The U.S. economy could be weakened by escalating trade wars or a sudden downturn in global financial markets, the International Monetary Fund (IMF) warns.

In an annual review of the U.S. economy, the IMF said it was on a 2.6 percent growth track this year, greater than the 2.3 percent growth rate forecast in April.

But the report also said the U.S. economy appears to be increasingly vulnerable amid investor concern over America’s trade wars, noting they could trigger worsening global financial conditions.

The IMF criticized U.S. President Donald Trump’s administration for efforts to remake global trade relationships through higher tariffs and said it was “especially important” to resolve the trade dispute with China.

The report said the U.S. economy has recovered from the financial crisis that began in 2008, but millions of Americans did not benefit from the recovery. Household income increased a meager 2.2 percent from the end of the last century, the report said, while the U.S. economy expanded 23 percent per capita during the same period.

“The poorest 40 percent of households have a level of net wealth that is lower today than it was in 1983,” the report said.

The report called on the Trump administration to avert an economic slowdown by adopting measures to cut public and corporate debt and address inequality.

On Wednesday, the IMF warned the U.S.-China trade war could cut world economic growth next year.

IMF Managing Director Christine Lagarde said Trump’s threat to tax all trade between the two countries would shrink the global Gross Domestic Product (GDP) by one-half-of-one percent.

“This amounts to a loss of about about $455 billion, larger than the size of South Africa’s economy,” Lagarde said in a briefing note for the Group of Twenty (G-20), a collection of the world’s largest advanced and emerging economies. “These are self-inflicted wounds that must be avoided… by removing the recently implemented trade barriers and by avoiding further barriers in whatever form,” she added.

The warning came as G-20 finance ministers and central bankers prepare to meet in Japan later this month. They will gather just weeks after U.S.-China talks collapsed amid claims of broken promises and another round of punishing tariffs.
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Liz Hung supports a lot of the imaginative concepts being discussed to make Vietnam “greener” economically and in terms of urban planning.

 

Consider traffic lights. Hung described how government authorities could collect smartphone data to see which streets are crowded, and then calibrate the stoplights to optimize traffic flow.

 

Hung and others in the private sector are giving Vietnamese officials their wish list for a green economy, from more renewable energy to buildings that collect rain water for use.

 

“Road congestion costs us at least 2 to 5% of our [gross domestic product] growth every year because of the time we lost or the high transportation cost, so that is why being smart [in] mobility is very crucial,” said Hung, who is CBRE associate director of Asia Pacific Research.

 

Hung’s comment highlights the link between good city planning and economic benefits.

Emulating China, Australia

 

There is also a larger debate about whether the economic benefits outweigh the costs of going green.

 

There is a financial cost of technology to make Vietnam more efficient. But there also is a security cost, as “smart devices,” like lights connected to the internet, have looser security settings that make them easier to hack.

 

In looking for inspiration for Vietnam’s future, Hung looked at places from Hangzhou, China, where she heard about the traffic data, to Adelaide, Australia, where authorities installed smart sensors in trash bins, which alert garbage collectors when the bins are nearly full.

 

If the idea is to increase efficiency, Vietnam should think about energy use, said Tomaso Andreatta, vice chair at the European Chamber of Commerce in Vietnam.

 

Last month, the chamber held a forum on sustainable cities. In addition to rooftop solar panels and wind turbines, some cities are exploring ways to create energy from things that would otherwise be tossed out.

 

Trash can be burned, for example, to boil water for steam generators that produce electricity, a process known as waste-to-energy. This does risk increasing carbon emissions or decreasing incentives for recycling, however.

Aiming for zero waste

 

“More and more we realize that resources are limited, and producing waste destroys the quality of life,” Andreatta said. “Therefore, there’s been a movement worldwide to reducing waste to an absolute minimum, ideally zero.”

 

He went on to say, “The rapid development of the middle class and its lifestyle, which includes intensive air conditioning use, accounts for a considerable proportion of energy consumption growth.”

 

It may be the middle class that benefits most from a greener Vietnam, where the private sector steps in to create greater efficiencies, when the government is not involved.

 

Property developers are building enclosed communities where sustainability is part of the design, whether it’s motion-detecting lights, or insulation that keeps indoor temperatures manageable. One developer introduced pollution warnings. Another made a transportation app just for its residents.

 

But what about those who are not lucky enough to live in a gated community?

 

Government officials say they are listening to proposals across all sectors. They say that as Vietnam faces a major threat from climate change, it needs to make greater efforts at green planning.

 

“Climate change will have a big impact on the region,” said Huynh Xuan Thu, deputy chief officer of the Ho Chi Minh City Department of Architecture and Urban Planning.

 

Some of the ideas, such as a country full of electric cars, may be a pipe dream or years down the road. But Vietnam is getting started on some of the proposals.

 

In Ho Chi Minh City, officials are looking at traffic sensors and gathering data on congestion, which they hope to reduce through technology in the near future.

 
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U.S. productivity grew at a strong 3.4% rate in the January-March quarter, the best showing in more than four years, the Labor Department reported Thursday. It was an encouraging sign that productivity may finally be improving after a long stretch of weakness.

 

The first quarter gain was more than double the 1.3% increase in the fourth quarter, although it was slightly lower than an initial estimate of 3.6% made a month ago. Labor costs fell during the first quarter, declining by 1.6% following a 0.4% drop in the fourth quarter.

 

Productivity, the amount of output per hour of work, is a key factor determining an economy’s growth potential. If the current rebound continues, it would provide support for President Donald Trump’s efforts to achieve sustained 3% growth rates.

 

The slight downward revision in productivity reflected the fact that overall output, as measured by gross domestic product, was revised down from an initial estimate of 3.2% growth to 3.1% growth in the first quarter.

 

The 3.4% advance in productivity was the strongest increase since a 3.7% rise in the third quarter of 2014. Productivity has risen 2.4% over the past four quarters, the best performance since a 2.7% four-quarter gain in 2010.

 

Productivity gains over the past decade have been lackluster, averaging just 1.3% annually from 2007 through 2018. That was less than half the 2.7% gains seen from 2000 to 2007, a period when the economy was benefiting from technology improvements in computers and the internet. From 1947 through 2018, annual productivity gains averaged 2.1%.

 

Economists see the slowdown in productivity over the past decade as one of the country’s biggest economic challenges. But recent signs indicate that may be turning around. The economy’s potential to grow is governed by two major factors, growth of the labor force and growth in productivity.

 

For all of 2018, GDP growth was 2.9%. The Trump administration has projected sustained GDP gains of 3% or better over the next decade, well above the 2.2% average GDP gains seen since the current expansion began in June 2009.

 

In a separate report Thursday, the Labor Department said that applications for unemployment benefits, a proxy for layoffs, held steady at 218,000 last week. That is a low level that indicates a strong job market. The government will release its May jobs report on Friday.

 

 
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A rising share of older Americans is forgoing the concept of a traditional retirement at the age of 65, a trend that some younger workers aren’t particularly thrilled to see.

A recent poll by The Associated Press-NORC Center for Public Affairs Research found that workers under the age of 50 were significantly more likely to view America’s aging workforce as a negative development when compared with their older counterparts. About 4 in 10 respondents ages 18 to 49 and 44% of the youngest respondents ages 18 to 29 said they consider the trend to be a bad thing for American workers. Just 14% of those age 60 and over said the same.

“I don’t think in things like IT and medicine you’re as effective a worker (at 65 years old) as you are at 50,” says Katie Otting, a 29-year-old living in Southern California. “If some 65-year-old is in a position that he’s not ready to quit because he wants a better pension and there’s someone else ready to take that job, they’re not going to replace him.”

An aging population, elevated health care costs and lingering financial uncertainty following the Great Recession all are believed to be contributing to America’s steadily graying workforce. Nearly 20% of Americans over the age of 65 were employed or actively looking for work last year, up from less than 12% two decades prior, according to the Bureau of Labor Statistics.

But the increased prevalence of older workers has led some to believe seniors are holding back the country’s economic momentum by remaining in the workforce. Men were slightly more likely than women to cite the aging workforce as a problem for U.S. workers (32% to 27%). And about a third (34%) of more affluent respondents earning more than $100,000 annually said the same, slightly more than the 24% of those earning less than $30,000 who said so.

By contrast, about 6 in 10 Americans age 60 and over say the trend has actually been a good thing for the economy, compared with 3 in 10 Americans under 30 who think that.

About a third of Americans under 50 who have noticed the trend in their own workplace believe the aging workforce has negative implications for their own careers.

“One of the myths that’s out there causing younger and older people to butt heads is the idea that `Oh, it’s because these older people are on the job preventing me from getting the job I want,”’ says Steve Burghardt, a 74-year-old professor of social work at the City University of New York who thinks Americans are “looking for someone younger or someone older to blame” for inequality, job displacement and other economic problems.

Research is mixed on the aging workforce’s overall impact on the U.S. economy. Adam Ozimek, a senior economist at Moody’s Analytics, says his prior research efforts have suggested a growing population of older workers can slow productivity and ultimately hamper wage growth for the rest of the labor market.

But he says there’s little evidence to suggest that the presence of older workers is “crowding younger workers out of promotions,” noting that many of the workers who would naturally move up and replace positions currently held by baby boomers are not millennials but rather middle-aged members of Generation X.

“In anxious times, we look for scapegoats. And old people are a ready scapegoat, especially if you are forced out of having a public presence or are forced (out of a job),” says Ashton Applewhite, a New York-based writer and ageism activist.

The idea that older workers are keeping jobs away from younger Americans, preventing them from moving up the corporate ladder into higher-ranking, higher-paying positions, is not a new one. But economists say it doesn’t have much basis in economic reality.

“The more of those seniors continue to work, that means they’re also spending. And that spending helps build a rich economy that gives you jobs and lots of opportunities,” says Andrew Chamberlain, chief economist at employment hub Glassdoor.

But Chamberlain and Ozimek say it might be easier to believe older workers are holding back their younger counterparts when looking at the economy on a smaller scale. One particular company, for example, may only employ one chief of marketing. Should that person choose to remain in the workforce until he or she is 80 years old, lower ranking employees may perceive a lack of upward mobility.

A comparable job may be ripe for the taking elsewhere, Chamberlain says, but it may be at another company or in another city that would require a move that many employees may be unwilling to make.

“They feel like their opportunities are only within that firm,” Chamberlain says. “I think it’s just simple confusion. I think people are mixing up (opportunities) just inside one company versus the overall job market.”

Meanwhile, many older workers are coming to terms with the fact that they’ll need to remain in the workforce to keep their heads above water or maintain their current lifestyles. Mitch Rothschild, 61, lives and works in New York City and says he expects he is “probably going to have to work until I die.”

He says the aging workforce is less of an economic problem and more of a financial reality to which workers of all ages need to adapt.

“Hey, look, I wished I’d been skiing in the Alps since I was 40,” he says. “But you think I’m going to stop working a year from now and rely on Social Security for the next 20 years? No.”

 
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In a double blow for Mexico, credit ratings agency Fitch downgraded the nation’s sovereign debt rating on Wednesday, citing risks posed by heavily indebted oil company Pemex and trade tensions, while Moody’s lowered its outlook to negative.

The Mexican peso weakened as much as 1.3% on the news.

Cutting Mexico’s rating to BBB, nearing junk status, Fitch said the financial woes of state oil company Pemex were taking a toll on the nation’s prospects.

Fitch said mounting trade tensions influenced its view, according to a statement issued shortly after the end of a meeting in the White House in which Mexican officials tried to stave off tariffs U.S. President Donald Trump has vowed to impose next week.

Following a surge in mostly Central American migrants arriving at the U.S. border, Trump threatened blanket tariffs on Mexican imports if it did not do more to stem the flow.

“Growth continues to underperform, and downside risks are magnified by threats by U.S. President Trump,” Fitch said.

Mexican President Andres Manuel Lopez Obrador took office in December with ambitious plans to build a $8 billion refinery, a decision ratings agencies and investors warned would divert funds from its more profitable production and exploration business.

“Further evidence that medium-term growth is in decline, whether as a result of policies that actively undermine growth or because of continued policy unpredictability, would put downward pressure,” Moody’s said in a statement.

Mexico’s finance ministry declined to comment.

Lopez Obrador has said the ratings agencies were punishing Mexico for the “neo-liberal” policies of previous administrations.

A Reuters analysis of Pemex accounts from the past decade shows debt increased by 75% during the term of Lopez Obrador’s predecessor, Enrique Pena Nieto, amid a landmark energy reform.

Pemex

Moody’s highlighted the risks posed by Pemex, formally known as Petroleos Mexicanos, the world’s most indebted oil company.

“The impact of the contingent liability represented by Pemex weighs increasingly heavily on the sovereign credit profile,” Fitch said in a statement.

The latest moves by the ratings agencies on Mexico’s sovereign rating could also ratchet up pressure on the oil company’s own rating, which is teetering on the brink being downgraded from investment grade.

In March, S&P cut its stand-alone assessment of Pemex by three notches, following Fitch’s move to downgrade its credit in January. S&P pegs the rating of Pemex to that of the sovereign rating and the stand-alone assessment does not equal a rating.
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U.S. refiners warned the Trump administration that tariffs on imports from Mexico could deliver a punishing blow to refiners and raise the cost of gasoline just as the U.S. driving season kicks into high gear, according to sources familiar with the discussions.

Trump surprised Mexico last week with a threat to impose 5% tariffs on all its exports to the United States unless the Mexican government took measures to stem the flow of illegal immigrants into the United States.

The United States imports more than 650,000 barrels of crude per day from Mexico, about 10% of total crude imports, according to U.S. government data. Refiners are also worried that Mexico could retaliate with tariffs on its imports of U.S. fuel, a major source of revenue for the U.S. industry.

“If these tariffs take hold, particularly if they’re able to get up to 25%, that could really impact the overall competitiveness of the U.S. refining industry,” said Chet Thompson, chief executive of the American Fuel and Petrochemical Manufacturers trade association. The group has had discussions with the administration and Congress on the issue, Thompson said.

​Mexico oil complements US oil

Mexico’s oil is heavy and refiners need it to blend with lighter U.S. oil to produce diesel fuel, gasoline and other products. Tariffs would drive up the cost of those imports — and Trump has said he would increase levies by 5% monthly until they reach 25% in October.

Mexico is a prime supplier of heavy crude, which has been harder to come by since the United States imposed sanctions on Venezuela in January.

Gasoline prices have remained subdued as global oil prices have declined because of worries about worldwide economic demand. But without enough heavy crude, U.S. refineries could run plants at lower rates to save money if heavy crude feedstock becomes too costly, lobbyists said.

“The heavy crude market is tight and it’s only Mexico at the moment. The tariff would essentially make the crude uneconomical and we may have no choice but to consider run cuts,” said one Washington-based refinery lobbyist.

Refiners have said that could drive up the price of gasoline at the pump, just as American drivers take to the road in the period of the highest gasoline demand in the United States.

Texas lawmakers alarmed

International crude prices are near a six-month low, so any rise in gasoline prices is unlikely to be prohibitive.

Right now a regular gallon of gasoline in the United States averages $2.80, according to the American Automobile Association, but it tends to rise in the summer months.

“We are trying to educate the administration on what this means for gas prices,” the lobbyist said. The potential for tariffs has alarmed lawmakers of both major U.S. parties, including members of Congress from Texas, a reliably Republican state that voted for Donald Trump in 2016 but depends on the oil industry and cross-border trade with Mexico, which accounts for 39 percent of the state’s exports, according to the Texas-Mexico Trade Coalition.

“We shouldn’t be imposing tariffs on Mexico,” said Senator Ted Cruz, Republican of Texas. He told Reuters that Republican senators “had a vigorous and frank discussion” with White House officials on the issue.

Texas has 5.7 million barrels of daily refining capacity, more than any other state.

U.S. refiners are also concerned about retaliatory actions by Mexico, which buys about one-quarter of U.S. refined product exports. In March, Mexico bought about 1.3 million bpd of oil products from the United States, according to U.S. Energy Department data.

“It would be pretty devastating to us,” a second Washington-based lobbyist said.
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Lazaro Hernandez, who has made a good living showing U.S. cruise ship passengers around Havana in his pink 1950s Chevrolet, says the new U.S. ban on cruises to Cuba will wipe out 90% of his business overnight.

Hernandez is one of thousands of Cubans who benefited from the boom in American visitors to the Caribbean’s largest island following the loosening of travel restrictions under former U.S. President Barack Obama during the short-lived 2014-2016 detente between the Cold War foes.

Obama’s successor, President Donald Trump, aims to punish Cuba’s Communist government, especially for its alliance with Venezuela, by tightening the rules once more. Yet Cubans say those who will really suffer are the people, including the private-sector workers the United States purports to support.

“This is a fatal blow for us,” said Hernandez, 27, who makes $30 an hour — the equivalent of the average monthly state salary — doing tours of Havana. “If there’s no tourism, we don’t have work.”

​Second-biggest group of tourists

U.S. travelers excluding Cuban-Americans became the second-biggest group of tourists on the island in recent years after Canadians, with cruise travelers making up half of those.

Although they typically contributed less to the economy as they stayed on ships rather than in hotels or bed-and-breakfasts, they hired drivers and tour guides and spent at private shops, bars and restaurants.

“We bought T-shirts as souvenirs and bags,” said Sarah Freeman, 42, one of the passengers on the last U.S. cruise ship to sail from Havana, using a handcrafted wooden Cuban fan to fend off the Caribbean heat.

The new restrictions on U.S. travel to Cuba also include the elimination of so-called group people-to-people educational travel, one of the most popular exemptions to the overall ban on U.S. tourism to Cuba.

‘Negative perceptions’

William LeoGrande, a Cuba expert at American University in Washington, estimated the measures could reduce the number of non-Cuban-American U.S. visitors by two-thirds or more.

That could cut overall tourist arrivals in Cuba by about 10%, he said. Another expert, John Kavulich, said the drop could be as much as 20%.

“Optically, not having Carnival, Norwegian and Royal Caribbean in the marketplace will recreate negative perceptions about Cuba,” said Kavulich, president of the U.S.-Cuba Trade and Economic Council Inc., referring to the three main cruise lines forced to cancel service.

Earlier restrictions cut revenues

Tourism revenues, the country’s second-biggest source of hard currency, already slumped nearly 5% last year, according to official data.

That was partly the result of an earlier round of Trump administration restrictions.

Washington says it is pressuring Cuba to reform and tamp down its support for socialist Venezuelan President Nicolas Maduro, whom Trump has been seeking to force out in favor of opposition leader Juan Guaido, who is backed by most Western countries.

Critics say Trump is seeking to drum up support from the Cuban-American community in the swing state of Florida ahead of next year’s election.

Starting Thursday, many Cubans will be feeling the sudden absence in revenue from cruise passengers.

“For me, it will have a domino effect,” said Nichdaly Gonzalez, who earns her living posing for photos, dressed up in her colorful colonial garb, adding she expected to have to rein in her spending. As such, it will have a trickle-down impact on the local economy, especially in the ports of Havana, Santiago de Cuba and Cienfuegos that received the U.S. cruise ships.

The Cuban government has said it is aiming for tourism income to increase 5.8% this year, but it is hard to see how it can reach that goal now.

“We’ve lived with U.S. hostility now for 60 years, since the revolution, so we’ll get by,” said Abel Amador, 46, selling sketches to tourists on a cobbled street. “But this new move will still affect us.”
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Democratic presidential hopeful Elizabeth Warren on Wednesday criticized U.S. President Donald Trump’s decision to impose tariffs on Mexico as “random dart throwing” that lacks a coherent strategy.

Trump unexpectedly told Mexico last week to take a harder line on curbing illegal immigration or face 5% tariffs on all its exports to the United States, rising to as much as 25% later in the year. On Tuesday, Trump said he expected to impose the tariffs as of Monday.

“Trump’s random dart throwing ain’t helping anybody,” Warren, a U.S. Senator from Massachusetts, told reporters after a campaign event in Elkhart, Indiana.

Moments earlier, before a crowd of about 600 in the town with a large manufacturing sector, Warren assailed companies that are moving production abroad. While that echoed Trump’s criticism, she faulted his approach.

“Lets be clear — tariff policy by tweet does not work,” Warren said. “Randomly raising tariffs on a handful of goods with no coherent policy and doing it nation by nation makes no sense at all.”

Warren is one of more than 20 Democrats vying for the Democratic nomination to challenge Trump in the November 2020 election.

Mexican officials will seek to persuade the White House in talks hosted by U.S. Vice President Mike Pence on Wednesday that their government has done enough to stem immigration and avoid looming tariffs. The tariff fight merges two of Trump’s biggest campaign promises, on immigration and fair trade.

“Nobody goes into battle by themselves when they can be stronger by having allies in it,” Warren said, calling for a “coherent trade policy.”

Other Candidates Weigh In

U.S. Senator Amy Klobuchar, who is also running to be a Democratic presidential nominee, criticized Trump for creating “chaos” by creating the tariffs and promising more.

“That’s the kind of chaos he likes,” Klobuchar said in an appearance on CNN on Tuesday. “And I just think that’s not how you embark on international diplomacy with one of our best allies.

U.S. Senator Kirsten Gillibrand, another Democratic presidential hopeful, had a similar criticism.

“This president has no plan and no ability to have a thoughtful approach towards trade or the economy,” Gillibrand said on Monday in a town hall on Fox News. “Because if he wanted to reduce the trade deficit, he’s only grown it.”
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Ghana could end child labor on cocoa farms by increasing the prices it pays impoverished farmers by about 50%, a U.S. study said on Wednesday, as global efforts to end child labor stall.

Paying just 3% more at the farm gate could stop children in Ghana doing the most hazardous tasks, like using machetes, or working more than 42 hours a week, researchers said, as the illegal practice is driven by poverty and rarely prosecuted.

“We figured there has to be some kind of incentive, on top of the laws, to get the farmers to stop using child labor,” said Jeff Luckstead, an agricultural economist at the University of Arkansas, co-author of the study in the journal PLoS ONE.

“It’s a really difficult issue because these are very poor farmers … They don’t have many options – they can’t just go and hire people,” he told the Thomson Reuters Foundation.

A PLoS spokeswoman later added that while the underlying conclusions of the report were all accurate, some of the numbers cited in the study were under review with an update to follow shortly. No further details were given.

Ghana is the world’s second largest cocoa grower, with more than 700,000 children producing the crop, often doing dangerous jobs on family farms like carrying heavy loads or using sharp tools, the anti-slavery group Walk Free Foundation says.

Big chocolate makers have been under pressure to clean up their supply chains since reports of child labor on West African cocoa farms emerged in the 1990s, with major names like Mars and Hershey promising to only buy ethical cocoa by 2020.

The International Labor Organization has said the world is unlikely to meet a target of ending child labor by 2025, which is part of 17 global development goals agreed in 2015 at the United Nations.

Researchers came up with the price premiums by analyzing data between 2003 and 2015, including household budgets, cocoa prices and production and children’s education and leisure time.

While recognizing a 50% price increase was “implausible,” the study suggested that Ghana could become more competitive globally if it could certify its cocoa as “child labor-free”.

All cocoa produced in Ghana is sold to the regulator, COCOBOD, which paid farmers 7,600 cedi ($1,435) per ton last year. Ghana exports almost 20% of global cocoa output of some 4.8 million tons a year.

Most cocoa farming families live below the World Bank’s poverty line of $2 a day, according to the charity International Cocoa Initiative (ICI), fueling child labor.

But Genevieve LeBaron of Britain’s Sheffield University, who was not part of the study, said the key to ending poverty among cocoa farmers was not necessarily raising COCOBOD’s prices but fairer distribution of profits within the chocolate sector.

The global chocolate industry was worth about $85 billion in 2018, and is projected to jump to $102 billion by 2022, according to leading research firm Mintel.

“If you look at the annual profits of the largest cocoa and chocolate confectionary companies in the world, there’s plenty of money in that supply chain that could be redistributed downwards along the value chain,” said the politics professor.
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