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Illustration: Lazaro Gamio/Axios
New analysis shows that U.S. tariffs on Chinese goods are chipping away at the trade deficit with China. But there are other questions to answer when it comes to whether the tariffs are having their desired effect.
Are they reducing the U.S.-China trade imbalance? Yes.
After accounting for frontloading to get out in front of the tariffs early in the year, the rate of tariffed goods exported from China slowed, a new report from the Institute of International Finance shows, and will likely continue to slow without a resolution.
Are they helping American businesses? No.
Remember, U.S. companies that import Chinese goods pay the tariffs. When the full slate of tariffs went into effect in October, tariff collections topped $5 billion, the highest amount ever recorded. The amount of tariffs paid by these American companies has doubled since May, including an increase of more than 30% from August to October.
Businesses are not moving back to the U.S.
Have they hurt China? Sort of.
IIF's analysis of 7,000 individual products subject to new tariffs shows that there has been a measurable slowdown in purchases from both nations. However, both Chinese and American firms are largely finding substitutes or eating the price increases instead of passing them on to consumers, IIF economists tell Axios.
Who is benefiting? India, Brazil, Cambodia and other countries who can offer substitute products and locations.
"Tariffs reduce imports and, all else equal, reduce the U.S. bilateral trade deficit. The complication lies in the fact that China retaliates by reducing imports from the U.S., thus pushing up the bilateral deficit. In addition, the tax cut boosted domestic demand in the U.S. for imports from China and everywhere else. If tariffs hadn’t changed, the bilateral deficit would have likely widened anyway because of the tax cut.
"If tariffs remain in place in some sort of 'extended truce' we would see a more apparent decline in U.S. imports from China as frontloading will soon be water under the bridge. If all tariffs are removed (the consensus is that this is unlikely) chances are imports would normalize, reversing most of the decline we’ve seen so far.”— Gene Ma, Head of China Research, Institute of International Finance
S&P 500 executives are talking about a recession much more frequently than they were last year, Axios' Courtenay Brown reports.
What they're saying:
Last year, mentions hit a high with 194 in November. Before that, the number of mentions hit 360 in February of 2016, after widespread concern about slowing growth in China.
If history is a guide: S&P executives will ramp up talk about a recession when there's actually one underway — not beforehand.
The S&P 500 has risen more than 8% in less than a month and a half this year, but the benchmark 10-year Treasury note is almost unmoved from its Jan. 1 levels. That's a reversal from 2018 when bond yields jumped in tandem with stock prices.
What it means: This disconnect between stocks and Treasury yields reflects "the extent and speed and depth of the U-turn the Fed executed between December and January," Hill tells Axios.
Go deeper: This makes sense given that despite President Trump's tariffs on $250 billion worth of Chinese goods and a historically low U.S. unemployment rate, inflation has hardly budged. Both major metrics — CPI and PCE — were right around the Fed's 2% target in 2018. In fact, prices fell in December.
That puts the Fed in an interesting position. If economic data does start to improve and suggest inflation could rear its head, the Fed will need to raise interest rates.
But: "Even if the economy gets better in the short term, longer run growth and inflation expectations aren’t going to change," Hill says.
If longer-dated Treasury yields don't move and shorter-dated yields do because the Fed is hiking that will lead to a yield curve inversion, which has preceded every U.S. recession since 1955, with a lag time ranging from 6 to 24 months.
The 5 largest conglomerates combining health insurance and pharmacy benefits are on track this year to be bigger than the 5 preeminent tech companies, Axios' Bob Herman writes.
The big picture: Anthem, Cigna, CVS Health, Humana and UnitedHealth Group cumulatively expect to collect almost $787 billion in 2019, compared with $783 billion of projected revenue for Facebook, Amazon, Apple, Netflix and Google.
Yes, but: The tech companies cumulatively were 5 times more profitable than the health care companies in 2018 and are projected to be 3.5 times more profitable this year.
It's also worth remembering health insurance giants today do a lot more than just paying out claims for medical care and prescriptions.
History: Commonly known as the warrior queen, Queen Amina of Zaria was the first woman to be recognized as Sarauniya, or supreme ruler, of her people. As queen, she took command of an army of 20,000 men and is rumored to never have lost a battle.
In present day Nigeria, she expanded the territory of the Hausa people to its largest in history. She also made Zaria a center for international trade.
Amina also is credited with introducing the cultivation of kola nuts in the area. Her legendary stature and importance in Nigerian history led to the erection of the Queen Amina Statue at the National Arts Theater in Lagos State, and multiple educational institutions have been named after her.