This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here.
The U.S. and China are fighting about more than just trade, Europe warns the U.S. on tariffs, American shoppers take a breather, and we may finally have a breakthrough on Brexit. Let’s take a dive into today’s top economic news.
Trade War to Cold War
The U.S. and China are edging closer to a cold war despite their trade truce. When President Trump first hit China with tariffs more than a year ago, he was pursuing narrowly defined, transactional goals: a smaller bilateral trade deficit and better treatment of U.S. companies inside China. But the trade war has since blossomed into a broader, deeper ideological conflict. Events in the last week—from a U.S. decision to blacklist 28 Chinese entities to a dustup with the NBA—starkly illustrate the widening split. And the so-called trade mini-deal is most notable for what it didn’t do: roll back any tariffs. It simply delayed increases. China agreed to resume purchases of U.S. farm exports but has been vague on the scale and timing, Greg Ip writes.
- Update: China’s Ministry of Commerce on Thursday confirmed the nation would step up purchases of U.S. agricultural products but stopped short of saying how much. Spokesman Gao Feng didn’t address the $50 billion import figure mentioned by President Trump and reiterated China’s bottom-line demand: removal of existing tariffs, Liyan Qi and Grace Zhu report.
WHAT TO WATCH TODAY
European Union leaders meet in Brussels to discuss Brexit, budget priorities and other key issues.
U.S. housing starts for September are expected to fall to an annual pace of 1.32 million from 1.364 million a month earlier. (8:30 a.m. ET)
U.S. jobless claims are expected to rise to 215,000 from 210,000 a week earlier. (8:30 a.m. ET)
The Philadelphia Fed manufacturing survey for October is expected to slip to 6.4 from 12.0 a month earlier. (8:30 a.m. ET)
U.S. industrial production for September is expected to fall 0.2% from a month earlier. (9:15 a.m. ET)
Fed governor Michelle Bowman and the Chicago Fed’s Charles Evans speak at a “Fed Listens” event at 2 p.m. ET, and the New York Fed’s John Williams speaks in New York at 4:20 p.m. ET.
Japan’s consumer-price index for September is out at 7:30 p.m. ET.
China’s gross domestic product in the third quarter is expected to grow 6.1% from a year earlier, down a tick from 6.2% in the second. (8 p.m. ET)
Breaking: European Union and U.K. negotiators agreed on a draft of a new Brexit deal, clearing a major hurdle to Britain’s exit from the bloc. British Prime Minister Boris Johnson and the EU’s 27 leaders must now approve the text at a summit in Brussels on Thursday and Friday. It would then go to Britain’s Parliament, which rejected—three times—a previous deal negotiated by Mr. Johnson’s predecessor, Laurence Norman reports.
What’s Worse Than Trade War With China? Trade War With EU
With the U.S. scheduled Friday to slap tariffs on imports from the European Union over Airbus subsidies, Bundesbank president Jens Weidmann said in New York that a U.S.-EU trade war’s “adverse effects might be considerably larger than in the case of the current trade spat with China.” President Trump declared he’s not worried: “We can’t lose that particular war of tariffs because the trade imbalance is tremendous.” Really? Mr. Weidmann noted the U.S. exports three times as much to the EU as it does to China. The EU thus has far more scope to retaliate than China. The Bundesbank estimated 25% tariffs on imports and exports between the two would shrink U.S. GDP by 1.5%, that of other countries by less. World trade would fall 3.5%, he said. While this is for now hypothetical, Mr. Trump has until Nov. 14 to decide whether to impose tariffs on EU car imports for national security reasons. If he does, the EU is almost certain to retaliate. —Greg Ip
How Are Those Tariffs Working Out for Investors?
Alcoa plans to sell up to $1 billion in assets and may close facilities over the next few years as it grapples with slowing economic growth that has driven aluminum prices lower, damaging its financial performance. The Pittsburgh-based manufacturer has been hurt by fears that a weaker global economy will cut into demand for its products and crimp prices for metals, Micah Maidenberg reports.
Stop and Shop
American shoppers pulled back on spending in September, signaling a key support for the U.S. economy this year could be softening amid a broader global economic slowdown. Retail sales—a measure of purchases at stores, at restaurants and online—decreased a seasonally adjusted 0.3% in September from a month earlier, the first monthly decline since February. Consumer spending is the main driver of the U.S. economy, accounting for more than two-thirds of economic output, Amara Omeokwe reports.
Americans Have a Beef with Asia
Cattle prices in the U.S. have risen since September, as a protein shortage in Asia drives bets that livestock will be in increasingly high demand. Live cattle futures on the CME are up 14% since Sept. 10. The rally coincides with the continued spread of African swine fever in Asia. The disease has devastated hog herds in China, the world’s largest pork market, and was found in South Korea last month. The U.S. beef industry is aiming to fill some of that protein deficit. Beef exports to South Korea are already 8% higher than last year, Kirk Maltais reports.
When One Door Closes, Another Opens
The United Auto Workers struck a tentative labor deal with General Motors on Wednesday, a critical step in ending a monthlong strike that has brought more than 30 GM factories in the U.S. to a standstill, Nora Naughton and Mike Colias report.
Chicago teachers will begin a strike Thursday, following a national wave of teacher strikes that have brought raises and other benefits in recent years. Chicago Public Schools said classes will be canceled during the strike. About 300,000 students in the nation’s third-largest school district will be affected, Tawnell D. Hobbs reports.
TWEET OF THE DAY
[wsj-responsive-sandbox id = “0” ]
WHAT ELSE WE’RE READING
White House trade advisor Peter Navarro seems to have an imaginary friend. Mr. Navarro has quoted one Ron Vara a dozen or so times in six books, usually as an epigraph before a chapter. But he doesn’t exist. “While [Mr. Navarro] declined to speak on the record, he did send a statement in which he called Ron Vara a ‘whimsical device and pen name I’ve used throughout the years for opinions and purely entertainment value, not as a source of fact,’ ” Tom Bartlett writes in The Chronicle Review.
Sign Up for Our Calendar
Real Time Economics has launched a downloadable Google calendar with concise previews, forecasts and analysis of major U.S. data releases.
- To add to your Google Calendar on desktop, click here.
- To add to your Google calendar app on mobile, click here.
- If you prefer to view the calendar using a web browser, with the option of adding select Real Time Economics entries to your calendar, click here.
- And here’s our how-to.
Let us know what you think. This is a pilot project, so we’d appreciate your feedback.