Should the U.S. Drop Tariffs on China?

This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here.

The Trump administration is formulating its negotiating strategy with China as the next round of talks approaches.

Good morning. Jeff Sparshott here to take you through key economic developments, including the latest with China, mixed signals on global growth, why every state should be more like Utah, Tesla's job cuts, how a higher minimum wage affects job creation, and the latest on the partial government shutdown. Let us know what you think...


U.S. officials are debating whether to ratchet back tariffs on China to help calm markets and strike a long-term a trade deal. Treasury Secretary Steven Mnuchin proposed the idea but faces resistance from U.S. Trade Representative Robert Lighthizer, who is concerned that any concession could be seen as a sign of weakness, Bob Davis and Lingling Wei report.

Push and pull: In past China discussions, President Trump has sided with Mr. Lighthizer, who favors removing tariffs only after China has carried out promises made during the talks. But this time, the president has made clear he wants a deal—and is pressing Mr. Lighthizer to deliver one.


The next round of talks is set for Jan. 30 in Washington with top Chinese trade envoy Liu He. The sides face a March 1 deadline. At 12:01 a.m. the following day, tariffs on $200 billion of Chinese goods are scheduled to jump to 25% from the current 10%. The higher levies could batter U.S. importers and further harm an already weakening Chinese economy.


U.S. and Chinese trade officials are in talks to reopen China’s market to U.S. chicken exports as they seek to forge a new trade deal. The negotiations are part of efforts to resolve broader U.S.-China trade disputes over market access, intellectual-property protections and other matters, Jacob Bunge and Lingling Wei report. China represented hundreds of millions of dollars in annual sales before a ban was implemented in 2015 in response to an outbreak of avian flu in the U.S.


Japan's Nidec Corp. slashed its earnings forecast and blamed the U.S.-China trade conflict for a sharp slowdown in Chinese demand. “I’ve been a manager for almost half a century, but this is the first time I’ve seen such a large single-month drop in orders for us,” said Nidec Chief Executive Shigenobu Nagamori. “What we witnessed in November and December was just extraordinary.”

Nidec is a bellwether for the global economy as a supplier of components for Apple smartphones and other consumer products. The company’s gloomy outlook is another sign of turbulence and could presage more disappointing results in the earnings season ahead, Takashi Mochizuki reports. 


Airlines are providing an early glimpse into the health of the global economy, where growth appears robust in the U.S., a bit less so in Europe. United Airlines in particular had a positive message: Business bookings—large corporate accounts and travel agencies—were up 11% in the first week of the year, Jon Sindreu reports. This is a “reasonably good forward indicator for the health of the economy” because “business customers are back in the office and planning business trips,” company President Scott Kirby said.


Economic growth is a function of gains in the number of workers and their productivity. More workers means more output, income and consumer spending. By those measures, Utah is on a roll and the country is on a slog. The state’s labor force has grown at more than triple the nation’s 0.6% pace. Its workforce is more educated, making it more productive and thus appealing to many employers, Sarah Chaney and Sharon Nunn report.

The result: Utah's economy is growing faster than the national average. If other states want to catch up, they're going to need more workers. 


House Democrats this week introduced a bill to raise the federal minimum wage to $15 per hour by 2024. The proposal won't get through the Senate or White House but it adds to the worker wage debate. Here’s what some of the latest research shows:

Raising the minimum wage leads to higher pay, not fewer jobs. "Low-wage workers saw a wage gain of 7% after a minimum wage increase, but little change in employment," Doruk Cengiz, Arindrajit Dube, Attila Lindner and Ben Zipperer find in a new working paper. The results, based on jobs and pay linked to 138 different minimum wage changes from 1979 to 2014, suggest that jobs below the minimum wage are essentially replaced by jobs at or above the new pay floor. That runs counter to some other research that’s found higher mandatory pay either destroys jobs or locks low-wage workers out of the labor market. One caveat: The research is based on wage hikes so far: “The employment consequences of a minimum wage surpassing the ones studied here remain an open question.” —Jeffrey Sparshott 


Tesla is cutting its full-time workforce by 7% as part of an effort to lower costs so the company can sell the Model 3 sedan at a lower price, Tim Higgins reports. “Tesla will need to make these cuts while increasing the Model 3 production rate and making many manufacturing engineering improvements in the coming months,” Chief Executive Elon Musk told employees.


  • Unpaid federal workers are turning to food banks. In one recent example, Utah Lt. Gov. Spencer Cox called for more donations: "Hey friends, because of the Govt shutdown we have over 10,000 furloughed employees that are struggling right now. Many of them have are filing for unemployment and may need our help."
  • The shutdown has cost the Washington, D.C.- region's transit system $400,000 a day because of decreased ridership.
  • The State Department is calling furloughed employees back to their jobs.
  • The White House said it won't send a delegation to the World Economic Forum in Davos, Switzerland.
  • President Trump denied House Speaker Nancy Pelosi military travel to visit troops in Afghanistan.

Follow the WSJ's live coverage for the latest developments here.


John Bogle has saved investors more than $1 trillion. "It isn't an overstatement to say that few in modern finance did as much to change the industry as Bogle. If you look at a list of the major trends in money management today, most of them lead back to him," Bloomberg Opinion's Barry Ritholtz writes in a tribute to the recently deceased Vanguard Group founder.

The U.S. leads the world in punishing corruption, money-laundering and sanctions violations. "America has much to be proud of as a corruption-fighter. But, for its own good as well as that of others, it needs to find an approach that is more transparent, more proportionate and more respectful of borders. If it does not, its escalating use of extraterritorial legal actions will ultimately backfire," The Economist writes.

Article source:

Share Your Own Perspective on the Forum!

Visit the FLI Forum Now

Reset Password