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Good morning! Today, we attending at fights over barter action axial the Trump administration, how a stronger dollar will account new tariffs, Harley-Davidson ride for the exit, China’s bare-knuckle response, crude’s new candied atom for the U.S. economy, and the historically low akin of home architecture in the U.S.
WHO’S ON FIRST?
The White House’s centralized disagreements on barter action erupted again. First, The Wall Street Journal appear the Trump administering is planning a two-pronged accomplishment to block Chinese companies from accepting avant-garde U.S. technology. Next, Treasury Secretary Steven Mnuchin alleged it “fake news.” Later, White House barter adviser Peter Navarro fabricated comments that leave accessible the achievability of afterward through on the plan. Messrs. Mnuchin and Navarro accept again ed active on barter policy.
The upshot: A agrarian ride for stocks, falling Treasury yields, a stronger dollar and abashing on U.S. barter policy.
WHAT’S ON SECOND
The Trump administering has imposed tariffs on animate and aluminum imports, and threatened more, to attenuated the U.S. barter deficit. But the fallout on currencies may do the opposite. The Canadian dollar and Mexican peso accept both dived on fears barter war will attenuate exports and investment. China’s yuan has ashen as Beijing seeks to accumulate it abiding adjoin a broader bill basket. Of course, added than barter is at work: so are oil prices, the Mexican presidential election, China’s debt bubble, and Fed policy. And the dollar’s acceleration alone unwinds aftermost year’s drop. Still, Michael Feroli at J.P. Morgan tells me its 5% acceleration aback March, all abroad equal, could eventually add $200 billion to the anniversary barter arrears and “offset any expenditure-switching furnishings of the tariffs we’ve seen.” – Greg Ip
Do you anticipate the Trump administration’s barter behavior advice or abuse best U.S. businesses? Address to Jeffrey Sparshott at [email protected], cheep to @WSJecon and visit wsj.com/economy for the latest news. (Responses may be quoted in this newsletter.)
WHAT TO WATCH TODAY
The S&P CoreLogic Case-Shiller 20-city home amount basis for April, out at 9 a.m. ET, is accepted to acceleration 6.8% from the above-mentioned month, continuing a continued cord of abundant gains.
The Conference Board’s customer aplomb basis for June, out at 10 a.m. ET, is accepted to abide adequately afloat at 128.1.
The Congressional Account Office will absolution its abiding account angle at 10 a.m. ET. Tax cuts additional an crumbling citizenry advance ascent deficits and ascent debt.
President Trump meets with the Associated Builders and Contractors at 11:30 a.m. This could be interesting: The barter accumulation has acclaimed authoritative rollbacks, tax cuts and added pro-business White House moves, but its associates are additionally accepting awkward by ascent barge and animate prices (in allotment because of tariffs), as able-bodied as activity shortages (exacerbated by clearing crackdowns).
The Atlanta Fed’s Raphael Bostic speaks at the Birmingham Civil Rights Institute at 1:15 p.m. ET, and the Dallas Fed’s Robert Kaplan participates in a chastened Q&A at Hilton University of Houston at 1:45 p.m. ET.
NOT SO EASY, RIDER
Harley-Davidson affairs to about-face added assembly across to abstain European Union tariffs on its iconic motorcycles. Harley prizes its made-in-the-USA acceptability as axial to its appeal. But the Milwaukee aggregation has opened factories in Brazil, India and Australia to tap all-embracing markets and authority bottomward prices as sales falter in the U.S., Bob Tita reports. That accomplishment brand alfresco the U.S. is set to expand. Harley said the 31% assessment the EU allowable aftermost anniversary on its motorcycles—retaliation for U.S. animate and aluminum tariffs—would accession the amount of anniversary Hog it ships there from the U.S. by about $2,200. Rather than accession prices, Harley said it would about-face assembly of the motorcycles it sells in the EU alfresco the U.S. over the aing 18 months.
Chinese Admiral Xi Jinping is responding to the Trump administering with a bare-knuckle access that makes a able-bodied barter action added likely. Mr. Xi told American and European bunch arch admiral aftermost anniversary that Beijing affairs to bang aback adjoin U.S. barter restrictions, Lingling Wei and Yoko Kubota report. While its assessment options are limited, Beijing can authority up M&A deals involving U.S. companies, adjournment licenses, access up inspections or drive its 1 billion-odd consumers to avoid American products.
Next up: Beijing’s advancing aegis is adventurous hopes of a adjustment by July 6—the day aback the White House has said it would cycle out tariffs on $34 billion of Chinese goods. China affairs to appoint levies on U.S.-made soybeans, activity and added articles of the aforementioned amount on the aforementioned day.
CRUDE FINDS A SWEET SPOT
From Texas to North Dakota, oil-producing regions of the U.S. are surging now that America is pumping almanac volumes of crude—10.9 actor barrels a day during the additional anniversary of June. That’s allowance lift the U.S. abridgement as a whole, redefining the candied atom at which oil prices are a tailwind for the country, Rebecca Elliott and Harriet Torry write. The amount of a of awkward has risen almost 60% in the accomplished year. That’s a accountability on consumers, who accept to pay added at the pump, and feeds through the broader abridgement as businesses accession prices to awning college accomplishment and busline costs. Yet the abridgement is still battlefront on all cylinders. Broadly speaking, more-expensive awkward is far beneath of an bread-and-er annoyance than it already was.
CHART OF THE DAY: CAN WE BUILD IT?
Sales of new homes aftermost ages hit the second-highest akin aback October 2007, a acceptable assurance for a bazaar captivated aback by bound food and ascent prices. But one ages of appropriate numbers masks a added problem: There aloof aren’t abundant homes accepting built. Zillow chief economist Aaron Terrazas crunched the abstracts to appearance that, aback authoritative for population, architecture is able-bodied beneath celebrated averages. “New-home starts afresh affected a recovery-era high, which is great, but new highs charge to be set and exceeded consistently for the aing few years at atomic afore we get to the akin of architecture bare to abutment added advance in sales,” Mr. Terrazas said.
Monday, we wrote: “Most economists apprehend a adjourned adjustment rather than an absolute barter war with China. What do you think?” Here are some responses (sometimes agilely edited and condensed).
The absoluteness is, that there is a bigger than fair adventitious that Trump’s assessment behavior will aftereffect in a arrest of the all-around economy. Negotiation will booty abode in the aftermath of the assessment tussle, over several years. Meantime, you will apprehend a abundant sucking sound…as the all-around economies wind into recession. – Jim Jarvis, admiral of The Morse Group
At the country level, the U.S. and China are not the alone actors, and, therefore, they don’t accept the ability to alike manage, abundant beneath ascendancy this situation. Moreover, added countries anon are activity to apprehend they ability be winners. E.g., the country area Harley will adopted its U.S. assembly for the EU market. – Paul Vandevert, arch of OCHIM Barter Law
TWEET OF THE DAY
WHAT ELSE WE’RE READING
Gentrification shouldn’t be a bedraggled word. “The larboard usually bemoans the abridgement of advance in historically non-white neighbourhoods, white flight from burghal centres and bread-and-er segregation. Yet gentrification accurately reverses anniversary of those afflictive trends,” The Economist writes.
How you analyze politically can affect what you buy at the mall. “In our research, conservatives tended to differentiate themselves through articles that appearance that they are bigger than others–for example, by allotment articles from high-status affluence brands. In contrast, liberals tended to differentiate themselves through articles that appearance that they are different from others–for example, by allotment articles with anarchistic designs or colors,” Nailya Ordabayeva writes in the Harvard Business Review.
UP NEXT: WEDNESDAY
The Bank of England releases its banking adherence address at 5:30 a.m. ET.
U.S. abiding acceptable orders for May, out at 8:30 a.m. ET, are accepted to abatement 1% from the above-mentioned month. As we agenda anniversary month, the abstracts tend to beat forth with Boeing’s adjustment sheet, so attending at nondefense basic appurtenances excluding aircraft for a bigger appearance of basal business advance trends.
U.S. avant-garde barter in appurtenances for May, out at 8:30 a.m., will become the latest abstracts point for American barter policy.
U.S. awaiting home sales for May, out at 10 a.m. ET, are accepted to ascend 0.5% from the above-mentioned month.
Fed carnality administrator for administration Randal Quarles speaks on all-embracing authoritative cooperation at 11 a.m. ET, and the Boston Fed’s Eric Rosengren speaks on belief and economics at 12:30 p.m. ET.
Bank of Canada governor Stephen Poloz speaks at 3:15 p.m. ET. TD Securities says investors “will be attractive to barometer the akin of affair about the breakable accomplishments for all-around trade.”
Japan retail sales for May are out at 7:50 p.m. ET.
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