FIG Topics of Interest

 

06/26/18

"There's no plans to impose investment restrictions on any countries that are interfering in any way with our country. This is not the plan," he said.
https://www.cnbc.com/2018/06/25/navarro-no-plans-to-impose-investment-restrictions-on-china-and-other.html
Peter Navarro, one of President Donald Trump's top trade advisors, said the market was overreacting to fears the administration would restrict foreign investment as part of its trade actions against China and other countries.

Navarro told CNBC that the administration currently does not have any specific countries targeted. His comments came after news reports that had Wall Street reeling over the prospect that the U.S. could prevent companies that had at least 25 percent Chinese ownership from buying businesses that possessed "industrially significant technology."

Click here to download a pdf of this article, Missile.pdf
 
 

06/22/18

With a dragnet closing in, engineers at a Taiwanese chip maker holding American secrets did their best to conceal a daring case of corporate espionage.

As the police raided their offices, human resources workers gave the engineers a warning to scramble and get rid of the evidence. USB drives, laptops and documents were handed to a lower-level employee, who hid them in her locker. Then she walked one engineer's phone out the front door.

What those devices contained was more valuable than gold or jewels: designs from an American company, Micron Technology, for microchips that have helped power the global digital revolution. According to the Taiwanese authorities, the designs were bound for China, where they would help a new, $5.7 billion microchip factory the size of several airplane hangars rumble into production.

https://www.cnbc.com/2018/06/22/inside-a-heist-of-american-chip-designs-as-china-bids-for-tech-power.html
A plan known as Made in China 2025 calls for the country to become a global competitor in an array of industries, including semiconductors, robotics and electric vehicles. China is spending heavily to both innovate and buy up technology from abroad.

Politicians in Washington and American companies accuse China of veering into intimidation and outright theft to get there. And they see Micron, an Idaho company whose memory chips give phones and computers the critical ability to store and quickly retrieve information, as a prime example of that aggression.

Three years ago, Micron spurned a $23 billion takeover offer from a state-controlled Chinese company. Today it faces a lawsuit and an investigation in China, which accounts for about half its $20 billion in annual sales.

Then Micron was the target of the heist in Taiwan, according to officials there and a lawsuit the company has brought against the Taiwanese company that employed the engineers, UMC, and the Chinese company it says wanted access to the technology, Fujian Jinhua Integrated Circuit Company.

Other companies may face similar predicaments to Micron, industry experts said.

One state-backed factory in the city of Wuhan, owned by Yangtze Memory Technology Company, or YMTC, will be turning out chips that look similar to those made by Samsung, the South Korean chip maker, said Mark Newman, an analyst at Sanford Bernstein.

"The YMTC one is virtually identical to Samsung's, which makes it pretty clear they've been copying," Mr. Newman said.

Micron's accusations focus on efforts by Fujian Jinhua Integrated Circuit, a state-backed chip maker, to build a $5.7 billion factory in China's Fujian Province. Two years ago, Jinhua tapped UMC, a Taiwanese company, to help it develop technology for the factory. Instead of going through the lengthy steps required to design the technology, Micron said in its suit, UMC and Jinhua decided to steal it.

A UMC spokesman denied the allegations and declined to comment further. Jinhua did not respond to requests for comment.

First, UMC lured away engineers from Micron's Taiwan operations with promises of raises and bonuses, according to the Taiwanese authorities. Then, it asked them to bring some of Micron's secrets with them, according to Micron's court filings and the authorities. The engineers illegally took with them more than 900 files that contained key specifications and details about Micron's advanced memory chips, the authorities said.

Micron grew suspicious, according to its court documents, after discovering one of its departing engineers had turned to Google for instructions on how to wipe a company laptop. Later, at a recruiting event in the United States aimed at Micron employees, Jinhua and UMC showed PowerPoint slides that used Micron's internal code names when discussing future chips it would make, according to the court documents.

Alerted by Micron, the Taiwanese police tapped the phone of one Micron engineer, Kenny Wang, who was being recruited by UMC. According to an indictment in Taiwan against Mr. Wang and others, UMC reached out to Mr. Wang in early 2016 using Line, the smartphone messaging app, while he was still working for Micron. UMC explained it was having problems developing its memory chip technology. Mr. Wang then grabbed the information it needed from Micron's servers, and later used it to help UMC's design. The police said Mr. Wang received a promotion at UMC.

When investigators showed up at UMC's offices early last year, the police said, some employees rushed to hide what they had taken from Micron. Mr. Wang and another former Micron employee gave laptops, USB flash drives and documents to an assistant engineer, who locked them in her personal locker. She then left the office with Mr. Wang's phone — the one that the police had tapped, which was quickly tracked down.

Click here to download a pdf of this article, Missile.pdf
 
 

06/21/18

Chinese oil buyers will keep taking crude from the United States through September, but plan to reduce future purchases to avoid a likely import tariff amid a trade spat between the world’s two largest economies, multiple industry sources said.
https://www.reuters.com/article/us-usa-trade-china-oil/china-to-reduce-u-s-oil-imports-post-september-amid-trade-spat-sources-idUSKBN1JH1BD
Beijing has put U.S. energy products, including crude oil and refined products, on lists of goods that it will hit with import taxes in retaliation for similar moves by Washington.

Beijing did not specify when it will impose a 25 percent tax on oil, and that gives buyers time to adjust purchases while waiting for the outcome of trade talks, the sources said.

Unipec, trading arm of Sinopec - Asia’s largest refiner and biggest buyer of U.S. oil - has been offering U.S. crude, such as West Texas Intermediate (WTI) Midland, to other Asian buyers for July, said three sources with knowledge of the offers.

“They (Unipec) only offer crude for September arrival, that means July-loading cargoes,” one of the sources said, although adding that the offer was “quite expensive”.

Unipec officials said this was normal trading activity, as the trading unit often re-sells excess crude from its refining system depending on economics and the state of its supplies.

A top trading executive with Sinopec told Reuters the state refiner will maintain its usual import volumes for July-loadings, but can’t commit to bookings further out.

Click here to download a pdf of this article, Missile.pdf
 
 

06/20/18

"China has targeted America's industries of the future," Navarro said Tuesday citing aerospace, robotics and artificial intelligence as technologies threatened by Chinese cybertheft.

"If China successfully captures these emerging industries of the future, America will have no economic future and its national security will be severely compromised," he said adding that "economic security is national security."
https://www.cnbc.com/2018/06/19/theres-no-better-example-of-trumps-trade-fight-with-china-than-lockheed-martins-crown-jewel.html

For the Pentagon, there is no better example of Navarro's comments than the most expensive U.S. weapons system: the F-35 Joint Strike Fighter.

On Oct. 26, 2001, the Pentagon awarded Lockheed Martin a contract worth more than $200 billion to build the next-generation stealth strike fighter.

Click here to download a pdf of this article, Missile.pdf
 
 

06/15/18

“Most are hopeful this is all tactical and will eventually be resolved,” Douglas said. “The uncertainty, however, is already having a chilling effect on decisions by companies regarding cross-border investment and deals.”
https://www.bloomberg.com/news/articles/2018-06-15/across-the-u-s-wary-businesses-gird-for-a-trump-trade-war
Similar fears loom in Florida, bound to Latin America and the Panama Canal with 14 deep-water sea ports. The Florida Chamber of Commerce estimates that a quarter of the state’s economy depends on trade to some extent.

But in Granite City, Illinois, the sound of blast furnaces roaring back to life is the area’s hope.

U.S. Steel Corp. plans to hire about 300 people to restart a second furnace at its plant there to satisfy fresh demand for American-made steel, the company said this month. It resumed operations in March after Trump announced the tariffs based on national-security grounds.

The town of about 30,000 just across the Mississippi River from St. Louis was founded around the steel industry, said James Amos, its economic development director. More workers at U.S. Steel mean more people buying gas or grabbing lunch.

“It really does put a real smile on people’s faces,” Amos said.

Elsewhere in America’s industrial heartland, though, companies are on edge. Many have built supply chains that source parts from all over the world.

“Uncertainty in terms of trade and global flows like that isn’t good,” said Blake Moret, chairman and chief executive of Rockwell Automation Inc., a Milwaukee producer of industrial systems.

Some companies are delaying capital projects. Tariffs are clouding investment decisions and raising construction costs, said A.B. Ghosh, North America president of Akzo Nobel NV’s specialty chemical business.

While the Dutch company will proceed with a $100 million upgrade of an Illinois plant, “it may stop us from doing other investments,” Ghosh said.

Companies with links to Mexico are particularly worried. Mexico has been hit with steel tariffs, and Trump has threatened to pull out of the North American Free Trade Agreement.

Union Pacific Corp. has connections at six border crossings, and 12 percent of its volume originates or ends in Mexico. The Omaha, Nebraska-based railroad also owns a 26 percent stake in the Mexican railroad Ferromex.

“The worst fear would be the trade war in general,” said Rob Knight, chief financial officer of Union Pacific. “Does Mexico come up with some other retaliatory action?”

Jim Knott, chief executive officer of Riverdale Mills Corp. in Northbridge, Massachusetts, says his company supplies 85 percent of the North American market for the wire mesh that covers lobster traps. The price of the steel, much from Canada, has almost doubled since Jan. 1, he said, blaming the tariffs themselves and hoarding after Trump’s announcement.

As much as 45 percent of what Knott’s company produces is shipped overseas. He says the steel tariff threatens the livelihoods of his 200 employees.

“We work very, very hard to take jobs back from China, and we ship all over the world,” Knott said. “This tariff just puts handcuffs on us.”

Click here to download a pdf of this article, Missile.pdf
 
 

06/14/18

Trump returned to Washington early on Wednesday morning. In an interview aired on Wednesday, Trump told Fox News that he was “very strongly clamping down on trade” with China.

Asked how strong, Trump said: “Well, I think very strongly. I mean you’ll see over the next couple of weeks. They understand what we are doing.”

https://www.reuters.com/article/us-usa-trade-china/trump-to-meet-advisers-on-china-tariffs-as-beijing-urges-talks-idUSKBN1JA0XX
Trump is due to unveil revisions to his initial tariff list targeting $50 billion of Chinese goods on Friday. People familiar with the revisions said that the list will be slightly smaller than the original, with some goods deleted and others added, particularly in the technology sector.

Another administration official said that a draft document showed that the new list would still be close to $50 billion, with about 1,300 product categories, but both the dollar amount and quantity of products were still subject to change.

Under the 1974 trade law that Trump invoked to pursue a tariff investigation into China’s intellectual property practices, he could delay the activation by 30 days. He can also delay the tariffs by another 180 days if the U.S. Trade Representative’s office finds that negotiations with China are yielding progress.

“The president’s trade team has recommended tariffs. If there are not tariffs, it will be because the president has decided that he’s not ready to implement tariffs,” a person familiar with the administration’s deliberations told Reuters.

Click here to download a pdf of this article, Missile.pdf
 
 

06/13/18

The Fed is expected to announce a quarter-point interest rate hike when it wraps up its June meeting Wednesday afternoon, but that rate hike is widely anticipated and there are a few other things that could stir up markets more.
https://www.cnbc.com/2018/06/12/the-fed-is-hiking-rates-wednesday-but-heres-what-else-you-need-to-know.html
"They don't need much of a change at all for the headline to say four instead of three," said Michael Schumacher, director of rates at Wells Fargo. "The headline will be screaming and say the Fed looks for more aggressive tightening, but in reality if you look at the numbers, it wouldn't be that much different."
The Fed releases its so-called dot plot, a chart with anonymous Fed officials' forecasts on interest rate expectations. The chart currently shows three rate hikes for this year, but it's a very close call based on the positioning of the dots, so any slight move could add an interest rate hike in December. That would be a clear message from the Fed that it is going to be more aggressive.
The Fed is likely to bump up its forecast for GDP growth from its current median forecast of 2.7 percent for 2018. Economists currently see second-quarter growth running well ahead of 3 percent. The Fed could leave its outlook for unemployment about where it is, at 3.8 percent for 2018, which is where it was in the month of May.

The Fed could also slightly move its forecast for inflation, which is currently seeing a slight tailwind. The Fed's current forecast expects PCE core inflation at 1.9 percent for this year, and while PCE has been under 2 percent, CPI is running above the Fed target of 2 percent.

A news wire story that Powell is thinking of holding press briefings after every meeting roused markets Tuesday and sent the dollar higher. Marc Chandler, head of foreign exchange strategy at Brown Brothers Harriman, says the market viewed that Dow Jones report as hawkish and as suggesting there is more scope for further rate hikes if Powell needs to meet the press more often.
"If we get a full-blown trade war with China and tariffs on cars, we're in a recession in 2019," says Grant Thornton chief economist Diane Swonk. "With inflation, that's a bad combination for the Fed."

Economists are also listening for any mention by Powell of emerging markets and whether he expects contagion there or a crisis in Europe, started by Italy.

Economists expect to see the Fed increase its fed funds target range by 25 basis points, to a range of 1.75 to 2 percent. But it could do so by pushing up the interest on excess reserves by 0.20 percent.

That's because the funds rate has risen to the top of its range and the Fed would like to keep it more in the middle. The interest on excess reserves, or IOER, is the interest that the Fed pays banks to keep cash at the central bank.

Specifically, the benchmark is at 1.7 percent, just 0.05 points away from the IOER. The interest rate on excess reserves has historically been a guide for the funds rate and is usually a bit above the Fed's benchmark. But Fed officials were recently concerned the funds rate is rising more quickly than expected, causing a tightening in money markets, according to the minutes from its last meeting.

A solution suggested at the meeting was that the Fed raise the rate paid on reserves by 0.2 percent, while it hikes the funds rate 0.25 percent. This could hold back the funds rate from getting too close to the target ceiling.

"We believe the 25bp hike in the target range will be implemented by increasing the IOER rate by 20bp, thereby encouraging the effective fed funds rate to trade closer to the middle of the 1.75-2.00% range," wrote J.P. Morgan chief U.S. economist Michael Feroli.

Click here to download a pdf of this article, Missile.pdf
 
 

06/12/18

Here is the full text of what the two men signed:

Joint Statement of President Donald J. Trump of the United States of America and Chairman Kim Jong Un of the Democratic People’s Republic of Korea at the Singapore Summit

President Donald J. Trump of the United States of America and Chairman Kim Jong Un of the State Affairs Commission of the Democratic People’s Republic of Korea (DPRK) held a first, historic summit in Singapore on June 12, 2018.

President Trump and Chairman Kim Jong Un conducted a comprehensive, in-depth, and sincere exchange of opinions on the issues related to the establishment of new U.S.-DPRK relations and the building of a lasting and robust peace regime on the Korean Peninsula. President Trump committed to provide security guarantees to the DPRK, and Chairman Kim Jong Un reaffirmed his firm and unwavering commitment to complete denuclearization of the Korean Peninsula.

Convinced that the establishment of new U.S.-DPRK relations will contribute to the peace and prosperity of the Korean Peninsula and of the world, and recognizing that mutual confidence building can promote the denuclearization of the Korean Peninsula, President Trump and Chairman Kim Jong Un state the following:

1. The United States and the DPRK commit to establish new U.S.-DPRK relations in accordance with the desire of the peoples of the two countries for peace and prosperity.

2. The United States and the DPRK will join their efforts to build a lasting and stable peace regime on the Korean Peninsula.

3. Reaffirming the April 27, 2018 Panmunjom Declaration, the DPRK commits to work toward complete denuclearization of the Korean Peninsula.

4. The United States and the DPRK commit to recovering POW/MIA remains, including the immediate repatriation of those already identified.

Having acknowledged that the U.S.-DPRK summit--the first in history--was an epochal event of great significance in overcoming decades of tensions and hostilities between the two countries and for the opening up of a new future, President Trump and Chairman Kim Jong Un commit to implement the stipulations in this joint statement fully and expeditiously. The United States and the DPRK commit to hold follow-up negotiations, led by the U.S. Secretary of State, Mike Pompeo, and a relevant high-level DPRK official, at the earliest possible date, to implement the outcomes of the U.S.-DPRK summit.

President Donald J. Trump of the United States of America and Chairman Kim Jong Un of the State Affairs Commission of the Democratic People’s Republic of Korea have committed to cooperate for the development of new U.S.-DPRK relations and for the promotion of peace, prosperity, and security of the Korean Peninsula and of the world.

https://www.bloomberg.com/news/articles/2018-06-12/trump-and-kim-signed-something-in-singapore-here-s-what-it-says

Click here to download a pdf of this article, Missile.pdf
 
 

06/11/18

If a ship crossing a wide and placid harbor yaws so far that it almost hits the channel markers, its captain might want to have its rudder adjusted. That’s what the Federal Reserve is considering as the fed funds rate threatens to slip outside the central bank’s target range. The gap between the rate and the Fed’s upper bound has narrowed to a 7-1/2 year low, setting off alarm bells from Washington to Wall Street. It’s also prompted policy makers to discuss whether shifting tides in short-term markets mean they need to change the way they go about manipulating what is arguably the most important interest rate in the world.
https://www.bloomberg.com/news/articles/2018-06-10/the-fed-s-fight-for-control-of-its-key-interest-rate-quicktake
1. What’s going on?
2. What is the fed funds rate?
3. How does that work?
4. What about now?
5. What’s the IOER?
6. Why is the fed-funds rate rising toward the top of the band?
7. Why does this matter?
8. What is the Fed doing about it?
9. Will it work?

Click here to download a pdf of this article, Missile.pdf
 
 

06/08/18

Canada - Import Tariffs

https://www.export.gov/article?id=Canada-Import-Tariffs

Although Canada eliminated tariffs on all industrial and most agricultural products imported from the United States under the terms of NAFTA, tariffs and tariff-rate quotas (TRQs) remain in place on dairy and poultry tariff lines. Canada announced the elimination of MFN tariffs on baby clothing and athletic equipment (valued at C$76 million annually) in its 2013 federal budget. Canada proposed to permanently eliminate tariffs on mobile offshore drilling units in its 2014 federal budget.
Import Policies
Agricultural Supply Management
Canada uses supply-management systems to regulate its dairy, chicken, turkey, and egg industries. The regime involves production quotas, producer marketing boards to regulate price and supply, and tariff-rate quotas (TRQs) for imports. Canada’s supply-management regime severely limits the ability of U.S. producers to increase exports to Canada above TRQ levels. Under the current system, U.S. imports above quota levels are subject to high tariffs (e.g., 245 percent for cheese, 298 percent for butter).

Click here to download a pdf of this article, Missile.pdf