Trump and Biden offer clashing visions for economy

The proposed economic policies of President Donald Trump and Democratic challenger Joe Biden offer starkly different views of the world’s largest economy. (AFP)
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Updated 05 October 2020

Trump and Biden offer clashing visions for economy

  • The two men’s platforms appear aimed at benefiting different sectors of the economy

WASHINGTON: One US presidential candidate wants to raise taxes, the other lower them. One will pursue an ongoing trade war, the other may throttle back tensions. And neither will get much done without Congress’ approval.

The proposed economic policies of President Donald Trump and Democratic challenger Joe Biden offer starkly different views of the world’s largest economy and its global role, ahead of the tense Nov. 3 election.

Biden’s agenda is aimed at poorer Americans and includes a number of policies that would mark a sharp departure from Trump’s time in office, while building on the policies of Barack Obama, whom he served as vice president.

Trump, by comparison, has offered what analysts complain are few details on his plan, other than a vow to bring back the comparatively good economy and the record low employment Americans experienced until March, when the pandemic ended that.

“I would categorize the Biden plan as really being about an expansion of existing social programs,” said John Ricco, a senior analyst at the University of Pennsylvania’s Penn Wharton Budget Model.

“In contrast, the Trump plan, to the extent that such a plan exists, is ... sort of taking the same themes that the administration pursued in the last four years.”

The extent to which either candidate can get what they want will depend on which party controls Congress, which is currently split between the Republican-controlled Senate and the Democrat-controlled House.

With polls showing the former vice president ahead and many key Senate races leaning toward the Democrats, analysts are cautiously warming to the possibilities offered by a Biden victory — assuming Democrats win the Senate.

“Democratic control of the House, Senate and White House would produce the largest changes in policy, but if Republicans retain the Senate or White House, we expect limited new federal policies, fiscal or otherwise,” JP Morgan said in a note.

Biden’s economic platform has centered on the slogan of “build back better,” with promises of creating jobs via infrastructure and clean-energy improvements funded by $4.1 trillion in taxes over the next decade, most of it levied on big business and the rich.

Trump has vowed to restore what he calls “the greatest economy in history,” the period from his 2017 inauguration up until March; after a decade of economic expansion, unemployment was at a 50-year low.

Polls have shown voters thus far siding with Biden as the US grapples with the world’s worst coronavirus disease (COVID-19) outbreak. Then on Friday the race was upended when Trump reported he had contracted the virus.

The two men’s platforms appear aimed at benefiting different sectors of the economy, said Mark Zandi and Bernard Yaros, economists at Moody’s Analytics.

Biden’s platform is targeted at the poor and middle class, whose “tax bill will remain roughly the same as it is today, but they are significant beneficiaries of increased government spending on education, health care, housing, a plethora of other social programs and a larger economy,” Zandi and Yaros wrote.

A Trump presidency would likely see the extension of tax cuts passed by Congress in 2017, and “the benefits largely go to higher-income households and businesses, while government spending is scaled back on health care and a range of social programs,” they wrote.

If the Democrats manage to take Congress and the White House, Moody’s predicts that full employment, as seen before the pandemic, could return as soon as the second quarter of 2022. If Republicans get the same control, full employment would be restored only in early 2024.

However, Moody’s most likely scenario is that neither Trump nor Biden wins the White House and Congress, and employment is not restored until sometime in 2023.

While much of their economic policies are aimed at winning individual Americans, businesses are eyeing the two candidates’ differing approaches to trade and in particular to China, with which Trump has pursued a trade war.

More than 3,400 businesses from all sectors, including heavyweights like Tesla, Mercedes-Benz, Home Depot and Ralph Lauren, have sued the Trump administration over customs duties on Chinese exports to the US.

A President Biden could reverse those policies, but Ricco points out that he may only go so far.

“Both candidates are envisioning a platform in which there’s a lot more skepticism toward free trade,” he said. “The tools to get there are different.”

EU proposes six-month tariff freeze with US

Updated 10 April 2021

EU proposes six-month tariff freeze with US

  • Brussels seeks compromise in 16-year-old dispute over aircraft subsidies

BERLIN: The EU has suggested that it and the US suspend tariffs imposed on billions of dollars of imports for six months, EU trade chief Valdis Dombrovskis was quoted as telling Germany’s Der Spiegel on Saturday.

That would go beyond a four-month suspension agreed to last month, and send a signal that Brussels is seeking compromise in a 16-year-old dispute over aircraft subsidies.

The dispute about airplane subsidies is one of two ongoing trade fights with Europe. Former US President Donald Trump in 2018 imposed a tariff on steel and aluminum imports, using an obscure provision of US code that allows him to do so on issues of national security. 

European leaders, whose manufacturing industry was hit hard by the measures, decried the reasoning because most of them are longtime US allies. The EU imposed a retaliatory set of tariffs that same year.

The two sides exchanged proposals for a solution but disagreements over ensuring future compliance and aid repayment derailed efforts. The US offered a truce on Oct. 14, 2020 if Airbus agreed to repay state loans at a level of interest assuming a 50 percent product failure rate; however, the EU declined and decided to move forward with tariffs. 

“We have proposed suspending all mutual tariffs for six months in order to reach a negotiated solution,” Dombrovskis told the news magazine.

“This would create a necessary breathing space for industries and workers on both sides of the Atlantic,” he added.

In March, the two sides agreed on a four-month suspension covering all US tariffs on $7.5 billion of EU imports and all EU duties on $4 billion of US products, which resulted from long-running World Trade Organization cases over subsidies for planemakers Airbus and Boeing.

Dombrovskis also said the EU would closely monitor US President Joe Biden’s “Buy American” laws which provide for US public contracts to be awarded exclusively to American firms.

“Our goal is to push for procurement markets that are as open as possible all over the world,” he told Der Spiegel.

Saudi Credit Bureau issued 116m reports in 16 years

Updated 10 April 2021

Saudi Credit Bureau issued 116m reports in 16 years

  • SIMAH plays an important role in helping consumers, corporates, and SMEs obtain financing
  • Its credit data on individuals and corporate borrowers helps remove the uncertainty that has traditionally been associated with lending

RIYADH: The Saudi Credit Bureau (SIMAH) issued more than 116 million credit reports to the Saudi market since its establishment in 2004 until the end of December 2020, helping its members identify their customers’ credit behavior and bring more transparency to the Kingdom’s lending system.
Over the same period, the size of SIMAH’s database of consumers rose to around 18 million — individuals and companies. The number of credit scores it provided between 2018 and 2020 amounted to over 28 million.
SIMAH plays an important role in helping consumers, corporates, and small and medium-sized enterprises obtain financing.
Its credit data on individuals and corporate borrowers helps remove the uncertainty that has traditionally been associated with lending.
The new data comes as SIMAH launched its latest awareness campaign Amwalk-2. The financial literacy program is designed to help all segments of society achieve their financial goals, reduce defaults and enhance the culture of savings.
With Amwalk-2, SIMAH aims to shed light on issues related to financial and credit aspects of individual consumers, in an effort to raise the level of financial literacy and introduce consumers to the importance of financial planning.
It also aims to enhance the essential role of SIMAH, being the first licensed credit bureau in the Saudi market, in helping consumers assess their creditworthiness and guide them toward the most optimal use of credit cards.
Through Amwalk-2, SIMAH is actively contributing to the preservation of consumers’ rights and follows the eight credit principles: Neutrality, transparency, education, awareness, credit behavior, complaints, protection and confidentiality.
It seeks to stress the importance of a credit report in organizing and managing budgets, taking financing decisions and knowing financial obligations with credit donors.
“Amwalk-2 comes as an extension of Amwalk-1 that SIMAH launched in 2019, as one of the largest financial education programs. We believe in the importance of spreading financial culture and try to play a role in this aspect by highlighting consumers’ rights,” SIMAH CEO Swaied Alzahrani said in a statement.
“Financial education is progressively necessary. It’s turning into essential for the typical family making an attempt to determine the way to balance its budget, buy a home, fund the children’s education and ensure an income when the parents retire. Recent developments have created financial education more and more necessary for financial well-being.”

Aramco agrees $12.4 billion pipeline deal with EIG

Updated 10 April 2021

Aramco agrees $12.4 billion pipeline deal with EIG

  • Aramco to hold 51% stake in new company
  • Aligns with recently announced "Shareek" program

RIYADH: Aramco has agreed a $12.4 billion leaseback deal with a consortium led by EIG Global Energy Partners in one of the biggest energy infrastructure transactions.
It represents a continuation of Aramco’s strategy to unlock the potential of its asset base and maximize value for its shareholders, it said in a statement.
A newly-formed unit called Aramco Oil Pipelines Company will lease usage rights in Aramco’s stabilized crude oil pipelines network for a 25-year period.
In return, Aramco Oil Pipelines Company will receive a tariff payable by Aramco for the stabilized crude oil that flows through the network, backed by minimum volume commitments.
Aramco will hold a 51 percent majority stake in the new company and the EIG-led consortium will hold a 49 percent stake.
The Saudi oil giant said it would retain full ownership and operational control of its stabilized crude oil pipeline network and that the transaction would not impose any restrictions on Aramco’s actual crude oil production volumes.
“This landmark transaction defines the way forward for our portfolio optimization program,” said Aramco President Amin Nasser. “We are capitalizing on new opportunities that also align strategically with the Kingdom’s recently-launched Shareek program. Aramco’s strong capital structure will be further enhanced with this transaction, which in turn will help maximize returns for our shareholders.”


Oil prices dip on mixed supply and demand outlook

Updated 10 April 2021

Oil prices dip on mixed supply and demand outlook

  • Downward pressure has been exerted by the decision of OPEC+ to increase supplies by 2 million barrels per day between May and July

LONDON: Oil prices edged lower on Friday on rising supplies from major producers and concerns over a mixed picture on the COVID-19 pandemic’s impact on fuel demand.

Brent crude futures for June fell 37 cents, or 0.59 percent, to $62.83 a barrel while US West Texas Intermediate (WTI) crude for May was at $59.24, down 36 cents.

Both contracts are on track for a 2-3 percent drop this week but still far from a low of $60.47 hit two weeks ago.

Downward pressure has been exerted by the decision of the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, to increase supplies by 2 million barrels per day between May and July.

Analysts expect global oil inventories to continue to fall, but predict fuel demand will accelerate in the second half of the year as the global economic recovery gathers steam.

“A lot of destocking is going on, so we are well into the rebalancing process,” said Energy Aspects analyst Virendra Chauhan.

Physical markets will still need to pick up before prices and inter-month spreads can rally, he added.

For all the optimism, renewed lockdowns in some parts of the world and problems with vaccination programs could threaten the oil demand picture.

Stephen Innes, chief global markets strategist at Axi, said oil prices are expected to trade in a range between $60 and $70 as investors weigh these factors.

“Oil is currently in a wait-and-see mode, with market participants looking at the vaccination pace to understand when oil demand will recover further and at nuclear talks in Vienna to see when more Iranian barrels might come back,” said UBS commodity analyst Giovanni Staunovo.

Talks to bring Iran and the US fully back into the 2015 nuclear deal are making progress, delegates said on Friday, but Iranian officials indicated disagrement with Washington over which sanctions it must lift.

“If a fulsome framework can be crafted in the coming weeks, significant quantities of Iranian oil will likely hit the market in H2 2021,” RBC Capital analyst Helima Croft said in a note this week.

Pakistan's current $16 billion forex reserves will make import payments ‘easy’ — experts

Updated 10 April 2021

Pakistan's current $16 billion forex reserves will make import payments ‘easy’ — experts

  • The country's foreign currency reserves increased to $22.18 billion after four years, following significant Eurobond inflows
  • The situation has not done much for the national currency that may come under pressure in the long term due to debt servicing

KARACHI: Pakistan's foreign exchange reserves have reached $22.18 billion, with more than $16 billion held by the central bank, after a span of four years, as the country raised $2.5 billion by issuing Eurobonds, said an official statement released on Thursday.

"The State Bank of Pakistan (SBP) has received the proceeds of government's $2.5 billion Eurobond issuance in its account," said the statement circulated on Thursday night. "As a result, SBP's foreign exchange reserves closed above $16 billion, their highest level since July 2017."

According to economic analysts, the inflows have brought the government in a more comfortable position to pay for its imports, including any COVID-19 vaccines.

"The inflow of $2.5 billion has raised the cushion of the State Bank and it will also improve the country's current account position," Dr. Abid Qaiyum Suleri, member of the government's Economic Advisory Council (EAC), told Arab News on Friday.

"The inflows have made it easy for the country to make payments for imports of COVID-19 vaccine, wheat or sugar due to an improved reserves position," he continued. "This is also the right time to tap international market."

Some economists also suggested that Pakistan should utilize the Eurobond proceeds to pay off some of its debts.

"The country has arranged the liquidity to pay off previous external debts because time to make these payments is due and the prices of oil are also increasing with the ease of lockdown," Dr. Vaqar Ahmed, joint executive director at the Sustainable Development Policy Institute (SDPI), said.

"For the payment of external debts and oil imports the Eurobond proceeds can be utilized," he added.

The inflows did not generate any major fluctuations in the currency and interbank markets as the rupee only appreciated 0.05 percent to close at Rs152.94 against the greenback on Friday.

"Going forward the rupee can come under pressure due to debt servicing since the country is availing G20 debt relief at present," Samiullah Tariq, head of research at the Pakistan-Kuwait Investment, told Arab News. "Only strong and enduring inflows can resist the fall of rupee. Otherwise, we expect three to four percent depreciation in the long run."

Despite its limited impact on the national currency, an official statement announced that the country had returned to the international market for the first time by issuing securities since 2017.

"Pakistan has entered the international capital market after a gap of over three years by successfully raising $2.5 billion through a multi-tranche transaction of 5, 10 and 30-year Eurobonds," the finance ministry said on Thursday.

"The transaction generated great interest as leading global investors from Asia, the Middle East, Europe and the US participated in the global investor calls and the order book," it added.

This is for the first time that Pakistan has adopted a program-based approach with registration of Global Medium-Term Note program.

"The program will allow Pakistan to tap the market at short notice," the ministry continued in its statement. "The government intends to make full use of this program and become a regular issuer in the International Capital Markets."