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Buildings seen from Lake Ontario along the skyline of the city of Toronto, Ontario, Canada, on July 01, 2023.
Bank of Canada slashes interest rate, warns of tariffs
The Bank of Canada cut interest rates by half a point to 3.25% on Wednesday to kickstart some growth in the Canadian economy. Gov. Tiff Macklem indicated that further cuts would be more gradual.
Macklem said the outlook for the Canadian economy was uncertain, in part because President Donald Trump has threatened to impose tariffs on Canadian imports.
“If those things happen, they will have a big impact on the Canadian economy and will dramatically impact our forecast,” he said. “Let’s hope that does not happen.”
Bank of Nova Scotia economist Derek Holtsaid the rate cut was so steep that it seemed “like an apology note” after slowing the economy with earlier inflation-fighting increases.
Canada's economy has been shrinking on a per capita basis for six quarters, with most growth associated by an immigration-driven population increase. Figures released last Friday showed the unemployment rate rose to 6.8%, up from 6.5%.
But Macklem said Canada is not in a recession: “We’ve not seen widespread lay-offs or widespread job losses typically seen in a recession.”
Justin Trudeau welcomed the rate cut, clearly hoping to avoid more economic bad news while his Conservative opponents prosecute him as a hapless economic leader.
Skyline von Bangkok Skyline von Bangkok. Panorama von Chinatown. Bangkok, Changwat Bangkok, Thailand, 26.01.2024
Thailand set to hand out $13 billion to citizens
Thai Prime Minister Srettha Thavisin announced Monday that citizens will be able to register for a digital wallet handout starting in August that will give about $275 each to 50 million people. It’s the latest in a series of populist policies put forward by the ruling Pheu Thai party, which cut a deal with the military to take power last year.
The idea is to offer folks an incentive to download the new digital wallet. Digital currencies are issued by a country’s central bank and function just like the fiat money you use every day. There are pilot programs in the EU, China, India, Saudi Arabia, and many other countries.
The government claims this handout, equivalent to roughly 66% of the average monthly income in Thailand, will help grow the economy by about 1.6%. The program is restricted to Thais who earn less than $23,000 a year (about three-quarters of the population) and they’ll have to spend it in small shops near their homes. But the Bank of Thailand has concerns – as do many economists, as it will push the debt-to-GPD ratio past 66% and increase the fiscal deficit.
That may be a risk Srettha is willing to run, considering his approval rate hovers around 12.85%. His efforts to pass popular policy, including a recriminalization of cannabis, and legalization of same-sex marriage, have done little to erase the stain Pheu Thai acquired by siding with the military to push out the Move Forward party, who won the largest share of seats in 2023. We are watching whether handing out cash can reverse his slide.Japan's Foreign Minister Yoko Kamikawa and Philippine's Defence Minister Gilberto Teodoro shake hands after signing the reciprocal access agreement, at the Malacanang Palace in Manila, Philippines, July 8, 2024.
Can Japan afford to muscle up?
Japan and the Philippines signed a new defense pact on Monday, allowing the mutual deployment of forces to each other’s territory for training – part of a larger mutual effort to stave off China. But while Tokyo’s diplomats are sealing deals with much-needed allies, its defense officials are stressing that a weak yen threatens to eat up their budgets.
Before the Filipino deal, Prime Minister Fumio Kishida reached similar defense agreements with Australia and the UK, and he has established historically warmer ties with South Korea, improving political and military cooperation. He is also trying to double defense spending by 2027, which would make Japan the world’s third-largest military spender. So why is Tokyo slashing orders for new airplanes and warning of more cuts?
US President Joe Biden waits to welcome President William Ruto of Kenya to the White House in Washington on May 22, 2024.
It’s Biden’s economy, stupid
The United States is plagued with a “vibecession” — where confidence in the economy is at stark odds with the actual data.
A new Harris poll forThe Guardian shows nearly three in five Americans believe the economy is shrinking and in recession. Nearly half of those polled also believe US unemployment is at a 50-year high.
But none of that is true.
So why the disconnect?
Much of the bad vibes are lingering from America’s post-COVID economic recovery. The US generally bounced backbetter than its peers, but inflation is still squeezing average Americans while the Federal Reserve is keeping interest rates high. Even if the stock market and GDP reachnewheights, so is Americans’ cost of living — and at a time when it costs more to borrow.
Another vibecession culprit: politics, baby. OneYouGov poll shows the percentage of Republican respondents who thought the economy was improving dropped from 64% in November 2020 to 6% after Biden’s inauguration in January 2021. Unsurprisingly, Democrats’ views on the economy also shot way up after Biden took office, without much changing economically.
If Americans’ perceptions of the economy are deeply entrenched with their political affiliation, is there anything Biden can do ahead of November’s election? His administration is working to bring downgas prices and slashstudent debt. But as long as prices and interest rates stay high, he may have a hard time swaying voters’ historically low confidence in his ability to do the right thing for the economy.Tesla CEO Elon Musk steps out of a vehicle, during his visit to China, in Beijing, China, April 28, 2024, in this screen grab taken from a video.
Beijing gives Blinken cold shoulder, extends warm welcome to Musk
Last week, US Secretary of State Antony Blinken made a high-profile visit to China, marked by terse talk and some tough symbols. Two days ahead of Blinken’s arrival, China launched a submarine-based ballistic missile test, and as he departed, the Chinese air force flew jets over the Taiwan Strait. Beijing was not amused by the US Congress passing a supplemental spending bill last week, including billions in military assistance to Taipei.
In contrast, Tesla founder Elon Musk's surprise visit starting Sunday was all smiles. Musk posted to X about the honor of meeting Chinese Premier Li Qiang, who heralded Tesla as a pillar of US-China economic cooperation. Tesla has sold more than 1.7 million cars in China since it entered the market a decade ago, and its largest factory is in Shanghai.
Musk wants to roll out Tesla’s Full Self-Driving technology in China before Chinese automakers deploy similar capabilities. Musk is also seeking approval to transfer data collected in China to the US to train algorithms for FSD tech. Market watchers called the unexpected visit "a major moment for Tesla" as the company struggles with layoffs and slumping sales.U.S. Secretary of State Antony Blinken arrives at the Beijing Capital International Airport, in Beijing, China, April 25, 2024.
Blinken meets with Xi, but no breakthroughs
US Secretary of State Antony Blinken brought up concerns over China's support for Russia with his counterpart Wang Yi in Beijing on Friday, before meeting with Chinese President Xi Jinping. Blinken’s visit is largely meant to advance the mutual goal of stabilizing the relationship, and Xi said he wants to be "partners, not rivals" with the United States.
As Blinken landed in Shanghai for the first leg of his trip earlier this week, the Biden administration signed bills providing Taiwan with $8 billion in military aid and starting a process that could result in a ban of the popular video app TikTok in the US unless its Chinese owner, ByteDance, sells. The day before, the State Department released its annual human rights review, which criticized Chinese treatment of Muslim minorities.
Once he landed, Blinken pressed Shanghai Communist Party Secretary Chen Jining on treating US companies fairly. Meanwhile, he told students at NYU’s Shanghai campus that the cultural ties being built between both countries are of utmost importance.
Despite the many possible pratfalls during the first leg, China’s response has been fairly milquetoast. Spokesperson Wang Wenbin said, “We hope that the US side will respect the principle of fair competition, abide by WTO rules, and work with China to create favorable [trade] conditions.” Hardly “Wolf Warrior” stuff, and Wang said Friday that ties are “beginning to stabilize.”
Graphic Truth: Are Canada and the US narrowing the gender pay gap?
Despite lofty rhetoric about equality from politicians in Washington and Ottawa, the US and Canada are trailing behind several of their G7 counterparts (though both far ahead of Japan) when it comes to progress made in narrowing the gender pay gap over the past two decades or so, OECD data shows.
Women working full-time in the US make 84 cents for every dollar men make, according to the Census Bureau. Canadian women make 88 cents for every dollar men make, per the Canadian Chamber of Commerce.
Since 2002, the gender wage gap — defined as the difference between median earnings of men and women relative to median earnings of men — has declined in the US from 22.1% to 17%. During the same period in Canada, it declined from 24% to 17.1%.
Are the US and Canada doing enough to narrow the gender pay gap?
U.S. Treasury Secretary Janet Yellen meets Chinese Premier Li Qiang at the Great Hall of the People in Beijing, China, April 7, 2024.
EVs, economics, and a warning from Yellen in China
During her weekend visit to Beijing and Guangzhou, US Treasury Secretary Janet Yellen emphasized that the US-China relationship is on a "more stable footing" – but there are still imbalances to address.
Chief among them: China's industrial overcapacity and its effects on the global economy. Yellen and Chinese Vice Premier He Lifengagreed to kickstart formal talks to address China’s growing overproduction of electric vehicles and solar panels, which the US says is distorting global markets and undercutting American jobs.
“We can only make progress if we directly and openly communicate with one another,” Yellen said. Chinese Premier Li Qiang called for a market-oriented view of production capacity, including cooperation in the green and low-carbon energy transition and a potential partnership to address environmental challenges.
Tough talk on Russia: Yellen dropped the diplomatic gloves when it came to Beijing’s economic and military partnership with Russia.
"We've been clear with China that we see Russia as gaining support from goods that Chinese firms are supplying to Russia," she declared, warning of "significant consequences" for any material support lent to Russia’s war efforts against Ukraine.
We’ll see if this changes China’s tune like it did after Russia’s invasion in 2022, when US officials say their strong warnings prompted Beijing to walk back plans to provide military equipment to Moscow.