Trump sits pretty as trade wars and political crises hit
Business Week: Warnings from Soros and the OECD, and news on property
US president Donald Trump placed tariffs of 25 per cent on steel and the 10 per cent levy on aluminium.
“FAIR TRADE!” screamed a tweet from you-know-who at about 10.30pm on Thursday.
US president Donald Trump, who is known for neither his grasp of nuance nor a thirst for detail, appeared to be summarising the upshot of his decision to slap tariffs on steel and aluminium imports, which would come into effect at midnight that night.
The tariffs of 25 per cent on steel and 10 per cent on aluminium immediately renewed fears of a transatlantic trade war, with the European Union vowing to retaliate, while the Department of Enterprise warned Irish companies would be hit.
The levies were also placed on Canadian and Mexican metal imports, complicating ongoing talks on the North American Free Trade Agreement between the US, Mexico and Canada.
In military terms, there is an old rule of thumb that you shouldn’t open up a two-front war, but Trump had no such concerns, announcing plans to proceed with tariffs on $50 billion worth of Chinese imports, rebooting the trade war with that country that he had put “on hold” a fortnight ago.
The new tariffs came as critics in Congress attacked Trump for softening his approach to ZTE, the Chinese telecoms group, after president Xi Jinping said his earlier punishment would cost thousands of jobs.
Interestingly, Ivanka Trump won approval from Beijing for five new trademarks – potentially worth millions of dollars – as her father made the announcement, sparking further questions about conflicts of interest at the White House. But never fear, Chinese state-media said it was “highly likely to be just a coincidence”.
This week’s instability wasn’t confined to Trump’s actions. A political crisis in Italy sent stock markets tumbling and yields on Italian notes skyrocketing.
The crisis was triggered when Italy’s president Sergio Mattarella effectively blocked a populist alliance from taking power by vetoing the nomination of its eurosceptic economy minister.
The crisis abated by the end of the week as Mattarella agreed to a revised slate of ministers and the selection of political newcomer Giuseppe Conte as prime minister, but not before much damage had been done.
All of this no doubt contributed to an intervention from investor George Soros, who warned that another “major” financial crisis may be on the way.
The last time the Organisation for Economic Cooperation and Development (OECD) warned about the possibility of a housing bubble in the Republic was in June 2006 when the State was the verge of the financial crash.
The government didn’t listen to the Paris-based agency on that occasion, and we all know what happened next. Woe betide the current occupants of Government buildings should it make the same mistakes.
The OECD this week said signs of overheating have begun to emerge in the economy, with new mortgage loans and loans to small firms – largely driven by construction-related activity – up sharply in recent months.
It said the Central Bank’s lending restrictions, such as the loan-to-value and loan-to-income caps, had reduced the share of risky loans, but that they may need to be extended to cool the current level of credit growth.
Potential future problems at home, so, but the Government dare not take its eye off the Brexit talks, with more sparring this week between the UK and the EU.
EU chief negotiator Michel Barnier’s called on Britain to stop playing “hide and seek” and decide on a realistic exit policy, while his British counterpart David Davis accused the EU of “public posturing” that was putting the security of citizens at risk.
Later in the week, there were reports that Davis is putting together a Brexit plan that would give Northern Ireland joint UK and EU status so that it could trade freely with both, as well as a buffer zone to eliminate the need for border checkpoints at the Border.
Meanwhile, the race to diversify our exports continues, with a new report from Bord Bia this week showing that half of the growth in the Republic’s agrifood export volumes last year came from markets outside of Europe, led by a sixfold increase in exports to China.
You might be forgiven for thinking that the State might be spared the indignity of having to deal with a possible property bubble at the same time as it grapples with a housing crisis – but that, it seems, is where we find ourselves.
This could be down to the fact that at least 334 sites or buildings controlled by the Government are currently lying idle across the Republic, according to research carried out by The Irish Times this week.
It showed that bodies falling under the control of Government departments are sitting on vast swathes of land – 141 acres in one case – some of which has been unused for more than 30 years.
The worst offender is the Health Service Executive, which is holding 137 unused buildings or vacant land parcels. The other 197 sites are shared between bodies controlled by nine different Government departments.
Efforts to boost supply are continuing though, with Cullaun Capital, a new fund that plans to lend to property developers, setting a target of financing the building of thousands of homes in the Republic within the next three years.
Meanwhile, nearly 4 per cent of Irish mortgages taken out before the crash could default in the event of a financial shock, research published by the Central Bank suggested. It looked at what might happen in a scenario where there was a 4 per cent decline in property prices, a 1.1 percentage point rise in interest rates and a 3.3 per cent rise in unemployment over three years.
Separately, April’s figures from the Banking & Payments Federation Ireland showed the number of mortgage approvals rose more than 14 per cent in the previous 12 months. The value of mortgages was up almost 20 per cent in the year.
International developer Hines got planning permission to build its 2.1 million sq ft town centre at Cherrywood, which will include almost 1,300 apartments, office and retail space, and cost €1 billion.