Global economic outlook darkens

A man lifts a boy for him to reach soap bubbles made by a street artist in Frankfurt. The US-China trade row has a major impact on German exports. (AFP)
Updated 13 August 2019

Global economic outlook darkens

  • The auto industry is under pressure to meet lower greenhouse gas emissions limits imposed by the EU

BERLIN: The economic outlook has deteriorated worldwide as the trade dispute between the US and China escalates, a survey showed on Monday.
Germany’s Ifo economic institute said its quarterly survey among nearly 1,200 experts in more than 110 countries showed that its measures for current conditions and economic expectations have both worsened in the third quarter.
“The experts expect significantly weaker growth in world trade,” Ifo President Clemens Fuest said, adding that trade expectations hit the lowest since the beginning of the tariff conflict last year.
“Respondents also expect weaker private consumption, lower investment activity, and declining short- and long-term interest rates,” Fuest said.
US President Donald Trump said on Friday he was not ready to make a trade deal with China and even called a September round of talks into question, raising fresh doubts in financial markets that the dispute is unlikely to end anytime soon.
The US and China are important export destinations for German manufacturers, so the tit-for-tat tariff dispute between the world’s two largest economies is having a large impact on German goods producers.
The German economy, Europe’s largest, is widely expected to have contracted in the second quarter, and sentiment indicators suggest hardly any improvement in the third.
“We’re in the twilight zone of a marked economic slowdown and a recession,” said Commerzbank economist Joerg Kraemer.
Germany’s Federal Statistics Office will release preliminary gross domestic product figures for the April-June period on Wednesday. A Reuters Poll of analyst predicts a 0.1 percent contraction quarter-on-quarter.
Some of Europe’s troubles cannot be blamed on the trade dispute.

BACKGROUND

• The US and China are important export destinations for German manufacturers.

• The tit-for-tat tariff dispute between the world’s two largest economies is having a large impact on German goods producers.

• The German economy is widely expected to have contracted in the second quarter.

The auto industry is under pressure to meet lower greenhouse gas emissions limits imposed by the EU. Automakers had expected to rely on more fuel-efficient diesels to help meet the requirements, but saw diesel sales plunge after Volkswagen was caught in 2015 cheating on diesel emissions tests.
Another source of uncertainty is Britain’s impending departure from the EU, currently set for Oct. 31. British Prime Minister Boris Johnson has said he wants to leave without an extension even if that means no divorce deal to smooth trade.
In an effort to ward off a steeper slowdown or possible recession, the European Central Bank has signaled it could provide more monetary stimulus at its Sept. 12 meeting, including new purchases of bonds, which pump newly created money into the economy. It’s a measure of Europe’s reversal of fortune that a four-year, €2.6 trillion ($2.9 trillion) bond purchase program was halted only in December.
“What is hurting German exports currently is the uncertainty which has spread across the globe and has also paralyzed many European economies,” said Carsten Brzeski, chief economist for Germany at ING.
“Looking ahead, the outlook for German exporters is clearly in the hands of the US and China.”


Huawei given 90 days to buy from US suppliers

Trader Tommy Kalikas works on the floor of the New York Stock Exchange, Monday, Aug. 19, 2019. (AP)
Updated 20 August 2019

Huawei given 90 days to buy from US suppliers

  • Shortly after blacklisting the company in May, the Commerce Department initially allowed Huawei to purchase some American-made goods in a move aimed at minimizing disruption for its customers

WASHINGTON: US Commerce Secretary Wilbur Ross said Monday the US government will extend a reprieve given to Huawei Technologies that permits the Chinese firm to buy supplies from US companies so that it can service existing customers, even as nearly 50 of its units were being added to a US economic blacklist.
The “temporary general license,” due to expire on Monday, will be extended for Huawei for 90 days, he told Fox Business Network Monday, confirming an expected decision first reported Friday by Reuters. He also said he was adding 46 Huawei affiliates to the Entity List, raising the total number to more than 100 Huawei entities that are covered by the restrictions.
Ross said the extension was to aid US customers, many of which operate networks in rural America.
“We’re giving them a little more time to wean themselves off,” Ross said.
Shortly after blacklisting the company in May, the Commerce Department initially allowed Huawei to purchase some American-made goods in a move aimed at minimizing disruption for its customers.
The extension, through Nov. 19, renews an agreement continuing the Chinese company’s ability to maintain existing telecommunications networks and provide software updates to Huawei handsets.
Asked what will happen in November to US companies, Ross said: “Everybody has had plenty of notice of it, there have been plenty of discussions with the president.”
When the Commerce Department blocked Huawei from buying US goods earlier this year, it was seen as a major escalation in the Sino-US trade war.
The US government blacklisted Huawei, alleging the Chinese company is involved in activities contrary to national security or foreign policy interests.

BACKGROUND

The US blacklisted Huawei, alleging the Chinese company was involved in activities contrary to national security or foreign policy interests.

As an example, the blacklisting order cited a pending federal criminal case concerning allegations Huawei violated US sanctions against Iran. Huawei has pleaded not guilty in the case.

The order noted that the indictment also accused Huawei of “deceptive and obstructive acts.”
At the same time the US says Huawei’s smartphones and network equipment could be used by China to spy on Americans, allegations the company has repeatedly denied.
Huawei, the world’s largest telecommunications equipment maker, is still prohibited from buying American parts and components to manufacture new products without additional special licenses.
Many Huawei suppliers have requested the special licenses to sell to the firm. Ross told reporters late last month he had received more than 50 applications, and that he expected to receive more. He said on Monday that there were no “specific licenses being granted for anything.”