Stalled U.S.-China Trade Talks Raise Threat of Impasse The talks are in danger of hitting a deadlock, threatening to derail the Trump administration’s plan for a limited pact this year as both sides stand firm on key issues including tariffs and agricultural purchases.
(…) “China is going to have to make a deal that I like,” President Trump said Tuesday at a cabinet meeting. “If we don’t make a deal with China, I’ll just raise the tariffs even higher.” (…)
Still, the Trump administration can’t easily abandon the talks and impose more tariffs on China because such a move would risk hurting U.S. farmers further. (…)
Looming now are plans by the Trump administration to impose 15% tariffs on smartphones, toys and other products from China on Dec. 15. The levies are expected to directly hit consumers as Mr. Trump gears up for his 2020 re-election campaign.
Trade negotiators had originally hoped a deal could be signed by Mr. Trump and China’s President Xi Jinping on the sidelines of an economic summit in Chile on Nov. 16-17. But that summit was canceled, effectively removing what had served as a de facto deadline. (…)
(…) Two people briefed on the talks said Trump has decided that rolling back existing tariffs, in addition to canceling a scheduled Dec. 15 imposition of tariffs on some $156 billion in Chinese consumer goods, requires deeper concessions from China.
“The president wants the option of having a bigger deal with China. Bigger than just the little deal” announced in October, said Derek Scissors, a China scholar with the American Enterprise Institute in Washington. (…)
Goldman Sachs provide these insights (!):
Overall, while we think the risks of a tariff cut and a tariff increase have both risen [
] , the balance of risks now leans toward lower tariffs in our view. (…)
There are two potential complications to this view. First, we note that the Senate has just passed the Hong Kong Human Rights and Democracy Act. That bill, which the House passed in a slightly different form in October, would require the State Department to annually certify that Hong Kong enjoys a “high degree of autonomy” from mainland China, among other provisions. China’s Ministry of Foreign Affairs has said China “will take strong countermeasures” if the bill is enacted into law, and has urged the US to “pull back before it’s too late.” Now that the Senate has approved the bill, the House could pass it fairly quickly. If so, it might reach the President’s desk in the next few weeks, potentially around the same time that US-China trade negotiations might conclude.
Second, congressional approval of the US-Mexico-Canada Agreement (USMCA) might also relieve some of the political pressure on the White House to deliver an accomplishment on trade policy. USMCA passage looks increasingly likely over the next several weeks, though it might not come by the December 15 deadline.
U.S. Housing Starts & Building Permits Strengthen
The housing market remains on a firm footing. Housing starts increased 3.8% (8.5% y/y) during October to 1.314 million (SAAR) after easing to 1.266 million in September, revised from 1.256 million. The Action Economics Forecast Survey expected 1.310 million starts for last month.
Multi-family starts improved 8.6% (9.2% y/y) to 378,000 following a 25.3% drop during September. Single-family starts increased 2.0% in October (8.2% y/y) to 936,000, the fifth consecutive monthly increase.
Starts improved in most regions of the country. Starts in the West rose 17.6% (6.8% y/y) to 361,000. It was the highest level since March 2018. In the Midwest, starts improved 8.7% (-6.4% y/y) to 175,000 and recovered roughly half of September’s decline. Starts edged 0.7% higher (15.6% y/y) in the South to 689,000. Starts tumbled 21.9% (-1.1% y/y) in the Northeast to 89,000, the lowest level since May.
A 5.0% rise (14.1% y/y) in building permits to 1.461 million portends further improvement in new construction activity. It was the highest level since May 2007. Permits to build multi-family homes increased 8.2% (26.9% y/y) while single-family permits rose 3.2% (7.4% y/y).
Retail Results Send Mixed Signals on Consumer Spending Retailers gave a mixed read on consumer spending heading into the key holiday season, with Kohl’s and Home Depot reporting weak sales, but discounter TJX continuing to log strong sales
(…) TJX, parent of the TJ Maxx and HomeGoods chains, reported a 4% jump in comparable sales for the quarter ended Nov. 2 and raised its profit forecast for the year.
Executives cited strong traffic to its stores and an abundance of merchandise that the discount chain can buy to fill its shelves. (…)
Amazon Is Planning to Open Cashierless Supermarkets Next Year
Amazon.com Inc. is preparing to open Amazon Go supermarkets and pop-up stores, an expansion of the company’s cashierless ambitions that includes the possibility of licensing the technology to other retailers.
The new store formats and licensing initiative could launch as soon as the first quarter of 2020, according to a person familiar with the project. Amazon is testing a supermarket equipped with Go technology in a 10,400-square-foot retail space in Seattle’s Capitol Hill neighborhood. (…)
The company already operates the Whole Foods Market chain and last week confirmed plans to launch a separate supermarket brand, starting with a location in the upscale Woodland Hills neighborhood of Los Angeles. Those stores will have human cashiers. The previously unreported plan to expand Go revives Amazon’s original vision of creating full-size grocery stores without checkout lines.
Amazon opened the first Go convenience store at its Seattle headquarters almost two years ago and now operates 21 locations around the U.S. It’s not clear how much money the company has lavished on the project, but some of the 1,000 or so people working on it were recently told their cumulative salaries have totaled more than $1 billion since the project got underway in 2012, the person said. (…)
The Go team, which recently folded previously separate hardware groups and engineering support staff into a new entity called Physical Retail Technologies, has spent the past two years streamlining the technology. The efforts were aimed at making the existing Amazon Go stores more profitable and the guts of the system cheap enough to entice other retailers, said the person, who requested anonymity to discuss an internal project. (…)
Newer versions of Go’s hardware feature fewer backroom servers and more efficient cameras, software and networking capabilities, substantially cutting the cost of setting up a new store, the person said.
Amazon had originally envisioned a larger Go supermarket before abandoning the concept in favor of simpler, smaller convenience stores. Most Go locations are close to 2,000 square feet and stock grab-and-go staples—cold drinks, packaged sandwiches, salads—and a smaller selection of such household items as cold medicine and phone chargers. (…)
Amazon aims to support stores as large as 30,000 square feet, the size of a typical modern supermarket. (…)
US manufacturing limps into fourth quarter, but underlying trend is improving
