August 30, 2018
Welcome to Axios World, where two evenings a week we break down what you need to know about the big stories from around the globe.
1 big thing: Trump’s trade deal before the trade war
The U.S. could well have a new trade deal by tomorrow, and a trade war of staggering proportions by next week.
The big picture: President Trump has been fighting on three fronts — contentious NAFTA negotiations, tariffs on allies in Europe and Asia with the threat of more to come, and a multi-pronged standoff with Beijing. The China dispute pits the world’s two largest economies against one another, and has by far the greatest stakes for the global economy.
- Gary Hufbauer of the Peterson Institute tells Axios that if Trump imposes fresh tariffs on $200b in Chinese goods, as Bloomberg reports he plans to as early as next week, “that will trigger a trade war with huge financial repercussions, because China will not back down.”
- Axios contributor Bill Bishop, who recently returned from Beijing, writes: “I consistently heard that Chinese President Xi Jinping and his advisers had decided U.S. trade pressure is just one piece of a multi-dimensional strategy to ‘thwart China’s rise,’ and so it made little sense to them to offer significant concessions.”
- Axios’ Jonathan Swan says Trump sees this as a winning issue and is not about to change course: “He believes in this. It’s like theology to him."
On NAFTA, Trump has reached a preliminary deal with Mexico, and wants Canada to come aboard by Friday so the agreement can be finalized before a new leftist government takes office in Mexico City.
Where things stand: Swan is hearing some confidence in the White House and doubts on Capitol Hill, while Canadian leaders have expressed cautious optimism. It would be a remarkable turn of events to see Canada, sidelined in the talks and anxious to stand up to Trump, come around so fast.
- Remaining sticking points include Canada’s protectionist policies on dairy and a controversial system for handling investor disputes. The U.S. has backed off nearly all its most hardline proposals.
- All that's really needed tomorrow is a three-way handshake. The parties would then have 30 days to iron out the details and keep the process moving toward a potential ratification vote next year.
- Behind the scenes: Swan reports that Trump is under pressure from Republican senators to get a deal — any deal — to show progress is being made. The senators, particularly those from farm states, feel Republican voters are willing to give Trump the benefit of the doubt for now, but are growing nervous.
Meanwhile, Trump today rejected an EU offer to bring all auto tariffs down to zero. The new auto tariffs he's threatening would hit Europe and Japan hard and, according to an analysis from the Peterson Institute, could cause 624,000 U.S. workers to lose their jobs and car prices to spike.
- Trump wants to move ahead on auto tariffs but is facing strong resistance within his administration and from the Hill, Swan reports. One GOP senator told Axios “the dam would break” in Congress if Trump pulled the trigger. The senator has expressed that to Trump.
- The fallout here would be orders of magnitude larger than what we saw over metals tariffs. “Neither Europe or Japan is going to roll over on autos the way Mexico basically has,” Hufbauer says.
Trump's view: “The European Union is almost as bad as China, just smaller."
2. Where America's immigrants come from
The share of the U.S. population made up by immigrants has returned to the levels at the turn of the 20th century — although the makeup of today's immigrant population looks very different, Axios' Stef Kight reports.
The big picture: Nationalist phobias prompted the original immigrant quotas in the U.S., according to Guillermo Cantor, research director at the American Immigration Council. There were fears that the number of Chinese coming to the U.S. for work would change the culture, or that German would become the dominant language in Pennsylvania. There are echoes of those sentiments in the current political climate.
3. Young Americans warmer on China
Young Americans have significantly more favorable views on China than their older cohorts, according to a new Pew survey.
Why it matters: Competition with China for supremacy in the economic, military and technological fields is ramping up, and could well define the decades to come. It’s therefore noteworthy, and a bit surprising, that young people are more likely to have positive views of the country.
- Attitudes toward China became sharply more negative during the 2012 election cycle, before ticking back up in 2017. China’s favorability in the U.S. now sits at 38%, down from 44% last year.
- The top issues: Americans are most worried about U.S. debt to China, cyberattacks, environmental harm, the loss of U.S. jobs to China and the trade deficit. Economic concerns have actually dropped significantly since 2012, perhaps due to an improving U.S. economy.
The big picture: According to a separate Pew survey, from last year, Americans are about evenly split over whether China will surpass the U.S. as the leading global superpower. In China, the vast majority believe U.S. dominance is coming to an end.
4. Emerging markets feel the heat
Argentina's central bank took drastic action in an attempt to shore up its collapsing peso today, hiking interest rates to a world-high 60% and sending shock waves reverberating throughout emerging markets, Axios' Zach Basu writes.
The big picture: Argentina's peso is the latest and heaviest shoe to drop in a year that has seen Turkey's lira, South Africa's rand, and other emerging market currencies struggle against a strong U.S. dollar, which has been bolstered by the Federal Reserve hiking interest rates. Now down 45% on the year, the peso has investors worried that instability in developing economies could spell broader trouble for global markets.
- Exports of goods among G20 countries shrank this quarter for the first time since Q1 of 2016, according to new data from the OECD. The slowdown can be attributed in part to the weakening of emerging market currencies
The bottom line: Argentina and Turkey are both in dire financial straits, but whether their domestic instability will have true international consequences still remains to be seen.
5. Africa: Europe a step behind China on engagement
With U.K. Prime Minister Theresa May and German Chancellor Angela Merkel making multi-country visits to Africa this week, and Chinese President Xi Jinping about to preside over a yearly China-Africa forum, GZERO Media's Gabe Lipton puts things in perspective in the latest Signal newsletter:
The U.K. is going global, alone: Theresa May's first ever trip to the continent as prime minister brought her to South Africa, Nigeria and Kenya.
- The purpose of the visit is to solidify British commercial ties in Africa as part of a broader post-Brexit “Global Britain” plan. Skeptics back home have pointed out that, collectively, the economies of May’s three stops are smaller than the Netherlands. It’s hard to see Africa making a big dent in Britain’s post-Brexit economic blues.
Germany is looking for a quick fix to a long-term challenge: Merkel's stops include Senegal, Nigeria, and Ghana.
- Her main aim is to negotiate the return of some of the 14,000 migrants from these three countries that currently reside in Germany without approval. Merkel, once the EU’s standard bearer in promoting development and investment to deal with the drivers of mass migration from Africa, has been forced onto the back foot by political forces in Germany and the EU.
China, A Grand Strategy: Then there is President Xi, fresh off a trip to Africa and now preparing for the opening of a summit that brings representatives from 53 of 54 African nations to Beijing
- In recent years, Chinese trade with region has ballooned — hitting $170 billion last year, four times larger than that between the U.S. and Africa.
- Initially reliant on Africa for commodities exports, China has since expanded its investments into sectors such as construction and telecommunications. Despite some recent pushback, it has built ports, laid down miles of new railways, and established a bigger military foothold.
The bottom line: As Africa’s global economic and strategic footprint continue to grow, more countries will be eager to court new opportunities there. The latest diplomatic flurry suggest that China, with its steady hand and long-term thinking, will continue to overshadow other contenders across the continent.
6. Latin America: Nicaragua's human rights crisis
The UN Human Rights Office has accused the Nicaraguan government of violating international and human rights laws in a scathing report, Mateo Jarquín of Harvard University writes for Axios Expert Voices:
- After massive street protests shook the foundations of President Daniel Ortega’s authoritarian regime in April, police and armed parapolice groups cracked down with disproportionate force, including extrajudicial killings, forced disappearances, sexual violence and torture.
- The UN says that Nicaragua’s political crisis has left at least 300 dead and 2,000 injured, among a population roughly equal to that of the D.C. metro area. U.S. and Latin American diplomats worry that the instability could spawn a refugee crisis and create a power vacuum that might be filled by transnational organized crime groups.
- The latest: The UN Human Rights Office has called on the Ortega regime to cease the repression and disband the parapolice forces. More notably, it has urged the UN Human Rights Council to consider creating an independent probe into the matter. Such an extraordinary step, if taken, would elevate the crisis in Nicaragua to the same symbolic level as other, more well-known cases — such as Syria's and Gaza's — that have recently been the subject of UN inquiries.
What's next: Talks between the government and opposition groups have stalled, but increased international scrutiny and diplomatic isolation could help push Ortega back to the negotiating table.
7. Stories we're watching
- Pompeo seeks to dial down tensions with Moscow ahead of new sanctions.
- Putin softens position on retirement reform ahead of protests.
- Trump administration signals potential U.S. reset on Israel–Palestine.
- Iran still complying with nuclear deal.
- Myanmar military tightens hold on civilian government.
- Trump says joint Korea military exercises are still off the table.
- Go deeper: The EU-Italy migrant standoff.
"If they want to see me as their main opponent, they’re right."— Emmanuel Macron on populist leaders in Hungary and Italy.
Thanks for reading — see you Monday evening!