-US hiring weakened from June
-Trade wars are difficult to win
Tariff man strikes again. The Canadian prime minister on Thursday questioned why the Trump administration was again slapping tariffs on aluminum. On China, the US president said Chinese technology, namely the popular TikTok app, was a threat to national security. A Chinese response to this administration’s stance toward Beijing, meanwhile, bordered on shaming. With tensions rising in Lebanon, it would be no real surprise to see Iran testing any opening from the departure of Trump’s top policy man on Tehran. Against the backdrop of diplomatic tensions and Brent was moving lower in early Friday trading, as the US economy weakened further in the pandemic. But despite a steady string of dismal economic reports, the global benchmark for the price of oil is on pace for a gain of 3% on the week.
The price for Brent crude oil was marching steadily lower early in the Friday session. A strong opening in the previous session fizzled along with prospects for another round of federal stimulus in the US economy. Brent was down 1% as of 8 a.m. ET to strike $44.62 per barrel.
The growth in non-farm payrolls in the United States slowed as many states extended restrictions meant to control the spread of the coronavirus. Payrolls were up last month by 1.78 million, better than the expected 1.48 million, but far below the 4.8 million additions in June. The pandemic has become largely politicized in the United States, pitting personal liberties against state-mandated quarantine orders. Those divisions have left the US economy reeling. Private payroll processor ADP reported hiring last month was exceptionally weak, while Challenger, Gray & Christmas warned of a prolonged contraction. Some parts of the US economy, particularly the leisure and retail sectors, might have to wait years to return to pre-pandemic levels. Based on the actions of the political class, however, there is no real sense of urgency. Parties engaged in negotiations over a new round of stimulus remain far apart, with issues like funding for the US Postal Service and other non-economic measures clogging the wheels of bureaucracy.
To compound the issue, President Trump returned to the tariff arsenal as a means to punish economies accused of exploiting US relations. On Thursday, the president said he was taking the advice from US Secretary of State Mike Pompeo that Canada was dumping aluminum on the US market to the detriment of national security. So-called 232 tariffs, based on national security concerns, were used in the past to target steel imports in a bid to boost US manufacturing, though tariffs are tricky. For the energy sector, few US plants are designed to make the type of steel used in oil and gas pipelines, creating a rob-Peter-to-pay-Paul situation. Canadian Prime Minister responded to the renewed tariffs by saying there was no justification for the move, while the US Chamber of Commerce warned of economic blowback.
On his continued assault on China, and after a week of threats, the president signed an executive order designed to ultimately block access to the TikToc application in the United States. Trump in his executive order suggested that data-collection methods grants China access to personal and proprietary information, ”potentially allowing China to track the locations of Federal employees and contractors, build dossiers of personal information for blackmail, and conduct corporate espionage.” The company stated the accusations were baseless, adding it has tried to find a negotiated solution that addresses the administration’s concerns “for nearly a year” without a meaningful response. On US tactics in general, Yang Jiechi, the director of the Communist Party’s foreign affairs office, said the pressure campaign was detrimental to progress made since US President Richard Nixon embarked on a policy of détente in the 1970s.
“We must never allow a handful of self-serving US politicians to push the relationship into serious jeopardy,” his letter read.
With the US and global economies on their heels, tariffs can only be seen as a political tool. In Europe, a handful of right-leaning US lawmakers warned Germany it would face “crushing legal and economic sanctions” if progress continued on the second leg of the Nord Stream gas pipeline from Russia. The threat was made against a German port company, not the consortium members behind the project. The first leg of the pipeline was lauded because it protected European energy security from risks in Ukraine, through which a vast network of Soviet-era pipelines traverse. The rise of US LNG exports, however, changes the equation and Trump’s political supporters now see pressure on Nord Stream as a containment strategy of sorts. Targeting a legacy US ally, however, is questionable policy, particularly at a time when US influence is under question in the global community.
And on geopolitical issues, cries for change in the Lebanese political arena have become more amplified as the dust settles from Tuesday’s devastating blast at the Beirut port. More than 100 people are dead from an explosion of a vast cache of ammonium nitrate. Government neglect was raised as an initial point of blame, though Lebanese President Michel Aoun said Friday there “is a possibility of external interference through a rocket or bomb or other act.” The explosion took place amid heightened tensions between Israel and Hezbollah’s paramilitary forces and days before a special tribunal was expected to finger loyalists to the Iranian-backed organization for the assassination of former Prime Minister Rafic Hariri. French President Emmanuel Macron this week suggested Paris would come to the rescue of its former colony. From the US perspective, with Iran policy falling into the hands of US special envoy to Venezuela Elliot Abrams, expect Tehran to work to capitalize on any influence it has left in the Shiite Crescent.