of it?
Salman Ahmed, chief investment strategist at Lombard Odier Investment Managers reckons there are two possible scenarios - one in which other countries let the US get away with, and one where they retaliate.
Here they are:
Benign scenario – A one-off crowd-pleasing move by Trump:
“So far, US economic policy under Trump has focused on growth-enhancing measures to decrease regulation and reduce taxes. This lurch towards populism is something we have seen before with promises of a border wall and Border Adjustment Tax - but which has never truly materialised despite the heavy rhetoric. The key is whether other countries take this as a one-off, crowd-pleasing move by Trump and do not participate to create a vicious cycle. Merkel’s fourth term confirmation is a welcome development in this context, and China’s stance will be equally important. If both of these key blocs do not over-react, there is a strong possibility that this ends with steel and aluminium. These are both insignificant when it comes to the state of the global economy, but still useful ammunition as an over-charged rhetoric.”
Negative scenario – full blown trade war:
“This scenario was last in play right after Trump’s election in November 2016, when fears of a China-US trade war came into focus. At that time, the Trump administration did not follow up on its strong pre-election rhetoric and markets started focusing on his policy views around lower taxes and reduced regulations. However, with tariffs on steel and aluminium, we now have a concrete measure and the two worrying elements of this policy move are the domino effects of a tit-for-tat vicious cycle, coupled with negative signalling when it comes to US-China trade relations. What puts some additional weight to the probability of this scenario is the direct involvement of two trade hawks, Wilbur Ross and Peter Navarro, as the driving force behind this policy shift, which now seems to be offsetting the positives coming from the departure of Steve Bannon from the Trump administration.”
Another front cover for Donald Trump’s bathroom wall:
This week's cover. pic.twitter.com/sX7Bs4z7mZ
— Tom Nuttall (@tom_nuttall) March 8, 2018
Here’s our news story about the slump in profits at John Lewis:
And here’s some reaction:
Is the party over for @johnlewisretail & @waitrose ? Profits down whopping 77% as margins squeezed by higher costs and sales stagnant. Partner bonus of 5% lowest for over 60yrs
— Dharshini David (@DharshiniDavid) March 8, 2018
Strategy of absorbing higher costs at @johnlewisretail & @waitrose instead of passing on laudable (from consumer viewpoint) but backfired for profits and workers as sales barely rose
— Dharshini David (@DharshiniDavid) March 8, 2018
BREAKING: Shares in major British retailers slumped after John Lewis issued a profit warning https://t.co/MxvlrH91Fn pic.twitter.com/FVRTmWiThW
— Bloomberg (@business) March 8, 2018
Shares in Marks & Spencer are down 1.8%, while Dixons Carphone have lost 3%.
Updated
Bloomberg have helpfully created some video clips of Jamie Dimon discussing tariffs....
Exclusive: "We don't believe in these tariffs," JPMorgan's Jamie Dimon says of Trump's trade plan https://t.co/otlPc1JS85 pic.twitter.com/viFTSGSAIW
— Bloomberg TV (@BloombergTV) March 8, 2018
Exclusive: Gary Cohn's resignation from the White House is "terrible," JPMorgan's Jamie Dimon says https://t.co/otlPc1JS85 pic.twitter.com/41xIaTXBvV
— Bloomberg TV (@BloombergTV) March 8, 2018
Jamie Dimon: We don't believe in Trump's tariffs
Breaking: Jamie Dimon, the head of banking giant JP Morgan has criticised Donald Trump’s plan to impose tariffs on steel and aluminium imports.
Speaking on Bloomberg TV right now, Dimon says that “we don’t believe in these tariffs”. He agrees that global trade needs reforms, but fears that Trump’s plan could hurt the economy and trigger retaliations.
Dimon, who has previously backed Trump policies such as tax reforms, says:
There are serious issues around trade. WTO needs to get its act together and get a little more ambitious about fixing some of these problems, but I think tariffs is the wrong way to go about it.
There may be more, there may be retaliations, it kinda opens up a whole Pandora’s Box of additional problems....
It could escalate and it could hurt growth”.
Business leaders, Dimon continues, would rather see the US set out its strategy on trade properly, and negotiate with other countries in an organised fashion. Then, if you don’t get what you want, you take action.
Dimon also says the resignation of Gary Cohn as Trump’s top economic advisor is “terrible”.
He knows how an economy runs, he know how to make it run better for all Americans, and he’s not there, Dimon adds.
Updated
John Lewis staff bonus falls after profits shrink
Just in: Workers at UK retail chain John Lewis are getting their smallest bonus in decades, after profits slumped last year.
John Lewis has reported its profits, before exceptional items, shrank by 21.9% in the last year. Pre-tax profits plunged 77%, to £103.9m.
Its Waitrose supermarket chain was hit by falling profit margins, due to “the weaker exchange rate and commitment to competitive pricing”.
John Lewis is owned by its staff, or partners, who receive a percentage of each year’s profits as a bonus. This year, the bonus has fallen to just 5%. Last year it was 6%, the lowest in 63 years.
Sir Charlie Mayfield, Chairman of John Lewis Partnership, warns that 2018 will be tough too:
We expect trading to be volatile in 2018/19, with continuing economic uncertainty and no let up in competitive intensity. We therefore anticipate further pressure on profits.
Turkish assets hit after downgrade
It’s a bad morning for Turkish assets, after Moody’s slashed its credit rating last night.
Moody’s cited the “loss of institutional strength” recently under President Erdogan, and the growing risk of an “external economic shock” due to Turkey’s debts and current account deficit.
It downgraded Turkey to Ba2 from Ba1.
The lira slid against the euro, and traders also piled out of Turkish government bonds, as Fercan Yalinkilic of Bloomberg shows:
Goldman Sachs sees lira under pressure as #Turkey's current account deficit keeps widening. https://t.co/k6Cz9iMwzO pic.twitter.com/1meMU499Gk
— Fercan Yalinkilic (@FercanY) March 8, 2018
Turkey 10 year yields hit highest this year. pic.twitter.com/B3fhBiI0lC
— Fercan Yalinkilic (@FercanY) March 8, 2018
European stock markets are becalmed this morning, as traders wait for this afternoon’s ECB meeting - and any fresh developments over trade.
In London the FTSE 100 is basically flat.
Among smaller companies Countrywide, Britain’s biggest estate agent, has slumped by 13% after it posted a £208m loss and called 2017 “a disappointing year.
Mike van Dulken of Accendo Markets says Countrywide is suffering from its own mistakes, as well as the slowdown in the UK property markets
The company is paying dearly for the acquisitive growth that helped its shares climb 80% to peak at 700p just 12-months after its March 2013 IPO.
The problem is that the seemingly unbreakable UK housing market finds itself under increasing pressure with buyers deterred by economic uncertainty related to Brexit and the prospect of higher interest rates, letting investors hampered by both tax changes and rate hikes, clear slowing in house price growth and of course fierce competition from cheaper on-line selling alternatives.
Shares rose on China’s stock market, and beyond, as its strong export data cheered traders.
The CSI 300 index has closed 1% higher, while the Hong Kong Hang Seng index gained 1.5%.
Chinese foreign minister: Trade war would be a mistake
China has also waded into the row over steel tariffs, warning that it will take a necessary response if America begins a trade war.
China’s foreign minister Wang Yi said Beijing hopes to work in partnership with the US, and that a trade war would be a mistake.
However, he also cautioned that China wouldn’t stand by, if tariffs were imposed on steel and aluminium exports into America.
Wang said:
Especially given today’s globalisation, choosing a trade war is a mistaken prescription. The outcome will only be harmful.
“China would have to make a justified and necessary response.
More here:
Betty Wang, senior china economist at ANZ in Hong Kong, says China is benefitting from the strong global economy.
The broad-based recovery in China’s major export markets could explain part of the reason why exports were still quite strong.
But Xia Le, chief Asia economist at Banco Bilbao Vizcaya Argentaria, warns that Donald Trump’s plans for new tariffs could derail Chinese growth.
“Global demand remains robust and the economies of the U.S. and Europe are expanding, that’s the biggest boost for Chinese exports.
“The risk of a trade war in which Trump increases tariffs for a broader scope of products seems to be rising.”
Updated
Chinese exports surge
China has spiced up the growing debate over trade wars by posting its biggest jump in exports in three years.
Chinese exports jumped by a blistering 44.5% in February, smashing forecasts of a 13% gain, and up from 11.1% in January. It’s the biggest jump since early 2015.
Good #China v #Trump morning! China states trade wars are never a solution to problems after its exports skyrocket 44.5% YoY, biggest gain in three years... (ht @HaidiLun) pic.twitter.com/RXNLocNVHr
— jeroen blokland (@jsblokland) March 8, 2018
Imports, though, were more modest - rising by just 6.3%.
This data can be distorted by currency fluctuations, and seasonal factors (factories shut down at various times for the Lunar New Year). But the broad pattern is pretty clear.
Some experts would argue that strong Chinese exports show that the world economy is in good heath. But these figures could also used by protectionist voices to argue that China is getting an unfair deal, boosting its trade at the expense of others.
Michael Hewson of CMC Markets says:
This morning’s Chinese trade data are only likely to reinforce the US administration’s perception of unfair trade as Chinese exports were seen to show a rise 44.5% in February, the best performance in over two years.
Rather than show that the global economy appears to be in fairly good health, they are likely to be used as further evidence by President Trump’s trade hawks that his current policy is appropriate.
China trade: Exports surged 44.5% yoy. Imports slowed to 6.3% from revised 36.8% in Jan. Trade surplus = $33.7bn. Exports to US rose 46.1% with US-China trade surplus $20.96bn
— EMgist (@EMgist) March 8, 2018
RMB (=). Trade tensions to rise pic.twitter.com/F5sUar99ko
I’ll pull some reaction together now.
Updated
The agenda: It's ECB Day
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
All eyes are on the European Central Bank today, as Mario Draghi and colleagues meet to set monetary policy across the eurozone and release their latest economic forecasts on growth and inflation.
As usual, Draghi’s press conference will be the main event. He’ll be asked whether the ECB is considering ending its huge bond-buying stimulus programme, and will probably get a few questions about Donald Trump’s tariffs and the Italian election deadlock too.
Konstantinos Anthis of ADS Securities research says:
Today the focus will be on the European Central Bank rate decision and Mario Draghi’s thoughts on the progress of the Euro area. Investors are eager to find out whether the head of the ECB is ready to start tweaking the bank’s forward guidance and prepare market participants for the gradual unwinding of their QE program.
There’s a debate between analysts on whether Draghi will want to introduce changes to his rhetoric today or instead hold off until early summer.
Investors are still worrying about the dangers of a global trade war. However, the markets are a little calmer today after press secretary Sarah Sanders suggested that some countries could be granted an exemption from looming tariffs on steel and aluminium.
Sanders told reporters:
“There are potential carve-outs for Canada and Mexico based on national security, and possibly other countries as well”.
But with Europe threatening countermeasures, and various WTO members alarmed by Trump’s plans, the situation is still unclear.
In the City, outsourcing group G4S, estate agent Countrywide and takeaway group Domino’s Pizza are all reporting results.
The agenda
- 12.45pm GMT: ECB policy statement
- 1.30pm GMT: Mario Draghi’s press conference
- 1.30pm GMT: US weekly jobless figures
Updated
