Tag Archives: China

Wall Street plunges on heightening U.S.-China trade worries

By Amy Caren Daniel

(Reuters) – Wall Street’s main indexes tumbled more than 1 percent on Tuesday, as renewed worries over trade negotiations with China stoked global growth worries and kept investors away from risky assets.

Beijing said on Tuesday that Chinese Vice Premier Liu He will visit the United States this week for trade talks, playing down U.S. President Donald Trump’s unexpected threat on Sunday that he would raise tariffs on $200 billion worth of Chinese goods to 25 percent from 10 percent.

Trade tensions also pushed U.S. treasury yields lower as investors turned to low-risk government bonds, pressuring interest rate sensitive banking stocks, which fell 1.69%. [US/]

“Many had been looking at this week as providing a potential breakthrough in talks between the world’s two largest economies, yet we instead have seen the U.S. threaten a raft of new tariffs,” Joshua Mahony, senior market analyst at IG, wrote in a note.

“Much of the gains of the eventual deal have been factored into market valuations and thus there is a substantial risk that markets could jolt lower if the direction of talks shift towards more, rather than less barriers to trade.”

Boeing Co, the single largest U.S. exporter to China, slipped 2.7% and Caterpillar Inc declined 1.9%.

All the major S&P sectors were trading in the red, with technology companies posting the steepest decline of 2%.

The CBOE Volatility Index, a gauge of investor anxiety, spiked to its higher level in over three months.

At 10:55 a.m. ET the Dow Jones Industrial Average was down 355.41 points, or 1.34%, at 26,083.07. The S&P 500 was down 42.23 points, or 1.44%, at 2,890.24 and the Nasdaq Composite was down 138.67 points, or 1.71%, at 7,984.62.

Marquee names including Microsoft Corp, Apple Inc, Amazon.com Inc and Facebook Inc fell more than 1.7% and weighed on markets.

The earnings season has now reached its homestretch. Of the 414 S&P companies that have reported earnings so far, about 75% have surpassed analysts’ estimates, according to Refinitiv data.

The upbeat reports have turned around earnings estimates for the first quarter to an almost 1.2% rise, a sharp improvement from the 2.3% decline expected at the start of the earnings season.

American International Group Inc jumped 6.7%, the most among S&P companies, after the insurer reported a quarterly profit that blew past expectations.

Among decliners, Mylan NV tumbled 17% after the drugmaker missed Wall Street estimates for quarterly revenue, hurt partly by manufacturing problems at its Morgantown plant in West Virginia.

Shares of Regeneron Pharmaceuticals Inc fell 5% after the drugmaker missed quarterly profit estimates.

Declining issues outnumbered advancers for a 4.26-to-1 ratio on the NYSE and for a 2.95-to-1 ratio on the Nasdaq.

The S&P index recorded four new 52-week highs and four new lows, while the Nasdaq recorded 37 new highs and 22 new lows.

(Reporting by Amy Caren Daniel and Shreyashi Sanyal in Bengaluru; Editing by Shounak Dasgupta and Arun Koyyur)

Pentagon warns on risk of Chinese submarines in Arctic

FILE PHOTO: The Pentagon in Washington, U.S., is seen from aboard Air Force One, March 29, 2018. REUTERS/Yuri Gripas

By Phil Stewart and Idrees Ali

WASHINGTON (Reuters) – Deepening Chinese activities in the Arctic region could pave the way for a strengthened military presence, including the deployment of submarines to act as deterrents against nuclear attack, the Pentagon said in a report released on Thursday.

The assessment is included in the U.S. military’s annual report to Congress on China’s armed forces and follows Beijing’s publication of its first official Arctic policy white paper in June.

In that paper, China outlined plans to develop shipping lanes opened up by global warming to form a “Polar Silk Road” – building on President Xi Jinping’s signature Belt and Road Initiative.

China, despite being a non-Arctic state, is increasingly active in the polar region and became an observer member of the Arctic Council in 2013. That has prompted concerns from Arctic states over Beijing’s long-term strategic objectives, including possible military deployments.

U.S. Secretary of State Mike Pompeo will attend the meeting of the eight-nation Arctic Council in Rovaniemi, Finland, starting on Monday, which comes amid concerns over China’s increased commercial interests in the Arctic.

The Pentagon report noted that Denmark has expressed concern about China’s interest in Greenland, which has included proposals to establish a research station and a satellite ground station, renovate airports and expand mining.

“Civilian research could support a strengthened Chinese military presence in the Arctic Ocean, which could include deploying submarines to the region as a deterrent against nuclear attacks,” the report said.

The Pentagon report noted that China’s military has made modernizing its submarine fleet a high priority. China’s navy operates four nuclear-powered ballistic missile submarines, six nuclear-powered attack submarines and 50 conventionally powered attack submarines, the report said.

“The speed of growth of the submarine force has slowed and (it) will likely grow to between 65 and 70 submarines by 2020,” the report predicted.

The report said China had built six Jin-class submarines, with four operational and two under construction at Huludao Shipyard.

In a January report, the Pentagon’s Defense Intelligence Agency said the Chinese navy would need a minimum of five Jin-class submarines to maintain a continuous nuclear deterrence at sea.

The United States and its allies, in turn, are expanding their anti-submarine naval deployments across East Asia. This includes stepped-up patrols of America’s advanced, sub-hunting P-8 Poseidon planes out of Singapore and Japan.

TAIWAN CONTINGENCY

The expansion of China’s submarine forces is just one element of a broad, and costly, modernization of its military, which U.S. experts say is designed largely to deter any action by America’s armed forces.

Although Beijing’s official defense budget for 2018 was $175 billion, the Pentagon estimated that China’s budget actually topped $200 billion, when including research, development and foreign weapons procurement. It estimated that China’s official defense budget would likely grow to about $260 billion by 2022.

Much of China’s military doctrine is focused on self-ruled Taiwan, which Beijing sees as a renegade province.

On Jan. 2, Xi said in a speech that China reserved the right to use force to bring Taiwan under its control but would strive to achieve peaceful “reunification.”

The Pentagon report outlined a number of potential scenarios that China might take if Beijing decides to use military force on Taiwan, including a comprehensive campaign “designed to force Taiwan to capitulate to unification or unification dialogue.”

But the U.S. analysis appeared to downplay prospects for a large-scale amphibious Chinese invasion, saying that could strain its armed forces and invite international intervention. It also noted the possibility of limited missile strikes.

“China could use missile attacks and precision air strikes against air defense systems, including air bases, radar sites, missiles, space assets, and communications facilities to degrade Taiwan’s defenses, neutralize Taiwan’s leadership, or break the Taiwan people’s resolve,” the report said.

China has repeatedly sent military aircraft and ships to circle the island on drills in the past few years and worked to isolate Taiwan internationally, whittling down its few remaining diplomatic allies.

It has also strongly objected to U.S. warship passages through the Taiwan Strait, which have greatly increased in frequency in the past year.

Taiwan’s military is significantly smaller than China’s, a gap that the Pentagon noted is growing year by year.

Recognizing the disparity, the Pentagon report noted: “Taiwan has stated that it is working to develop new concepts and capabilities for asymmetric warfare.”

(Reporting by Phil Stewart and Idrees Ali in Washington; Editing by James Dalgleish and Leslie Adler)

Special Report: China’s furtive underwater nukes test the Pentagon

The littoral combat ship USS Fort Worth (LCS 3) prepares to transit alongside the Military Sealift Command dry cargo and ammunition ship USNS Wally Schirra (T-AKE 8) during a replenishment-at-sea during routine patrols in international waters of the South China Sea near the Spratly Islands May 9, 2015. U.S. Navy photo by Mass Communication Specialist 2nd Class Conor Minto/Handout via REUTERS

By Greg Torode and David Lague

HONG KONG (Reuters) – Recent visitors to the bay surrounding a submarine base on the southern coast of China’s Hainan Island describe a curious nocturnal phenomenon. Powerful spotlights are sometimes trained directly on the ocean frontages of neighboring hotels at night, making visibility out to sea virtually impossible. Some of the lights are mounted on land and others on passing naval patrol boats.

“The effect is incredible,” said one recent visitor. “The glare is so great you can hardly stand it on the balcony. You go inside and draw the curtains tight.”

The blinding lights cannot obscure something of intense interest to the world’s military intelligence agencies: evidence that China has made a breakthrough in its drive to rival America and Russia as a nuclear arms power.

A nuclear-powered Type 094A Jin-class ballistic missile submarine of the Chinese People's Liberation Army (PLA) Navy is seen during a military display in the South China Sea April 12, 2018. REUTERS/Stringer

A nuclear-powered Type 094A Jin-class ballistic missile submarine of the Chinese People’s Liberation Army (PLA) Navy is seen during a military display in the South China Sea April 12, 2018. REUTERS/Stringer

Satellite imagery reveals the regular presence of nuclear-powered ballistic missile submarines at the strategic base near the resort city of Sanya. Specialized surface warships and aircraft designed to protect the subs are prowling key waterways off the coast. Facilities at the base appear to have been built to store and load ballistic missiles. Antenna arrays that support the hunt for foreign submarines have appeared on Chinese-held islands in the hotly contested South China Sea. And a veteran submariner has been appointed to command Chinese forces in the south of the country.

Taken together, this means China has a force of missile submarines that can launch nuclear attacks from beneath the waves and now appear to be heading out on patrols, according to serving and retired naval officers, diplomats and security analysts. That gives Beijing something it has until recently lacked: a more reliable “second strike” capability if its land-based nuclear arsenal comes under attack.

After six decades of battling to master complex and challenging subsea military technologies, China has joined the United States, Russia, the United Kingdom and France in the nuclear ballistic missile submarine club. In its most explicit assessment so far of this Chinese capability, the Pentagon in its latest annual report on China’s military, published in August, said that Beijing now has a “credible” and “viable” sea-based nuclear deterrent.

An effective fleet of nuclear ballistic missile submarines, known as SSBNs, marks a dramatic boost to China’s nuclear capabilities. Each of China’s four Jin-class submarines is armed with up to 12 ballistic missiles that can carry a nuclear warhead with an estimated range of 7,200 kilometers (about 4,500 miles), according to the Pentagon. That would put the United States within striking distance from the Western Pacific. Analysts at the Washington-based Center for Strategic and International Studies estimate these missiles could fly at least 8,000 kilometers. The U.S. believes China has up to 100 nuclear missiles based on land.

Beijing’s enhanced nuclear capability is one of the hallmarks of Chinese leader Xi Jinping’s ambitious revamping of the People’s Liberation Army (PLA), the world’s largest fighting force. China’s nuclear submarine fleet, Western strategists say, has added to the challenge that the increasingly powerful Chinese military poses to U.S. dominance in Asia.

“The opposing side can never be exactly sure that it knows where all of the submarines are,” said Peter Horobin, a retired Australian submarine commander and veteran of the Cold War battles to detect and monitor Soviet subs.

China’s Ministry of National Defense, the U.S. Indo-Pacific Command and the Pentagon did not respond to questions from Reuters.

FILE PHOTO: A missile is launched from a Chinese submarine during a China-Russia joint military exercise in eastern China's Shandong peninsula, August 23, 2005. REUTERS/China Newsphoto/File Photo

FILE PHOTO: A missile is launched from a Chinese submarine during a China-Russia joint military exercise in eastern China’s Shandong peninsula, August 23, 2005. REUTERS/China Newsphoto/File Photo

It is still unclear if the Chinese are deploying fully armed submarines to maintain a round-the-clock deterrent, as the other ballistic missile submarine powers do. Some analysts doubt China has advanced that far.

But the United States and its allies are behaving as if China has. Western military officials say privately that in operational terms, America and its allies – including Japan, Australia and the United Kingdom – are already attempting to track the movements of China’s missile submarines as if they are fully armed and on deterrence patrols.

Asked about their role in tracking Chinese subs, Japan and the United Kingdom said they don’t comment on operational details.

“China’s military modernization is consistent with its rapid economic growth,” the Australian Department of Defense said. “As with all countries, we encourage China to be transparent about its military capabilities and strategic intentions to provide greater assurance to its neighbors.”

GROWING STOCKPILE

“An armed Jin-class SSBN will give China an important strategic capability that must be countered,” Admiral Harry Harris, then head of the U.S. Pacific Command, told a congressional committee last year.

That response appears to be happening. The United States and its allies are expanding their anti-submarine naval deployments across East Asia. This includes stepped-up patrols of America’s advanced, sub-hunting P-8 Poseidon planes out of Singapore and Japan.

With its relatively small force of nuclear missiles, Beijing has always worried that it might be vulnerable to a debilitating first strike. These fears were magnified as Chinese military planners watched Washington employ precision-guided weapons in conflicts like the Gulf wars, Afghanistan, Syria and the Balkans.

As it strengthens and improves its nuclear arsenal, Beijing is the only major nuclear power to be adding warheads to its stockpiles. China is developing an air-launched ballistic missile and plans to build a long-range stealth bomber capable of carrying nuclear weapons. With the sea-based second-strike deterrent in place, those programs suggest Beijing eventually intends to field a triad of air, sea and land-based nuclear weapons like the United States and Russia.

In the past two decades, the PLA Rocket Force, the service which controls China’s nuclear and conventional missiles, has invested heavily in expanding its stockpile of nuclear warheads and boosted the range and accuracy of the missiles that deliver them. It has also hardened the protection of its silo-based nuclear weapons, according to reports in China’s state-controlled media. The Pentagon and official Chinese military publications have reported that China has also deployed modern, road-mobile missiles that are more difficult for an adversary to find and attack.

Still, China lags far behind the United States and Russia in overall nuclear firepower. The Stockholm International Peace Research Institute estimates that China has a total of 280 nuclear warheads. China does not disclose how many of its warheads are deployed and ready for conflict. The United States has 1,750 deployed warheads and Russia 1,600, the institute’s 2018 report said. The United States and Russia each have thousands more warheads held in stockpiles, according to the report.

Hans Kristensen, director of the Nuclear Information Project of the Washington-based Federation of American Scientists, said he had yet to see hard intelligence suggesting China had placed fully armed ballistic missiles on its submarines at sea, despite the intense activity. Just because the submarines exist, he said, “that doesn’t mean that they have the weapons aboard the vessels.”

While acknowledging that China has significantly enhanced its nuclear deterrence, the Pentagon isn’t convinced that Chinese subs are yet conducting around-the-clock patrols. In a January report, the Pentagon’s Defense Intelligence Agency said the Chinese navy would need a minimum of five Jin-class submarines to maintain a continuous nuclear deterrence at sea. China now has four.

UNDERSEA DUELS

A fleet of nuclear missile submarines hidden in the vast expanses of the ocean would help offset Beijing’s nuclear shortcomings, say Chinese and Western strategists.

Chinese naval designers and nuclear technicians have been working to build a force of nuclear missile submarines since the late 1950s. A single vessel was launched in the 1980s, but it was never fully operational. This submarine served as a test bed as Chinese technicians and designers struggled to overcome problems with nuclear propulsion technology, missiles and excessive noise that would have made the vessels easier for an adversary to detect and target.

To maximize its second-strike capability, China’s missile subs would need to be stealthy enough to go undetected as they sail to their patrol areas in the open ocean. U.S. and other foreign naval analysts say the Jin-class submarines are a sharp improvement over China’s earlier efforts, but they remain less stealthy than their U.S., Russian, French and British counterparts.

The 11,000-tonne Jin-class submarines are stationed on the southern coast of China’s Hainan Island, close to deep water channels leading into and out of the South China Sea. The geography of China’s coastal waters has forced Beijing to base its missile submarines in this area, astride one of the world’s most important shipping lanes.

In the north, the Yellow Sea is too shallow to conceal big, ballistic missile submarines. The East China Sea is deeper but it’s confined by the Korean Peninsula, Japan’s island chain and Taiwan.

And Japanese and U.S. forces can deploy advanced anti-submarine warfare ships and aircraft based in Japan to closely monitor these waters and the channels that pass out into the Western Pacific, where the submarines are ultimately headed. The Chinese need to reach these waters to be in a position to fire on the United States.

The South China Sea, by contrast, is much bigger and in parts deeper, making it more suitable for concealed submarine operations, according to Western submariners with extensive experience of patrolling in this area.

China would need to get its submarines out of Hainan, past surveillance and into seas east of the Philippines for their missiles to be in striking range of the United States. This is a key reason why China has gone to such lengths to reclaim and fortify islands and reefs in the South China Sea that are expanding Beijing’s control over this area, according to Western submariners and military attaches.

The sub fleet’s vulnerability to detection also explains China’s extreme sensitivity to the surveillance operations of the United States and its allies in these waters. A Chinese destroyer sailed within 45 meters of the American destroyer USS Decatur in late September, as the American warship patrolled in the Spratlys, a highly contested island chain where China has expanded its foothold in recent years. It was the latest in a series of close encounters in the past decade.

China now appears to be on guard against foreign subs attempting to detect and shadow its ballistic missile fleet. As China’s Jin-class vessels put to sea, they appear to be flanked by protective screens of surface warships and aircraft on station to track foreign submarines, according to military officers and analysts familiar with allied surveillance of the Chinese coast.

Serving and former senior naval officers also point to the extensive, frequent deployments of the Chinese navy’s latest Type 056A corvettes into key waters south of Japan and east of the Philippines. The Type 056A is China’s most advanced submarine hunter. It is able to tow sonar arrays and other listening equipment deep beneath the surface to detect enemy submarines – advanced technology that China did not have just five years ago.

China has also installed an array of sensors, antennas and satellite communications installations on islands in the Spratlys, according to the International Institute for Strategic Studies. The PLA is tracking the foreign undersea hunters from the air, too. It has formed a squadron of Y-8GX6 aircraft on Hainan with the ability to comb vast areas of the sea surface for magnetic anomalies. The turboprop planes have already been seen landing on Woody Island, China’s key offshore holding in the South China Sea. These patrols are not the infrequent exercises of the past, but now near-constant deployments, shadowing foreign warships as well.

“We’re looking at them looking for us,” said one Western military attache.

FURTIVE FORCE

The submarine base near Sanya is now under the direct control of the Central Military Commission, the top military decision-making body, chaired by Xi Jinping himself. The new communications installations in the South China Sea have helped knit together the new command structure, allowing tighter control from Beijing, right down to individual vessels.

In 2017, Beijing appointed a veteran submariner, Vice Admiral Yuan Yubai, to head the Southern Theater Command, which is responsible for the South China Sea. His promotion was a clear indication of the importance China attaches to supporting nuclear sub-operations, according to Chinese naval experts. Yuan is the first naval officer to head a command of this type, a promotion that’s part of a sweeping overhaul of the military structure by Xi Jinping.

Commercial satellite images of the submarine base give insight into the furtive force stationed there. They appear to show missile submarines regularly tied up alongside long piers in the harbor. Satellite images from Google Earth in June last year show what appear to be three Jin-class missile submarines at the base.

The vessels have a distinctive shape, with a hump-like structure that houses the missile tubes behind the sail, the vertical structure that rises from a submarine’s hull. Clearly visible in the images: a partially submerged entrance to what appear to be underground submarine pens, beneath a hill next to the harbor.

Construction at the base near Sanya also points to the PLA’s ability to stealthily arm submarine-launched missiles with nuclear warheads.

Western intelligence analysts familiar with satellite imagery of the area say a covered railway has been completed that runs into a hillside bunker – the suspected warhead arsenal. The railway, in turn, is linked by tunnels to the pens built for the submarines. This, they say, means the missiles can be armed and loaded on the submarines without detection.

(Reporting Greg Torode and David Lague in Hong Kong. Edited by Peter Hirschberg.)

U.S.-China trade talks will likely conclude in next two weeks: Mulvaney

FILE PHOTO: Mick Mulvaney testifies before the House Appropriations Subcommittee on Financial Services and General Government on Capitol Hill in Washington, U.S., April 18, 2018. REUTERS/Aaron P. Bernstein/File Photo

By Matt Scuffham and Svea Herbst-Bayliss

BEVERLY HILLS, Calif. (Reuters) – Talks between the United States and China aimed at resolving their trade dispute will likely be resolved “one way or the other” in the next two weeks, White House chief of staff Mick Mulvaney said on Tuesday.

“It won’t go on forever. I think, at some point, in any negotiation, you realize we’re close to getting something done so we’re going to keep going,” Mulvaney said at the Milken Institute Global Conference. “On the other hand, at some point, you can think this is not going to get anywhere. I think you will know, one way or the other, in the next couple of weeks.”

Mulvaney spoke only days after data came out showing that the United States economy grew stronger than expected 3.2 percent during the first three months of the year and said that strong growth is going to help support President Donald Trump as he prepares for the 2020 election.

“We think the economy has been good for everyone,” Mulvaney said. “We can ride that to the 2020 election. People know what is good for them.”

Mulvaney said policymakers are focusing on solving wage inequality.

He said the White House plans to make strong economic growth, at a time the expansion is well into its 10th year, healthcare and trade into key topics for the campaign. He also said Trump, a Republican, will benefit from the fact that Democrats have more than a dozen candidates running for president and “we have weak competitors.”

Mulvaney currently is acting chief of staff but he said he expects to keep the job permanently and that he has improved morale in the White House since replacing John Kelly in the job in January.

He said he does not expect a lot of change in top administration positions before the election. The Trump administration has had an especially high rate of turnover with his homeland security secretary being among the most recent to leave.

(Reporting by Matt Scuffham and Svea Herbst-Bayliss; Editing by Bill Trott)

Trade war and sagging prices push U.S. family farmers to leave the field

A crowd of mostly farmers watch the bidding as a retiring farmer's equipment is auctioned at Jim & Karen Taphorn's farm near Beattie, Kansas, U.S., February 27, 2019. REUTERS/Lane Hickenbottom

By P.J. Huffstutter

BEATTIE, KANSAS(Reuters) – Shuffling across his frozen fields, farmer Jim Taphorn hunched his shoulders against the wind and squinted at the auctioneer standing next to his tractors. After a fifth harvest with low grain prices, made worse last fall by the U.S.-China trade war, the 68-year-old and his family were calling it quits. Farming also was taking a physical toll on him, he said; he’d suffered a heart attack 15 months before.

It took less than four hours to sell off all the tractors, combines and other farm equipment at the Taphorn retirement sale, ending a family tradition that had survived nearly a century.

“We went through the bad times in the ’70s and ’80s,” said Jim, 68, broad-shouldered and stocky. “In some ways, this is worse.”

Across the Midwest, growing numbers of grain farmers are choosing to shed their machinery and find renters for their land, all to stem the financial strain on their families, a dozen leading farm-equipment auction houses told Reuters. As these older grain farmers are retiring, fewer younger people are lining up to replace them.

The trend has created boom times for the auction houses, which report that their retirement business has grown 30 percent or more over the past six months, compared to the same period a year earlier.

But it is expected to put a strain on the agricultural supply chain: It means fewer customers for seed and chemical companies, fewer machine buyers, and fewer suppliers for grain merchants.

The revival of the family farming tradition proved short-lived.

In the wake of the U.S. recession of 2007-2008, the lure of high grain prices drew young people from their city jobs to their family’s fields.

By 2012, farm profits were flourishing as corn and soybean prices soared amid global demand and tight supplies. For the first time in decades, the number of producers aged 44 or younger in the Midwest grew.

From the financial crisis in 2008 through 2012, their ranks increased more than 40 percent in Iowa and Illinois, nearly 57 percent in Indiana and 60 percent in Kansas, according to data from the U.S. Department of Agriculture.

Taphorn’s son Tom, who works as a district manager at a cattle feed company near Manhattan, Kansas, was among those who wanted to return home to farm with his parents.

But the father of three couldn’t make it work. During the boom, Tom sought to expand by renting more land – but as grain prices fell, most landlords refused to lower their rates. It was beyond Tom’s reach, leaving him and his parents with too little land to till to cover two families’ expenses.

Tom kept his job. His siblings, one also in Kansas and the other in Indiana, didn’t want to farm full-time.

Jim and Karen knew no one else within their family would take over their business. So they decided to sell their equipment and rent out their land.

COMES DOWN TO MATH

At the Taphorns’ auction, Karen, 68, reached for her husband’s hand, squeezing it hard.

“Karen, it’s ok to shed a tear,” auctioneer Dan Sullivan said, as she pressed her face into her husband’s shoulder. “It’s the end of an era.”

Farmer retirement rates are not tracked by either state or U.S. government agencies, but federal data shows the ranks of farmers are gradually aging. The average age of U.S. farm operators was 57.5 years in 2017, up from 54.3 years in 1997.

The number of farms is shrinking, too, as the industry increasingly is consolidated either into the hands of large-scale operators or tiny niche crop growers. Mid-sized farms and those with annual sales of more than $50,000 but less than $5 million – are dwindling.

For many families, leaving farming is a painful but simple calculation: The trade war with China, set off by tariffs imposed by the Trump Administration, has lasted nearly 10 months.

China, the top buyer of U.S. soybeans, the nation’s most valuable agricultural export, has dramatically reduced its purchases. Grain prices have remained stubbornly low and operating costs are rising fast.

Such factors now are “speeding things up” among farmers deciding to retire, says H. Andrew Pyron, chief executive of Big Iron Auctions in St. Edward, Nebraska.

ILL-TIMED BET

In the spring of 2018, Mike and Linda Manson of De Soto, Kansas, decided to plant soy on all their fields.

It was an ill-timed bet, coming just before China applied retaliatory tariffs on U.S. soybeans

By summer, U.S. soybean exports had plummeted. Heavy rains hammered the plants, reducing their crop. Finding help at harvest was tough, too, because healthy young people are hard to come by in the industry these days.

“I had one guy, a retiree, helping me. But he’s fat and his knees gave out on him, so he couldn’t get into the combine,” Mike Manson, 69, said wryly.

The erosion of multi-generational family farms is painful for sons and daughters as well.

“I’m the only son of an only son, and I was still trying to figure out my path back to the farm,” said Sam Hudson, 34, who co-owns an agricultural marketing firm in central Illinois.

His father has a small farm. Even if the men borrowed $1 million to get enough land, equipment and other supplies to scale up the operation, the business might only break even, given current grain prices and land rent costs.

“It doesn’t make any sense right now,” he said.

Farm equipment is on display at a retiring farmer's auction of all his equipment at Jim & Karen Taphorn's farm near Beattie, Kansas, U.S., February 27, 2019. REUTERS/Lane Hickenbottom

Farm equipment is on display at a retiring farmer’s auction of all his equipment at Jim & Karen Taphorn’s farm near Beattie, Kansas, U.S., February 27, 2019. REUTERS/Lane Hickenbottom

A BOON TO AUCTIONEERS

The budget-conscious farmers who remain seek deals on quality used equipment rather than splurging at dealerships, auctioneers say.

Steffes Group, a top auction firm in the upper Midwest, recently had to juggle staff to cover three large retirement auctions in three states on the same day, auctioneer Scott Steffes said. Big Iron Auction’s retirement farm business has surged 40 percent this year.

“Up until now, there wasn’t a lot of motivation to exit farming,” Steffes said. “Now, what I’m hearing from folks is, ‘It’s no longer fun to farm.'”

Many farmers don’t have 401Ks or other traditional retirement safety nets. Now they’re worried that if they keep going, they’ll have to take on debt against land they own, which will threaten their income stream long-term.

“We’re getting calls every day from farmers looking to sell off their equipment, but keep the land,” said Luke Sullivan of Sullivan Auctioneers, headquartered in Hamilton, Illinois. “They want to rent out their ground, because that land is their retirement.”

Some renters propose to split farm expenses and pay landlords in corn or soybeans, not cash, the modern equivalent of sharecropping. But typically retirees seek renters who pay top-dollar, tenants who are big and can farm thousands of acres.

The Taphorns were different: They turned down several huge operations as renters, instead choosing to be paid less by a young family trying to expand their business.

BIDDERS SWARM IN

For weeks, out-of-town farmers and machinery buyers had called the Taphorns to ask questions about their equipment.

On auction day, buyers from four different states joined the crowd of locals. Bidders also flocked to the Sullivan Auctioneers website.

Jim’s tractor went to a middle-aged farmer in Illinois. Another farmer from Iowa grabbed his planter. The soil ripper went to a guy in Kansas, about 100 miles away.

A couple weeks ago, old friends started calling, asking for help in their fields.

One was in his early 60s and had injured his leg over the winter. Jim assured his friend he’d be there – forever a farmer, even in retirement.

(Reporting By P.J. Huffstutter; Editing by Caroline Stauffer and Julie Marquis)

Global military spending at new post-Cold War high, fueled by U.S., China: think-tank

FILE PHOTO: U.S. President Donald Trump greets Lockheed Martin CEO Marillyn Hewson in front of a Lockheed Martin F-35 stealth fighter on the driveway abutting the South Lawn prior to delivering remarks at a showcase of American-made products event at the White House in Washington, U.S., July 23, 2018. REUTERS/Carlos Barria/File Photo

STOCKHOLM (Reuters) – Global military expenditure reached its highest level last year since the end of the Cold War, fueled by increased spending in the United States and China, the world’s two biggest economies, a leading defense think-tank said on Monday.

In its annual report, the Stockholm International Peace Research Institute (SIPRI) said overall global military spending in 2018 hit $1.82 trillion, up 2.6 percent on the previous year.

That is the highest figure since 1988, when such data first became available as the Cold War began winding down.

U.S. military spending rose 4.6 percent last year to reach $649 billion, leaving it still by far the world’s biggest spender. It accounted for 36 percent of total global military expenditure, nearly equal to the following eight biggest-spending countries combined, SIPRI said.

China, the second biggest spender, saw military expenditure rise 5.0 percent to $250 billion last year, the 24th consecutive annual increase.

“In 2018 the USA and China accounted for half of the world’s military spending,” Nan Tian, a researcher with the SIPRI Arms and Military Expenditure (AMEX) program, said.

With President Donald Trump committed to strong national defense despite reducing U.S. troops numbers in conflict zones such as Afghanistan, 2018 marked the first increase in U.S. military spending since 2010, SIPRI said. His defense spending request to Congress this year is the largest ever in dollar terms before adjustment for inflation.

“The increase in U.S. spending was driven by the implementation from 2017 of new arms procurement programs under the Trump administration,” Aude Fleurant, the director of the SIPRI AMEX program, said in a statement.

The other top spenders are, in declining order, Saudi Arabia, India, France, Russia, Britain, Germany, Japan and South Korea. Saudi Arabia, which is leading a military coalition battling Iran-aligned Houthis in Yemen, was the biggest per capita spender on defense, just ahead of the United States.

NATO TARGET

Trump has criticized some of Washington’s NATO allies in Europe, especially Germany, for failing to meet the alliance’s spending target of 2 percent of gross domestic product.

SIPRI data showed military spending equaled 1.2 percent of GDP in Germany – Europe’s largest economy – last year, based on GDP estimates for 2018 from the International Monetary Fund.

Britain and France, the two other largest economies in Europe, spent 1.8 percent and 2.3 percent of GDP respectively on defense in 2018.

Military expenditure by all 29 NATO members amounted to just over half of global spending, SIPRI added.

Russia, which flexed its military muscles with its 2014 annexation of Ukraine’s Crimea region and intervention in the Syrian conflict, dropped out of the list of the top five spenders in 2018 following an annual decline of 3.5 percent.

Despite a sustained drive to upgrade and modernize Russia’s armed forces, President Vladimir Putin has had to tighten purse strings following a sharp decline in global oil prices and the need to prioritize some domestic spending programs.

Russian spending recorded its first annual decline in nearly two decades in 2017, with a fall of 20 percent in real terms, SIPRI estimates released last year showed.

(Reporting by Niklas Pollard; Editing by Gareth Jones)

Mnuchin hopes latest talks may seal U.S.-China trade deal

FILE PHOTO: U.S. Treasury Secretary Steven Mnuchin leaves the G-20 Finance Ministers and Central Bank Governors' meeting at the IMF and World Bank's 2019 Annual Spring Meetings, in Washington, April 12, 2019. REUTERS/James Lawler Duggan

WASHINGTON (Reuters) – U.S. Treasury Secretary Steven Mnuchin, in a television interview that aired on Monday, said he hopes that the United States and China can finalize a trade deal with two more rounds of talks between the global economic powerhouses.

Speaking to Fox Business Network as the latest round of trade negotiations commence in Beijing, Mnuchin also said the part of the negotiations aimed at enforcement is close to finished. Another round of talks is planned for next month Washington.

“We still have more work to do,” Mnuchin said. “I think there is a strong desire from both sides to see if we can wrap this up or move on.”

“We hope within the next two rounds, in China and in DC, to get to the point where we can either recommend to the president that we have a deal or recommend that we don’t,” he told the television network.

Mnuchin and U.S. Trade Representative Robert Lighthizer are scheduled to travel to Beijing on Monday for the latest negotiations in what could be the talks’ end game.

Chinese Vice Premier Liu He will visit Washington for discussions starting on May 8.

(Reporting by Susan Heavey; Editing by Steve Orlofsky)

Strong growth gives U.S. leverage in China trade talks-White House adviser

U.S. President Donald Trump talks to reporters as he departs for travel to Indianapolis, Indiana from the White House in Washington, U.S., April 26, 2019. REUTERS/Jonathan Ernst

By Jason Lange and Jeff Mason

WASHINGTON (Reuters) – Strong U.S. economic growth and modest inflation are giving Washington leverage over Beijing in trade talks, the White House’s top economic adviser said on Friday as U.S. and Chinese negotiators prepared for a new round of meetings next week.

Larry Kudlow, director of the White House’s National Economic Council, also said on CNBC television that strong growth could give the Federal Reserve room to cut interest rates.

He spoke after the Commerce Department reported that first-quarter U.S. economic growth accelerated to a 3.2 percent annualized rate, driven by a smaller trade deficit and a jump in business inventories.

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are headed to Beijing for talks starting next Wednesday, while Chinese Vice Premier Liu He is scheduled to return to Washington on May 8.

“I hope additional progress will be made; I’m cautiously optimistic about the outcome for a deal,” Kudlow said of next week’s talks.

“China’s economy is slumping and has been slumping for quite some time,” Kudlow added. “The U.S. economy, as I say, is in this prosperity cycle with no end in sight. So we believe that does give us some leverage if you will, but we believe also that China may be open to a lot of good trade reforms.”

U.S. President Donald Trump on Friday repeated that China trade talks were “going very well,” a day after he said that he would soon host Chinese President Xi Jinping at the White House. Trump has said he expects to finalize a deal in a meeting with Xi.

Asked about prospects for a such a meeting on Fox News Channel, Kudlow said Trump would like to meet Xi and close a deal if it is “a great one for America. … We’re not there yet.”

The world’s two largest economies have been locked in a tariff war for nearly 10 months, levying hundreds of billions of dollars in duties on each other’s goods, and are trying to negotiate a way out.

The United States is demanding that China make major changes to its economic policies to better protect American intellectual property and end cyber theft of trade secrets and policies that force U.S. companies to turn over technology to Chinese firms.

Washington also wants Beijing to curb subsidies for Chinese state enterprises, increased access to China’s markets for U.S. companies and increased purchases of U.S. agricultural, energy and manufactured products by China.

China is seeking removal of U.S. tariffs on some $250 billion worth of Chinese goods imposed by Trump.

(Reporting by Jeff Mason and Jason Lange; Writing by David Lawder and Makini Brice; Editing by Chizu Nomiyama and Jonathan Oatis)

China shows off new destroyer as Xi views naval parade

Chinese President Xi Jinping reviews the honor guards of the Chinese People’s Liberation (PLA) Navy before boarding the destroyer Xining for the naval parade celebrating the 70th founding anniversary of the Chinese People's Liberation Army (PLA) Navy in Qingdao, Shandong province, China April 23, 2019. Xinhua via REUTERS

By Ben Blanchard

QINGDAO, China (Reuters) – China showed off the first of its new generation of guided missile destroyers on Tuesday as President Xi Jinping reviewed a major naval parade through mist and rain to mark 70 years since the founding of China’s navy.

Xi is overseeing a sweeping plan to refurbish the People’s Liberation Army (PLA) by developing everything from stealth jets to aircraft carriers as China ramps up its presence in the disputed South China Sea and around self-ruled Taiwan, which has rattled nerves around the region and in Washington.

The navy has been a major beneficiary of the modernization, with China looking to project power far from its shores and protect its trading routes and citizens overseas.

After boarding the destroyer the Xining, which was only commissioned two years ago, Xi watched as a flotilla of Chinese and foreign ships sailed past, in waters off the eastern port city of Qingdao.

“Salute to you, comrades. Comrades, thanks for your hard work,” Xi called out to the officers standing on deck as the ships sailed past, in images carried on state television.

Chinese navy personnel perform at an event celebrating the 70th anniversary of the founding of the Chinese People's Liberation Army Navy (PLAN) in Qingdao, China, April 22, 2019. REUTERS/Jason Lee

Chinese navy personnel perform at an event celebrating the 70th anniversary of the founding of the Chinese People’s Liberation Army Navy (PLAN) in Qingdao, China, April 22, 2019. REUTERS/Jason Lee

“Hail to you, chairman,” they replied. “Serve the people.”

China’s first domestically produced aircraft carrier, which is still unnamed and undergoing sea trials, was not present, though the carrier the Liaoning was, the report said.

The Liaoning, the country’s first carrier, was bought second-hand from Ukraine in 1998 and refitted in China.

State television also showed pictures of the Nanchang at the review, the first of a new fleet of 10,000-tonne destroyers, though details of that and other ships were hard to determine from the footage, due to the intermittent thick mist and rain.

China had said it would also show new nuclear submarines, and state television did show submarines taking part in the display.

Singapore-based regional security expert Collin Koh said that based on the available evidence, the larger submarine on show was a modified version of China’s existing Jin-class nuclear-powered ballistic missile submarines – a key part of its nuclear deterrent.

The navy has four Jin-class submarines, which are based in Hainan island in the south, and the Pentagon says it believes construction on a new generation of ballistic missile submarines will start in the 2020s.

“It does appear that this is a modified version rather than an entirely new submarine, something which would have been a more significant development,” said Koh, of Singapore’s S. Rajaratnam School of International Studies.

“Outside analysts still don’t have a complete picture of the precise modifications.”

China’s last major naval parade was last year in the South China Sea, also overseen by Xi.

Tuesday’s parade featured 32 Chinese vessels and 39 aircraft, as well as warships from 13 foreign countries including India, Japan, Vietnam and Australia.

A total of 61 countries have sent delegations to the event, which includes a naval symposium on Wednesday and Thursday.

For a special report on China’s military click:

Chinese Navy's destroyer Shijiagzuang takes part in a naval parade off the eastern port city of Qingdao, to mark the 70th anniversary of the founding of Chinese People's Liberation Army Navy, China, April 23, 2019. REUTERS/Jason Lee

Chinese Navy’s destroyer Shijiagzuang takes part in a naval parade off the eastern port city of Qingdao, to mark the 70th anniversary of the founding of Chinese People’s Liberation Army Navy, China, April 23, 2019. REUTERS/Jason Lee

‘LONG FOR PEACE’

Earlier, meeting foreign naval officers at Qingdao’s Olympic sailing center, Xi said the navies of the world should work together to protect maritime peace and order.

“The Chinese people love and long for peace, and will unswervingly follow the path of peaceful development,” Xi said, in remarks carried by the official Xinhua news agency.

“Everyone should respect each other, treat each other as equals, enhance mutual trust, strengthen maritime dialogue and exchanges, and deepen pragmatic cooperation between navies,” he added.

“There cannot be resorts to force or threats of force at the slightest pretext,” Xi said.

“All countries should adhere to equal consultations, improve crisis communication mechanisms, strengthen regional security cooperation, and promote the proper settlement of maritime-related disputes.”

China has frequently had to rebuff concerns about its military intentions, especially as its defense spending reaches new heights.

Beijing says it has nothing to hide, and invited a small number of foreign media onboard a naval ship to watch the parade, including from Reuters.

China’s last naval battles were with Vietnam in the South China Sea in 1974 and 1988, though these were relatively minor skirmishes. Chinese ships have also participated in international anti-piracy patrols off Somalia since late 2008.

The United States has sent a low-level delegation to Qingdao, led by the naval attache at its Beijing embassy, and no ships.

However, the USS Blue Ridge, the command ship of the Japan-based U.S. Seventh Fleet, is visiting Hong Kong, having arrived in the city on Saturday.

A senior U.S. naval official aboard the ship said the Seventh Fleet would continue its extensive operations in the region, including so-called freedom of navigation operations to challenge excessive maritime claims.

China objects to such patrols close to the Chinese-held features in the Paracels and Spratlys archipelago in the South China Sea, where U.S. warships are routinely shadowed by Chinese vessels.

The U.S. official said he believed an incident last September, when a Chinese destroyer sailed within 45 meters of the American destroyer USS Decatur, was an isolated event and other routine interactions with the PLA navy had proved more professional.

(Reporting by Ben Blanchard; Additional reporting by Greg Torode in HONG HONG; Editing by Michael Perry, Robert Birsel)

U.S. trade deficit hits eight-month low as Chinese imports drop

FILE PHOTO: A container ship is shown at port in Long Beach, California, U.S. July 16, 2018. REUTERS/Mike Blake

By Lucia Mutikani

WASHINGTON (Reuters) – The U.S. trade deficit fell to an eight-month low in February as imports from China plunged, suggesting President Donald Trump’s “America First” agenda was starting to bear fruit.

The surprise narrowing in the trade gap reported by the Commerce Department on Wednesday also implied a much stronger pace of U.S. economic growth in the first quarter than initially anticipated at the start of the year.

The 20.2 percent drop in imports from China was the main driver behind a nearly 3.4 percent improvement in the U.S. trade deficit to $49.4 billion, data from the Commerce Department showed. Economists polled by Reuters had forecast the trade shortfall would widen to $53.5 billion in February.

The politically sensitive goods trade deficit with China – a focus of the Trump administration’s protectionist trade policy – decreased 28.2 percent to $24.8 billion in February as U.S. exports to the world’s No. 2 economy jumped 18.2 percent.

But even with the improvement, the trade deficit remains large and February’s drop in Chinese imports could be temporary. The trade data have been volatile in recent months amid big swings between exports and imports, because of the United States’ conflicts with trading partners, including China.

Washington last year imposed tariffs on $250 billion worth of goods imported from China, with Beijing retaliating with duties on $110 billion worth of American products. Trump has delayed tariffs on $200 billion worth of Chinese imports and talks to end the trade impasse continue.

The U.S. goods trade deficit declined 1.7 percent to $72.0 billion in February, also the lowest level since last June.

When adjusted for inflation, the overall goods trade deficit fell $1.8 billion to $81.8 billion in February. The average goods trade deficit for January and February is below the fourth-quarter average. This suggests that trade could provide a boost to gross domestic product in the first quarter after being neutral in the October-December period.

SLOWING DOMESTIC DEMAND

Growth estimates for the January-March quarter are in a 1.5 percent to 2.3 percent annualized range, largely reflecting an accumulation of inventories amid slowing domestic demand. The economy grew at a 2.2 percent rate in the fourth quarter, slowing from the July-September period’s brisk 3.4 percent pace.

U.S. Treasury yields rose slightly after the release of the data. U.S. stock index futures were trading higher while the dollar was largely unchanged against a basket of currencies.

The trade deficit in February was pushed down by a 1.1 percent jump in exports to $209.7 billion. Exports of services were the highest on record.

Goods exports increased 1.5 percent to $139.5 billion in February. The surge in goods exports is a hopeful sign for global economic growth, which has showed signs of slowing in recent months.

Exports of motor vehicles and parts increased by $0.6 billion in February. Shipments of civilian aircraft soared by $2.2 billion in February. But commercial aircraft exports are likely to decline in the months ahead following Boeing’s decision to suspend deliveries of its troubled 737 MAX aircraft.

The MAX planes have been grounded indefinitely following two deadly crashes.

There was a modest increase in soybean exports.

In February, imports rose 0.2 percent to $259.1 billion. Consumer goods imports increased by $1.6 billion in February, led by a $2.1 billion rise in imports of cellphones and other household goods. Imports of industrial supplies and materials fell by $1.2 billion. Capital goods imports rose slightly.

Crude oil imports fell to 173.7 million barrels, the lowest since March 1992, from 223.1 million barrels in January. An increase in domestic production has seen the United States become less dependent on foreign oil.

Imported oil prices averaged $46.89 per barrel in February, up from $42.59 in January.

(Reporting by Lucia Mutikani; Editing by Paul Simao)