Trade tensions between China and the US rise with another imminent round of tariffs likely on the way

Policy Watch

• President Trump indicates that another round of tariffs on Chinese imports could be imminent. In an interview with the Wall Street Journal, President Trump told the publication that it was “highly unlikely” that he will refrain from imposing another round of 25% tariffs on $200 billion worth of Chinese goods. This comment comes in anticipation of a summit between President Trump, President Xi Jinping of China, and a group of 20 industrial and developing nations in Buenos Ares. President Trump claims that if in this meeting, the US and China do not strike a deal, he will likely impose tariffs on another $267 billion worth of Chinese goods. The ensuing trade tensions between the two countries is a multidimensional issue. For one, Beijing has already sent a proposal for a deal that has garnered mixed responses from the White House. While some say it is insufficient, others believe that could become the basis of a future deal. President Trump has expressed that his priorities are to open up China to competition from the US and to mitigate the theft of US intellectual property by China. Alternatively, Chinese officials have claimed that their priority is to prevent the subsequent impositions of new tariffs and to lift existing punitive taxes on China-made steel and aluminum. The speculated consequences of these disagreements have been mixed as well. While some argue that because Chinese imports only represent $500 billion of the $19 trillion US economy, it will likely not slow US growth, others argue that the tariffs’ long term effects on key industries could tip the country into a recession. [WSJ]

• New year-end tax package seeks bipartisan approval. House Representative Kevin Brady, Chairman of the House Ways and Means Committee, released a new tax and IRS package on Monday, addressing a variety of issues including disaster relief, renewal of expired tax provisions, technical fixes to last year’s tax-cut law, incentives for retirement, and improvements to the IRS. The House Rules Committee is scheduled to discuss the plan on Wednesday, with a likely vote on the House floor later this week. In a statement, Brady claims that while the package has bipartisan support, it is still yet to be seen whether enough Senate Democrats will support the package. [The Hill]

• Trump reveals new proposal to reduce Medicare drug costs. In keeping with President Trump’s promises to address the soaring price of pharmaceuticals, The White House proposed to relax patient protections that require insurance plans to provide mandatory drugs for beneficiaries in “protected classes.” These drugs include antidepressants, antipsychotic medicines, immunosuppressant drugs, ant-epilepsy drugs, antiretrovirals used in H.I.V./AIDS treatment, and many cancer drugs. According the Trump, drug companies have little incentive to bargain drug prices with insurers because of their mandatory status. By relaxing the existing provisions, Trump argues that it will provide greater bargaining power to insurance providers, ultimately lowering out-of-pocket costs for Medicare beneficiaries. While those in the administration have claimed that reducing the costs for protected class medicines would expand access to these important medicines, the drug industry and advocacy groups have argued that the policy is dangerous for beneficiaries suffering from certain conditions. [NYTimes]

  Economic Indicators and News

• Overall, Consumer Confidence remains optimistic. Although the Consumer Confidence Index dipped in November, under performing at 135.7 instead of the expected 135.9, it remains near historically strong levels. According to experts, while consumers’ assessment of current conditions increased, expectations weakened, due to views on future business conditions and personal income prospects. The decline of business expectations comes amid fears regarding a global economic growth slowdown, which have also contributed to losses in the US stock market. [CNBC]

• Home price gains slow in November. Although home prices are continuing to rise, the gains made have shrunk to the lowest level since January 2017 due to rising mortgage rates. According to the S&P Case-Shiller index, prices rose by 5.5 percent, lower than the 5.7 in August. The average rate on the 30-year fixed mortgage is now a full percentage point higher than it was one year ago, causing housing affordability to fall to its weakest level in over a decade. [CNBC]