Blaine Rollins: Global Trade Gets Muddy

The U.S. semiconductor industry bristled at President Donald Trump’s plan to impose tariffs on about $50 billion of Chinese goods, arguing they will hurt American business and make the country less competitive.

The rules, which take effect July 6, will place 25% tariffs on a variety of goods including semiconductors and related product imports, products brought into the U.S. that amounted to $2.5 billion in 2017, according to the Semiconductor Industry Association, a U.S. trade group.

A second set of tariffs, which would take effect at a later date, includes additional semiconductors and related products—and that impact is more extensive, including a wider collection of components in chips than the original list, the group said. The trade group said it was still determining the financial impact.

China, in a retaliatory move, said it would impose tariffs of 25% on U.S. products including autos, agriculture and seafood.

(WSJ)

Lyon Group Holding owns Lyon and Republic, century-old companies that dominate the market for American-made lockers. The companies’ combined annual sales are around $100 million, and they employ some 400 full-time workers at three manufacturing plants in Indiana and Illinois.

Steel has long accounted for 45% of the cost of making lockers at Lyon and Republic, the single biggest expense. Mr. Trump’s 25% tariff has driven up the price of foreign steel and given domestic steel the chance to raise prices. American hot-rolled steel coil recently sold for $900 per short ton—the highest price in a decade. That’s up 38%, or $248 per ton, since the beginning of January.
Lyon and Republic now spend $40.68 on steel for their $100 individual locker units, up from $33.90 before the tariffs. In this low-margin business, that’s the difference between a $5 profit and $1.78 loss on each unit.

“This is do or die for businesses,” Mr. Altstadt says. “Either you fix this problem, or if you can’t fix it somehow, the business will have to close completely because you can’t have a negative profit on the product you sell.”

Raising locker prices isn’t an option. Even before the tariffs, Lyon and Republic’s clients were paying a 10% premium for the convenience of buying American instead of Chinese, and they can’t afford to go any higher, Mr. Altstadt says.

(WSJ)

Perhaps Iowa farmers’ biggest fear is becoming a harsh reality: The escalating U.S.-China trade dispute erupted Friday, with each country vowing to levy 25 percent tariffs on $50 billion in goods.

U.S. and Iowa agriculture is caught in the crossfire, with farmers selling $14 billion in soybeans to China last year, its top export market.

Soybeans are among hundreds of U.S. products China has singled out for tariffs. The U.S. has an equally long list that includes taxing X-ray machines and other Chinese goods.

Iowa farmers could lose up to $624 million, depending on how long the tariffs are in place and the speed producers can find new markets for their soybeans, said Chad Hart, an Iowa State University economist.

U.S. soybean prices have fallen about 12 percent since March, when the U.S.-China trade dispute began.

(Des Moines Register)

Growers of apples, pears and cherries in Washington, Oregon and Idaho are rushing to figure out what they can do with perishable fruit that’s now the target of retaliatory tariffs in markets such as China, India and Mexico. Mark Powers, president of the Northwest Horticultural Council, said its 4,700 growers in those states export about $1 billion worth of produce each year. Finding new, tariff-free markets requires lengthy negotiations between countries.

“Quantifying the results of this is a guessing game,” he said. “We’re already seeing customers coming back and asking for discounts and offsets.”

Cherries are a pressing concern, particularly because members are enjoying a bountiful crop. The fruit lasts only about seven days once picked, and most exports are shipped in planes to Asia.

“If China closes, that’s our largest cherry market, and it’s hard to divert on the fly,” Powers said.

(Bloomberg)

The tightening labor market is costing the region more than 600 jobs.

InterContinental Hotels Group notified workers this week that it is closing its North Charleston call center later this year because of “staffing challenges,” spokesman Neil Hirsch said Thursday.
“We’ve seen a high level of turnover, so that impacts the performance of the center,” he said.

The closing is scheduled for November, and about 630 employees are affected.

The task of handling thousands of inbound calls a day from hotel guests will be transferred to a third-party customer service provider, IHG said.

(Post and Courier)

Metro Denver’s low unemployment rate is hindering business expansion plans, but employers aren’t giving up on trying to fill vacant positions, according to a new survey from Korn Ferry, a global human resources consulting firm.

In April, the unemployment rate in Metro Denver’s stood at a low 2.5 percent, on par with April 2017, according to the U.S. Bureau of Labor Statistics. The region hasn’t seen a run of unemployment rates this low since the tech boom in 1999 and 2000.

About six in 10 of the business professionals that Korn Ferry surveyed said the shortage of talent was affecting the ability to grown, while the remainder didn’t seen any impact.

(Denver Post)

OPEC members are discussing a compromise agreement that would see an oil production increase of between 300,000 and 600,000 barrels a day over the next few months, according to people briefed on the talks.
While Iran said on Sunday it’s opposed to any increase to current quotas, officials from a number of other countries are optimistic that an agreement can be won for a relatively modest hike at this week’s meeting in Vienna, the people said, asking not to be named discussing private conversations…

The compromise output boost, if agreed, would be smaller than the 1.5 million-barrel a day quota increase that Russia has proposed.

OPEC officials are also working on putting the cooperation between the cartel, Russia and other oil producers — the so-called OPEC+ group currently comprising 24 nations — on a permanent footing. That would be a major diplomatic breakthrough for Riyadh and Moscow after just two years of cooperation on oil policy.

The prospect of binding Russia, the world’s largest exporter after Saudi Arabia, more closely to OPEC might help persuade Iran and Venezuela, another skeptic about the need for an increase, to back higher production in the second half of the year.

(Bloomberg)

US law firms have launched an expensive bidding war for young talent after New York-based Milbank Tweed Hadley & McCloy raised the salary it is offering first-year lawyers to $190,000, forcing their competitors to follow suit.

The $10,000 increase for new starters by Milbank, which also raised salaries for those just below partner level to $330,000, took effect this month. It was echoed by several other leading US firms, including Cravath Swaine & Moore, which normally sets the salary bar — as it did when it sparked a similar pay war two years ago…

June’s pay wars look like leaving behind the leading UK firms, which were slow to react to the 2016 round of US salary raises. First-year lawyers at London “magic circle” firms such as Linklaters and Clifford Chance earn the equivalent of about $120,000.

On Friday Clifford Chance said that it would match the Cravath scale — though only for US-based associates.

“There has been something of a brain drain [from UK] to US firms — not only at partner level, where US profits are often much higher, but also for associates,” said Freddie Lawson, of legal recruitment firm Fox Rodney Search. “There’s a real fight for those guys.”

(Financial Times)

Netflix’s overthrow of television’s old business model began just seven years ago. That’s when the Silicon Valley company best known for mailing DVDs in little red envelopes outbid AMC and HBO for the rights to a drama from director David Fincher, a remake of the British mini-series House of Cards. It was a big deal at the time, both because of the money Netflix was spending ($100 million for two seasons) and because it was the first hint of the streaming platform’s ambitions to evolve beyond a digital warehouse for other conglomerates’ intellectual property.

House of Cards is airing its final season this fall, and Netflix now makes more television than any network in history. It plans to spend $8 billion on content this year. “I’ve never seen any one company drive the entire business in the way Netflix has right now,” says Chris Silbermann, managing director of ICM Partners and agent for Grey’s Anatomy and Scandal creator Shonda Rhimes, who moved her production company to Netflix last year.

TV has gone through major transformations in the past — cable and Rupert Murdoch’s Fox toppled the hegemony of the Big Three broadcast networks in the 1980s, for instance — but this leap dwarfs all others. Netflix doesn’t want to be a streaming, supersized clone of HBO or FX or NBC. It’s trying to change the way we watch television. Whether it can do that while turning a profit is another matter, given the more than $6 billion in debt it’s amassed during its expansion. But Wall Street seems optimistic: In recent weeks, its overall market capitalization has at times grown past $150 billion, surpassing Disney to become the most-valued media company in the world.

(Vulture)

“Patrick Soderlund, who runs EA Worldwide Studios, was the highest paid of the company’s leaders, receiving equity awards totaling $46.3 million, while Chief Executive Officer Andrew Wilson received $35.7 million in total pay, a 79 percent increase from a year earlier, the Redwood City, California-based company said Friday in a regulatory filing. The increases resulted from special equity awards in recognition of the firm’s financial performance over the past four years.”

(Bloomberg)

A tin of osetra caviar arrives in a crystal bowl of crushed ice. It’s served as a bona fide “bump”— the server spoons the eggs onto your fist along with a dollop of smoked creme fraiche, then drapes it all in a fat slab of barbecued wagyu beef fat. (Yes, all on your fist.) It’s a salty, smoky, slippery slurp, enlivened by a perfect pop. The effect is similar to the drug it alludes to: I immediately wanted more — although not at $68 a hit.

(SFEater)

Taking his words to heart, Jelinek—who became Sinegal’s successor in 2012—has never raised the price on Costco’s hot dog. Incredibly, it has sold for the same $1.50 since the retail club first introduced the dogs to customers in 1984. The quarter-pound, all-beef tube and 20-ounce soda combo appears to be inflation-proof and immune to the whims of food distributors. How does Costco do it?Simple. When it comes to hot dogs, Costco doesn’t price according to what the market will bear. They price according to their own cost and according to the value the hot dogs can afford them.

According to Jelinek, people would pay $1.75, and maybe more, for the deal. But is that extra 25 cents going to be more valuable than the goodwill and foot traffic generated by a combo that’s stuck to its price point for nearly 35 years? Probably not. Customers coming in to shop at Costco are amused, satisfied, and fueled by the hot dog meal. If they get it just before leaving the store, they’re left with a lasting impression of being treated well. That’s worth more than keeping up with inflation.

(Mental Floss)

An analysis of trading data from 15 global stock exchanges carried out during the 2010 World Cup—which was held in South Africa—found that trading volume dropped by roughly 33% from normal levels during games. The research, by two economists from the European Central Bank and the Dutch central bank, found median trading volume was 55% lower than normal when the national team from an individual exchange’s country was playing.

(WSJ)

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