Real Time Economics: China Works to Skirt Steel Tariffs; Domestic Opposition Picks Up

This is the web version of the WSJ’s economic newsletter. You can sign up for daily delivery here. Good morning! Today we look at China’s plans to keep flooding the global steel market, friendly fire for Trump’s tariffs, a warning for Canada’s economy, the dollar’s direction, and how U.S. oil got stranded in…the U.S. NECESSITY, MEET INVENTION The U.S. is building a tariff wall to protect its steel industry. China is working to find a way around. For the past several years, China has been shutting production at home and expanding overseas, fueled by tens of billions of dollars from Chinese state-owned lenders and funds. By owning production abroad, Chinese steelmakers aim to gain largely unfettered access to global markets—their factories in places like Malaysia and Serbia face few antidumping tariffs, Matthew Dalton and Lingling Wei write. Even with new 25% tariffs imposed by the Trump administration, China’s moves are paying . Existing U.S. tariffs on steel produced inside China often exceeded 200%. Combined with existing Chinese overcapacity, Western officials are worried more steel will hit the market and further depress prices.
If you quit your job today, do you think you’d have trouble finding another that’s just as good or perhaps better? Write to Jeffrey Sparshott at realtimeeconomics@wsj.com, tweet to @WSJecon and visit wsj.com/economy for the latest. WHAT TO WATCH TODAY The Institute for Supply Management’s nonmanufacturing index for May is out at 10 a.m. ET. Economists expect a slight increase to 57.6 from 56.8 the prior month. That’s well into expansion territory for a big chunk of the U.S. economy. The Labor Department’s Job Openings and Labor Turnover survey for April is out at 10 a.m. ET. It’s not a major report, but it’s must-see economic data for anyone following the labor market closely. One of our favorite metrics: quits. Lots of voluntary separations suggest people are confident they can easily find another job, and job-hopping is one of the best ways to get a raise. The number of quits was the second-highest on record in March.
Social Security and Medicare trustees release their annual reports on program finances. They are typically a reminder that the social safety nets will run out of money soon-ish (in 10-20 years). TOP STORIES TARIFFS: TRUMP FLANKED ON THE RIGHT China, Europe, Canada and Mexico aren’t the only ones opposed to President Donald Trump’s tariffs. Closer to home, organizations financed by conservative billionaire industrialists Charles and David Koch are launching a multimillion-dollar campaign against them. The effort is an indication of the deep consternation among business groups—normally strong Republican allies—about the effect of the tariffs, which have angered foreign countries, rivals and allies alike. It also serves as a message to Republican lawmakers to hold their ground against tariffs, Heidi Vogt reports. UH-OH, CANADA Canada is in a period of heightened economic anxiety due to U.S. trade and tax policy, the International Monetary Fund said, warning it could have a profound impact on investment and growth in the country for an extended period. The warning from the Washington-based agency emerges just as tensions between Canada and the U.S. over trade took a dramatic, negative turn, Paul Vieira reports. Last week, the Trump administration moved to place tariffs on steel and aluminum from Canada, as well as Mexico and the European Union, on national-security grounds. Canadian Prime Minister Justin Trudeau called the tariffs “insulting.” PEAK DOLLAR? The U.S. dollar surged from mid-April through the end of May, a monster rally that surprised investors and analysts. But now some market participants say they’re ready to call a top. The reasons: Europe is looking better. Eurozone inflation last month hit the European Central Bank’s target for the first time in a year, a possible cue for the ECB to withdraw stimulus. Italian tensions have faded. The euro has risen. Add some decent economic data from Asia, and that’s enough to convince some investors that the dollar’s rally is looking fragile, Saumya Vaishampayan writes. For the U.S. economy, a weaker dollar would be a mixed blessing: good for exporters, bad for consumers and a bit of fuel for inflation.
CHART OF THE DAY: OIL SPREAD In an open market, a commodity should sell at about the same price just about anywhere. The oil market shows how that’s not working. Global prices last week closed almost $11 a barrel above the U.S. benchmark—the widest in more than three years. Why? Congress lifted the ban on exports in 2015 but crude is still stuck in the country. Infrastructure bottlenecks in the most prolific shale fields have stopped up supply, and producers have little means to send it to the coast for shipping outside the U.S., Stephanie Yang reports. That may help consumers and hold down inflation, though it’s certainly no boon for U.S. drillers.
TWEET OF THE DAY
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WHAT ELSE WE’RE READING President Trump’s tariffs make perfect sense. The U.S. and other countries can either compete or cooperate. For decades, the U.S. cooperated, most nations grew richer and the U.S. came to dominate the global economy. Now, the U.S. wants to remain at the top rather than rise to the top. “Under these conditions, it is no longer in the interest of the U.S. to co-operate; as the global political and economic hegemon, the United States can win a strategic competition for wealth and power. Everyone ends up poorer, but the U.S. remains top dog,” Christian Leuprecht and Roger Bradbury write in Canada’s Globe and Mail. Air travel has gotten pretty unpleasant, right? The Roosevelt Institute’s Marshall Steinbaum says the coach-class misery is a symptom of broader issues. “By now the nature of the economy’s market power problem is clear: decades of lax antitrust policy have permitted a concentration of economic power in the hands of dominant corporations, their executives, and their boards of directors not seen since the Gilded Age,” he writes in Washington Monthly. UP NEXT: WEDNESDAY The U.S. trade deficit for April, out at 8:30 a.m. ET, is expected to hold roughly steady at $48.7 billion. The figure has become a key yardstick for the Trump administration as it looks to overhaul U.S. commercial relationships. U.S. productivity growth for the first quarter is expected to suffer a slight downward revision to 0.6% from 0.7%.  

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