Finance

What you need to know in markets on Friday – Yahoo Finance


Trade fears continue to weigh on stocks.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="The Dow (^DJI) snapped a three-day winning streak on Thursday and closed down 27.59 points, the S&P 500 (^GSPC) fell 0.22% and the Nasdaq (^IXIC) dropped 0.25%.” data-reactid=”16″>The Dow (^DJI) snapped a three-day winning streak on Thursday and closed down 27.59 points, the S&P 500 (^GSPC) fell 0.22% and the Nasdaq (^IXIC) dropped 0.25%.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="The G20 summit in Argentina will continue to garner attention on Friday. On Thursday, President Donald Trump abruptly canceled his planned meeting with Russian leader Vladimir Putin. He tweeted saying that due to the Ukraine crisis, he thought it would be best not to meet. The main event of the summit continues to be the working dinner planned for Saturday when President Trump and President Xi Jinping will discuss trade.” data-reactid=”17″>The G20 summit in Argentina will continue to garner attention on Friday. On Thursday, President Donald Trump abruptly canceled his planned meeting with Russian leader Vladimir Putin. He tweeted saying that due to the Ukraine crisis, he thought it would be best not to meet. The main event of the summit continues to be the working dinner planned for Saturday when President Trump and President Xi Jinping will discuss trade.

The Chicago Purchasing Managers Index (PMI) data for the month of November will be released Friday morning. Economists polled by Bloomberg are expecting a reading of 58.5 versus 58.4 for October.

There are no notable earnings reports scheduled for Friday.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Here’s what caught markets correspondent Myles Udland’s eye.” data-reactid=”20″>Here’s what caught markets correspondent Myles Udland’s eye.

Market commentary

President Donald Trump remains set on getting the U.S. what he thinks are better trade deals.

But many economists and investors disagree with Trump’s approach to trade and believe imposing tariffs on imports will directly result in what are effectively taxes on U.S. consumers as a result of higher prices.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="In a tweet on Thursday, however, Trump said, “Billions of Dollars are pouring into the coffers of the U.S.A. because of the Tariffs being charged to China, and there is a long way to go. If companies don’t want to pay Tariffs, build in the U.S.A. Otherwise, lets just make our Country richer than ever before!” ” data-reactid=”24″>In a tweet on Thursday, however, Trump said, “Billions of Dollars are pouring into the coffers of the U.S.A. because of the Tariffs being charged to China, and there is a long way to go. If companies don’t want to pay Tariffs, build in the U.S.A. Otherwise, lets just make our Country richer than ever before!” 

As tends to be the case with almost everything Trump says, he is a little bit right and a little bit wrong. Tariffs imposed on imports from China make the price of those goods more expensive, which hurts consumers. Taxes paid to the U.S. Treasury from tariffs, however, are clearly rising.

The following chart was flagged for us by Neil Dutta at Renaissance Macro and shows the sharp uptick in government tax receipts from customs duties. In other words, tariffs.

Tax receipts from import duties have surged this year as the Trump administration began imposing tariffs on the import of some goods from China. Trump has said this increased revenue is a sign the U.S. is getting the result it wants from his trade war with China. (Source: FRED)

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="In July, the Trump administration put tariffs on $34 billion worth of imports from China; in September, the administration added a 10% tariff on the import of $200 billion in additional imports, a figure set to rise to 25% at the beginning of 2019.” data-reactid=”38″>In July, the Trump administration put tariffs on $34 billion worth of imports from China; in September, the administration added a 10% tariff on the import of $200 billion in additional imports, a figure set to rise to 25% at the beginning of 2019.

In the third quarter of 2018, over $51 billion in taxes were paid to the Treasury as a result of duties imposed on imports, up from about $38 billion in the same quarter last year. Through the first three quarters of 2018, more than $136 billion in taxes were paid to the Treasury from these duties. In all of 2017, these duties totaled around $153 billion.

And while this impact isn’t massive in an absolute sense, the current run-rate for tariff-related taxes is about $200 billion per year, which would be a roughly 30% increase over the payments the Treasury had previously been receiving.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="When some economists or analysts talk about the potentially minimal impacts that tariffs might have on GDP, it is this higher government income that could offset a decline in consumption due to higher prices. And this chart clearly shows the “billions of dollars [that] are pouring into the coffers” of the U.S. government. As Dutta notes, more tax income offsetting higher prices is how tariffs could manage to avoid being a major drag in the aggregate.” data-reactid=”41″>When some economists or analysts talk about the potentially minimal impacts that tariffs might have on GDP, it is this higher government income that could offset a decline in consumption due to higher prices. And this chart clearly shows the “billions of dollars [that] are pouring into the coffers” of the U.S. government. As Dutta notes, more tax income offsetting higher prices is how tariffs could manage to avoid being a major drag in the aggregate.

“I’m not saying I like it, but context is key,” Dutta writes.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="And so ahead of this weekend’s G20 summit which some investors might see as a potential turning point for markets and a thawing of trade relations between the U.S. and China, keep this chart in mind because when Trump continues to insist that the U.S. is winning on trade, this is the sort of data he’s likely pointing to.” data-reactid=”43″>And so ahead of this weekend’s G20 summit which some investors might see as a potential turning point for markets and a thawing of trade relations between the U.S. and China, keep this chart in mind because when Trump continues to insist that the U.S. is winning on trade, this is the sort of data he’s likely pointing to.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.” data-reactid=”44″>Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Follow Yahoo Finance on TwitterFacebookInstagramFlipboardLinkedIn, and reddit” data-reactid=”45″>Follow Yahoo Finance on TwitterFacebookInstagramFlipboardLinkedIn, and reddit

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="More from Heidi:” data-reactid=”46″>More from Heidi:

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="The U.S. has a secret weapon in the trade war: Nomura” data-reactid=”47″>The U.S. has a secret weapon in the trade war: Nomura

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="The 10 U.S. cities with the highest economic confidence” data-reactid=”48″>The 10 U.S. cities with the highest economic confidence

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Trump slams Fed Chair Powell, says he’s ‘not even a little bit happy’ with him” data-reactid=”49″>Trump slams Fed Chair Powell, says he’s ‘not even a little bit happy’ with him

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Trade uncertainty is ‘squelching business investments,’ JPMorgan strategist says” data-reactid=”50″>Trade uncertainty is ‘squelching business investments,’ JPMorgan strategist says

 

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