China is sending a top-level trade delegation to the U.S. to continue negotiations over tariffs and trade; Europe’s slowdown began to show; why Venezuela’s military is staying loyal to Maduro – so far.
“[Spain has] lost a decade. We have the obligation to win the one ahead.”
U.S. – China trade talks: Next round
Hopes for a thaw in the prolonged U.S.-China trade stalemate rose in early January, when Vice Premier Liu He unexpectedly attended a trade negotiation session in Beijing. Mr. Liu is China’s highest-ranking official to attend this series of meetings, suggesting tariff and trade issues are now meriting greater attention.
Vice Premier Liu is scheduled to make another appearance in trade negotiation meetings later this week, as leader of his country’s delegation to Washington. The current willingness of the U.S. to engage in a high- profile session led to speculation that some form of agreement is in the offing.
Europe: Creeping funk
Sentiment on the part of corporations in Germany fell for the fifth time in a row in December, according to the highly-regarded Ifo Institute. The main issues surfaced in the Ifo survey were uncertainties in trade and increased concern about China’s economy. “Disquiet is growing among German businesses,” said Ifo President Clemens Fuest.
The concerns were consistent with recent economic results. Germany’s economy contracted 0.2% in Q3, though this was mainly about newly restrictive auto emissions standards. Results for Q4 should be released this week; Germany’s central bank published its expectation that the “German economy should have grown again in the final quarter of 2018, albeit only at a muted pace.”
More broadly, European Central Bank (ECB) President Mario Draghi sounded downbeat during this most recent ECB monthly press conference. The sentiment was echoed by ECB Executive Board member Benoit Coeure, who said the persistent weakness in Europe “has surprised us” and may have changed the ECB’s plans to raise rates later this year -- but, in his words, “it’s too early to have that discussion because we’re still understanding the nature of the shock.”
Venezuela: Sticking with the plan
The continued willingness of the military to support Venezuela’s Nicolás Maduro amid the country’s economic collapse has attracted renewed attention after National Assembly President Juan Guaido declared himself as interim head of state, gaining the explicit support of the United States.
Other countries, including Russia and China, had the opposite reaction. That’s not a complete surprise, since the two powers have been supporting Venezuela’s dominant public-sector economy by extending billions of dollars of credit, via purchasing Venezuela’s bonds. That credit extension helps the two countries maintain and extend their influence in Central and South America, and helps ensure the support of certain public-sector groups – especially the military – who, as a result, are relatively insulated from the economic disasters befalling the rest of the economy.
All Data Source: Bloomberg, as of Jan 25, 2019 unless otherwise noted.
The Ifo Institute for Economic Research is one of Germany's largest economic think-tanks. Ifo is an acronym from Information and Forschung (research).. Ifo is widely known for its monthly Ifo Business Climate Index.