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US readies to slap duties on $16 billion of Chinese goods

The U.S. said it will begin imposing 25% duties on an additional $16 billion in Chinese imports in two weeks, escalating a trade war between the world’s two biggest economies.
Customs will begin collecting the duties on 279 product lines, down from 284 items on the initial list, as of Aug. 23, the U.S. Trade Representative’s Office said in an emailed statement on Tuesday. The new list covers products ranging from motorcycles to steam turbines and railway cars. China’s trade surplus with the U.S. stood at $28.1 billion, close to the record-high in June, data released Wednesday showed.
It will be the second time the U.S. slaps duties on Chinese goods in about the past month, despite complaints by American companies that such moves will raise business costs and eventually consumer prices. The U.S. levied 25% duties on $34 billion in Chinese goods on July 6, prompting swift in-kind retaliation from Beijing. China has vowed to strike back again, dollar-for-dollar, on the $16 billion tranche, but the government hadn’t said anything as of 4:30 p.m. in Beijing on the timing of its move.
The total could increase soon. The USTR is reviewing 10% tariffs on a further $200 billion in Chinese imports, and is even considering raising the rate to 25 percent. Those duties could be in place after a comment period ends on Sept. 6.
President Donald Trump has suggested he may tax effectively all imports of Chinese goods, which reached more than $500 billion last year.
Still, there’s little sign the trade threat is hurting shipments just yet. Chinese data Wednesday showed imports jumped and exports remained robust in July.
A U.S.-China trade war will reduce global output by 0.7% by 2020, with China’s economy taking a 1.3% hit and U.S. GDP dropping 1 percent, Oxford Economics said in a research note Tuesday, before the new list was released. While there’s no major risk of the world lapsing into “damaging stagflation,” the possibility remains of a “bigger blow-up” that sharply reduces trade, as in the 1930s, it said.
Among the products removed from the earlier list on $16 billion of imports were shipping containers, including those used by freight companies. Schneider National Carriers Inc. and other firms testified during a hearing July 24-25 in Washington that there are no U.S. manufacturers and that the containers are almost exclusively made in China.
Log Splitters
Also removed were splitting, slicing or paring machines. Joseph Cohen, chief executive officer of New Jersey-based Snow Joe LLC, which makes log splitters, had asked that they be taken off the list.
The final list did not remove tariffs on fertilizer distributors, which Jane Hardy, chief executive officer of Brinly-Hardy Co. In Indiana, testified on July 24 could be the “nail in our coffin” for her firm after 179 years in business.
Over the weekend, Trump said he had the upper hand in the trade war, while Beijing responded through state media by saying it was ready to endure the economic fallout.
The U.S. and China have been trying to restart high-level talks that broke off after Trump followed through on his tariff threats. Representatives of Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He are having private conversations as they look for ways to reengage in negotiations, according to two people familiar with the efforts.
No Talks
The two sides held three rounds of formal talks, beginning with a delegation to Beijing led by Mnuchin in May. After Liu visited Washington later that month, the nations released a joint statement pledging to reduce the U.S. trade deficit with China, among other things. But within days, Trump himself backed away from the deal, saying talks would “probably have to use a different structure.”
Negotiations broke off after the Trump administration imposed the tariffs on $34 billion in Chinese imports, a move the Chinese said would void any promises they’d made in negotiations.
Trump’s mission to reduce the U.S. trade deficit via the threat of tariffs has brought him into conflict with China as well as U.S. allies, roiling financial markets and raising fears of a global trade war the International Monetary Fund has warned may undermine the strongest economic upswing in years. — Bloomberg

SMFB net income jumps in first half

The newly-consolidated food and beverage arm of diversified conglomerate San Miguel Corp. (SMC) saw its earnings jump by a fifth in the first six months of 2018, boosted by the double-digit growth across its portfolio.
In a statement issued Wednesday, San Miguel Food and Beverage, Inc. (SMFB) said it delivered a combined net income of P15.4 billion in the first semester, following a 15% increase in consolidated revenues to P137.4 billion.
The comparative figures were derived from the consolidated financials of San Miguel Brewery, Inc. (SMB), Ginebra San Miguel, Inc., and San Miguel Pure Foods Company, Inc., following the completion of the businesses’ consolidation last June 29.
The food group generated P62.9 billion in consolidated revenues, 12% higher in the same period a year ago due to the performance of the feeds, poultry and meats, and branded value-added units. Operating income accordingly went up by six percent to P4.7 billion.
SMB benefited from the higher consumption of beer products nationwide, expanding its consolidated revenues by 18% to P62.5 billion for the first semester. The unit delivered P17.3 billion in operating income, 23% higher year-on-year. — Arra B. Francia

Senator to block tax reform provision that could lead to rise in school tuition

Senator Paolo Benigno A. Aquino IV said he will block the removal of the 10% preferential tax rate for private non-profit schools under the second package of the tax reform program.
In a statement, the senator feared the removal of such provisions will lead to increase in tuition and other fees. He said these institutions may be taxed up to 25%, more than double its current rate.
“Sa dulo, ang mga pamilyang nagpapa-aral din ang papasan nito kaya tataas ang matrikula (In the end, the burden will be passed on to parents as these schools raise tuition.),” he said.
Under the present system, non-profit proprietary educational institutions receive a preferential 10% income tax rate, together with non-profit hospitals, offshore banking units, and regional operating headquarters.
The Senate version of the bill removed the 10% preferential income tax rate provision in the National Internal Revenue Code (NIRC) for proprietary educational institutions and hospitals.
Meanwhile the House version of the bill retained the 10% income tax rate for proprietary educational institutions and hospitals. However, it provided a condition that the institutions’ performance complied with the criteria provided by the Commission on Higher Education (CHEd), Department of Education (DepEd), and the Department of Health (DoH).
The institutions which failed to meet the standards will have to pay 10% income tax but will eventually increase to 15% and later to 20% at a specified period, if its performance remained below standards. — Camille A. Aguinaldo

Robinsons Land books Q2 profit growth

Robinsons Land Corp. (RLC) delivered a 16% increase in attributable profit during the second quarter of 2018, driven by the performance of its residential, commercial, and hospitality segments.
In a regulatory filing, the Gokongwei-led property developer said net income attributable to the parent reached P1.79 billion, higher than the P1.54 billion it realized in the same period a year ago. This followed a 20% increase in revenues to P6.74 billion.
For the first semester, RLC’s attributable profit jumped by 14% to P3.33 billion, while revenues went up 19% to P13.1 billion. — Arra B. Francia

Bloomberry posts lower Q2 net income

Earnings of Bloomberry Resorts Corp slumped by 17% in the second quarter of 2018, as the company incurred losses from its operations in South Korea coupled with foreign exchange losses.
In a regulatory filing, the listed casino operator said net income attributable to the parent slipped to P1.64 billion in the April to June period, lower than the P1.97 billion it generated in the same period a year ago. Revenues reached P10.6 billion, 7.7% higher year-on-year.
Bloomberry attributed the decline to a net loss of P513 million from Jeju Sun Hotel & Casino, in addition to P387 million in foreign exchange losses. Profit from the Solaire Resort & Casino along the Bay Area was also flat at P2.129 billion.
The company also said expenses went up by 14% during the quarter, counting gaming taxes, employee related expenses, outside services and charges, and additional interest expense from its new syndicated loan which was used to pay off previous debt facilities and to acquire Solaire’s expansion area in Entertainment City from the Philippine Amusement and Gaming Corp. — Arra B. Francia

Max’s earnings up by 34% in second quarter

Max’s Group, Inc. (MGI)’s net income expanded by 34% in the second quarter of the year, as the company implemented operational efficiency initiatives to help temper rising costs of raw materials.
In a statement issued Wednesday, Aug. 8, the listed casual dining restaurant group said net income picked up to P208.3 million for the April to June period, accelerating from the P155.7 million posted in the same period a year ago.
System-wide sales went up by 11% to P4.9 billion, as same store sales growth stood at six percent. New store sales also grew by five percent during the quarter.
“The results underpin prior initiatives to reorganize ourselves and invest on building professional capabilities to spearhead long-term growth,” MGI President and Chief Executive Officer Robert F. Trota said in a statement. — Arra B. Francia

Megaworld nets higher profit in second quarter

Megaworld Corp. grew its attributable profit by 14% in the second quarter of 2018, driven by its residential, office, and mall properties alongside the acceleration of its hotel business.
In a regulatory filing, the property firm of tycoon Andrew L. Tan reported a net income attributable to equity holders of the parent to P4.1 billion in the April to June period, higher than the P3.6 billion it generated in the same period a year ago.
Reveues went up by 11% to P13.7 billion during the second quarter, against the P12.3 billion recorded in the same period a year ago.
This pushed Megaworld’s attributable profit 13% higher to P7.25 billion in the first semester of 2018, after revenues climbed 10% to P26.8 billion.
“Megaworld’s consistent growth across all business segments is a clear indicator of where the company is going, and we are continuously focusing on putting better value to our customers through our programs on innovation and design, digital technology, smart mobility and connectivity as well as environmental sustainability,” Megaworld Senior Vice President and Treasurer Francis C. Canuto said in a statement. — Arra B. Francia

Phoenix Petroleum second-quarter profit surges 62%

Phoenix Petroleum Philippines, Inc. reported a net income of P531.11 million in the second quarter, higher by 62% compared with the P327.77 million posted a year ago, as revenues during the period more than doubled with the surge in sales volume.
Revenues during the quarter hit P22.17 billion, up 118% from P10.16 billion in the same three months last year.
“As we grow our core business, we are also realizing the value of our new businesses, as we maximize synergies across our portfolio of fuels, lubricants, LPG, trading and supply, convenience store retailing, and asphalt,” said Phoenix Petroleum Chief Operating Officer Henry Albert R. Fadullon in a statement.
“We are committed to delivering greater value to our stakeholders and being their indispensable partner,” he added. — Victor V. Saulon

Oil’s near $69 as trade conflict counters latest supply risks

Oil held gains near $69 a barrel as falling American stockpiles added to speculation of tightening supplies, offsetting concerns over escalating trade tensions between China and the U.S.
Futures were little changed in New York, following a 1% advance over the previous two sessions. Nationwide crude inventories as well as supplies stored in the key hub of Cushing, Oklahoma, slipped last week, the American Petroleum Institute was said to report. Meanwhile, the U.S. said Tuesday it will begin imposing tariffs on an additional $16 billion in Chinese imports in two weeks.
Crude has hovered within a $3 range so far this month, with a measure of oil-market volatility falling to the lowest level since May. A trade spat between the U.S. and China has kept oil from rebounding from a 7% plunge last month. At the same time, President Donald Trump restored some American sanctions on Iran and has reaffirmed plans to impose tougher penalties on the nation’s oil sales in November. Australia & New Zealand Bank Group Ltd. said OPEC’s output increase may not be enough to offset any losses of Iranian supplies.
“Oil has barely made its way above $69 and is struggling to gain further, trading in a tight range, as both the upward and downward elements co-exist, pulling prices from opposite directions,” Kim Kwangrae, a commodities analyst at Samsung Futures Inc., said by phone from Seoul. “While concerns of a supply disruption from Iran due to the resumption of U.S. sanctions is buoying prices, the U.S.-China trade row is keeping oil from rising higher.”
West Texas Intermediate crude for September delivery traded at $69.11 a barrel on the New York Mercantile Exchange, down 6 cents, at 7:55 a.m. in London. The contract climbed 16 cents to $69.17 on Tuesday. Total volume traded was about 48% below the 100-day average.
Brent for October settlement traded at $74.53 a barrel on the London-based ICE Futures Europe exchange, down 12 cents. The contract rose 90 cents to close at $74.65 on Tuesday. The global benchmark crude traded at a $6.22 premium to WTI for the same month.
Futures for September delivery lost 2.9% to 521.9 yuan a barrel on the Shanghai International Energy Exchange. The contract surged 3.6% on Tuesday after rising as much as their daily limit to a record.
U.S. crude inventories fell 6.02 million barrels last week, the API was said to report. That’s more than double the 3-million-barrel decline predicted in a Bloomberg survey before Energy Information Administration data. API also showed supplies stored at Cushing dropped by 576,000 barrels. If it’s confirmed by the EIA data, it would be the twelfth straight week of losses.
In America, customs will begin collecting duties on 279 product lines of Chinese goods as of Aug. 23, the U.S. Trade Representative’s Office said Tuesday. China has vowed to strike back again, dollar-for-dollar, on the $16 billion tranche. This will be the second time the U.S. slaps duties on Chinese products in about the past month, despite complaints by local companies that such moves will raise business costs and eventually consumer prices.
In Iran, America’s first round of sanctions hit on Aug. 7 and a second, tougher set targeting oil sales, will take effect on Nov. 5. Washington’s reinstatement of sanctions is already isolating the Persian Gulf nation’s economy. German carmaker Daimler AG froze a plan to make Mercedes Benz trucks in Iran, while Total SA said it couldn’t risk investing in Iran because of its large U.S. operations. — Bloomberg

Biggest rate hike in a decade on the cards for the Philippines

The question facing policy makers in the Philippines is not whether to raise interest rates for a third time in a row, but by how much.
A booming economy, surging inflation and pressure on the currency are setting the stage for a 50 basis-point increase in the benchmark rate to 4% on Thursday, according to most of the 17 economists surveyed by Bloomberg. That would be the biggest hike since 2008 and follows a similar move by Indonesia as central banks in emerging markets take more aggressive steps to curb the fallout from rising U.S. rates and a stronger dollar.
“With rising inflation and inflation expectations, the central bank will likely implement a more aggressive rate increase,” said Euben Paracuelles, an economist at Nomura Holdings Inc. in Singapore, who penciled in a half-point increase. “We also expect that they will leave the door open for more rate hikes.”
Facing criticism that the central bank was too slow to act, Governor Nestor A. Espenilla, Jr. has been preparing the markets for more decisive action, saying he’ll take “strong” steps to rein in inflation after it climbed above 5 percent. With data on Thursday set to show the economy sustained growth of more than 6 percent in the second quarter, a rate hike is all but sealed.
Despite the recent rate increases, the economy is expected to remain strong, supported by the government’s massive infrastructure program and robust consumer spending. The economy expanded a revised 6.6% in the first quarter from a year earlier, the statistics agency said on Wednesday.
“There won’t be any significant spillovers to the growth cycle,” said Rahul Bajoria, a senior economist at Barclays Plc. in Singapore, who forecast a half-point hike this week.
Regional Tightening
Other central banks in Asia are also tightening monetary policy. Indonesia has raised its benchmark rate by 1 percentage point since May, while India increased its policy rate a second time this year in August.
In the Philippines, higher global oil costs, an increase in levies on fuel, sugary drinks and cigarettes and record rice prices boosted inflation to a five-year high of 5.7% in July.
Inflation is set to breach the central bank’s 2% to 4% target band in 2018, with the peso’s more than 5% slump against the dollar this year adding to concerns. The peso fell 0.1% to 53.065 per dollar on Wednesday, while the benchmark stock index gained 1.1%.
While being an independent body, the central bank is facing mounting political pressure as more lawmakers join in the criticism of its failure to curb inflation. Congressman Joey Salceda, economic liaison of House Speaker Gloria Arroyo, said on Wednesday a half-point rate increase is needed and that monetary response this year has so far been “weak.”
The Philippines is the only Southeast Asian economy to have negative real interest rates at -2.2%.
Bangko Sentral ng Pilipinas raised its benchmark rate by 25 basis points at each of its May and June meetings. The last time the central bank raised the key rate by more than a quarter-point was in July 2008 when it hiked by 50 basis points.
Analysts will be closely looking at the central bank’s rhetoric on Thursday, with officials expected to maintain a hawkish stance.
“A neutral or dovish statement from BSP, even with a 50 basis points hike, is likely to disappoint markets,” Chidu Narayanan, Asia economist at Standard Chartered Plc in Singapore, said in a note this week. “We expect it to maintain a hawkish stance, reiterating its ‘commitment to take decisive action’.” — Bloomberg

Higher revenues boost Chelsea Logistics’ first-half profit

Chelsea Logistics Holdings Corp. (CLC) booked higher earnings in the first half of this year driven by a surge in revenues.
In a disclosure to the stock exchange, CLC’s net income grew to P360 million, 29% higher than the P278 million reported during the same period in 2017.
The listed company said its earnings were boosted by its accumulated revenue for the January to June period, which reached P2.7 billion. A bulk of those revenues came from its shipping activities, which rose 67% to P2.6 billion compared to the same period last year.
CLC added: “The tankers and tugs business of CLC saw 37% growth in revenues contributing P1.2 billion to the top-line, while revenue from the freighter segment grew by 97% to P855 million during the first half of the year. The Company’s revenues from passage registered the highest growth at 116%, realizing P545 million over the same period.” — Denise A. Valdez

Court grants PT&T appeal for rehab exit

The Philippine Telegraph and Telephone Corp. (PT&T) said the regional trial court (RTC) of Makati City has granted its appeal to leave its court-assisted corporate rehabilitation.
The company said in a disclosure to the stock exchange on Wednesday, Aug. 8, the Rehabilitation Court, or Makati RTC Branch 66, has “allowed to exit from rehabilitation subject to compliance with certain requirements in line with the approved Rehabilitation Plan.”
This development is in relation to PT&T’s request last week to exit rehabilitation to resume operations. — Denise A. Valdez

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