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Today, we sweat it out in Europe, debate scrapping US tariffs on China, and hope for a longer peace in Yemen.

Thank you for reading.

Carlos Santamaria

SIGNAL - The GZero Newsletter

Today, we sweat it out in Europe, debate scrapping US tariffs on China, and hope for a longer peace in Yemen.

Thank you for reading.

Carlos Santamaria

   

Europe feels the heat

European leaders are worried about storing enough energy to keep houses warm next winter, but many on the continent currently wish their houses were cooler amid this summer’s drastic heatwave. For the first time, temperatures are expected to exceed 40 C (104 F) in England this week, and the government is urging Brits to work from home. Meanwhile, firefighters are battling wildfires amid extreme temperatures in France, Greece, Portugal, and Spain. More than 1,000 people have died on the Iberian Peninsula, with temperatures having topped 47 C in Portugal last week, and the death toll is expected to rise across Europe. In France, experts are predicting a “heat apocalypse,” and environmental scientists warning that these summer heatwaves will soon become the norm, not the exception. In a bid to make progress in fighting climate change, leaders from 40 countries, including UN Secretary-General Antonio Gutteres, met in Berlin on Monday for the 12th Petersberg Climate Change conference. The main focus of discussions was rebuilding trust between developed and developing countries ahead of this November’s COP27 climate summit in Egypt.


Zelensky purges suspected collaborators

William Shakespeare knew that for a lightweight to become a leader, he must sometimes banish his old friends. On Sunday, President Volodymyr Zelensky took down two of his most trusted allies, spy chief Ivan Bakanov and Prosecutor General Iryna Venediktova. He had little choice, he told listeners during a video speech. More than 60 officials working under their command, Zelensky explained, are suspected of working against Ukraine in Russian-occupied territory, and more than 650 treason and collaboration cases have been opened against Ukrainian law enforcement officials. “Such an array of crimes against the foundations of the national security of the state ... pose very serious questions to the relevant leaders,” Zelensky said. It’s a reminder that Russian security services have spent decades recruiting and embedding pro-Russian officials in senior positions within Ukraine’s government. Bakanov and Venediktova, who are considered Zelensky loyalists, have not yet been fired. (Bakanov is Zelensky’s childhood friend.) They are suspended, pending an investigation. But Ukraine’s president has signaled that he knows Russia’s invasion of Ukraine extends far beyond men with guns.

Khan makes a comeback in Pakistan

It wasn’t long ago — April to be precise — when Pakistan’s former Prime Minister Imran Khan was licking his wounds after a no-confidence vote ousted him from power. But after his party’s landslide victory in a provincial by-election this weekend, the former cricket star looks poised for a big comeback. His Pakistan Tehreek-e-Insaf party won 15 of the 20 seats up for grabs in Punjab, Pakistan’s most populous province, which is considered a bellwether for national politics. The rival Pakistan Muslim League-N party of current PM Shehbaz Sharif won just four seats in a region that's historically been one of its strongholds. Since being sacked, Khan has attracted huge crowds with speeches alleging a US-led conspiracy led to his ouster and by blaming his successor for the country’s reeling inflation crisis. A general election isn’t due until Oct. 2023, but Khan may be able to force one sooner than that: a new vote, he tweeted Monday, is “the only way forward.”

Tory race for future PM narrows

And then there were four. Since last week, when Britain’s Conservative Party released a list of eight candidates running for the top job to replace Boris Johnson as prime minister, three rounds of elections have narrowed the field by four. Monday’s third-round vote left Rishi Sunak, Penny Mordaunt, Liz Truss, and Kemi Badenoch in the running, ending Tom Tugendhat’s candidacy. The final two rounds will take place on Tuesday and Wednesday, leaving two candidates in the contest. Select Conservative Party members will then cast their mail ballots to select Johnson’s successor. So far, Sunak has been no. 1 in the first three rounds, followed by Mordaunt and then Truss. The Tory contest has been a roller-coaster, with the first live debate revealing plenty of friction, especially with regard to taxation, Brexit, and trust. In the latest debate, things got so personal between Sunak and Truss that they refused to meet again,which forced SkyNews to cancel Tuesday’s scheduled debate. But that won’t stop the voting process: by Wednesday, we will know the two finalists, one of whom will be named as the UK’s next PM on Sept. 5.
 
 

 
 
   

Sometime this month, US President Joe Biden is expected to make up his mind about nixing (some of) the tariffs his predecessor, Donald Trump, slapped on three-quarters of Chinese imports. This was part of a wider trade war against Beijing, which hit back in kind.

Two years ago, then-candidate Biden said he'd remove Trump’s China tariffs if he won the White House but later decided to leave them in place — as he's done with many Trump-era China policies. Now, Biden is taking another look at keeping his campaign promise because, hello, inflation.


Most economists think it’s a no-brainer. "It was a poorly conceived policy right from the start. Those tariffs are essentially paid for by American consumers and businesses and haven't achieved anything in terms of US-China relations," says David Dollar, a senior fellow at the Brookings Institution. "It's time to recognize [the policy] hasn't worked."

Trump scored political points by playing up his anti-China bonafides and telling his base that the tariffs would bring back manufacturing jobs from China. Spoiler: they didn't, and the overall impact of his trade war on the US economy has been ... disastrous.

Indeed, the Tax Foundation estimates that since 2019 the tariffs have imposed nearly $80 billion in new taxes on Americans by making Chinese products more expensive, cut GDP growth by 0.22%, and killed 173,000 full-time jobs. Despite costly subsidies to make up for their losses, US farmers have taken a big hit.

What's more, Dollar says the tariffs have not only done little to damage China's economy; they’ve also encouraged the Chinese to shift their investment toward other countries and away from the US.

But it's a political gamble for Biden. Lifting the tariffs ahead of the November midterms would be a gift for Republicans, who’ll accuse the president of being soft on China, seemingly the only issue the GOP and Democrats can agree on these days.

Also, labor unions, very influential with the Dems, would rather keep the tariffs in place because removing them could lead to more US jobs being outsourced to China. Finally, Trade Representative Katherine Tai has warned that unilaterally lifting tariffs would take away critical US leverage in broader trade negotiations with China.

Still, Biden is desperate to fight inflation, and getting rid of the China tariffs could help. The question is how far the US president is willing to go.

A recent study by the Peterson Institute for International Economics shows that removing the China tariffs might ease inflation by one percentage point. That’s nothing to sneeze at, but it’ll take a bit of time for the effect to kick in.

The thing is, it seems Biden only wants to cut tariffs on some $10 billion worth of Chinese goods — barely 3% of the total. That won’t move the needle on inflation and is hardly worth the political pushback from Republicans and Big Labor.

"That's frankly nothing in the context of US trade or the US economy. [It] won't have any measurable effect," says Dollar. "It seems odd to be considering something that would really just be symbolic" and tantamount to "doing nothing at all."

And what does China have to say about all this? Not much, according to Eurasia Group's senior China analyst Michael Hirson.

"Among China’s foreign policy crowd, there is some degree of amusement that the tariffs have 'backfired' on the US," he explains. "For trade officials and Chinese firms, the possibility of lower tariffs is welcome news," although since the reduction will probably be only symbolic, this topic hasn’t been top of mind for Beijing.

If Biden were to lift all the tariffs, Hirson says China might respond by removing its own retaliatory tariffs, and perhaps offer to buy more American goods. But the Chinese won't do what Biden really wants from them on trade: to get rid of industrial subsidies for state-owned companies, which the US regards as unfair competition.

Would you ditch Trump's tariffs against China? Let us know here.
 
 

 
 
   

Over the past half-century, human development indicators have seen unprecedented improvement worldwide. But policy failures have also led to greater inequality, now exacerbated by climate change and Russia’s war in Ukraine. In response, we’re seeing a lot more anger and pushback against globalization.

Americans are not dismantling it, but Ian Bremmer says they’re unsure where they want to go next. Without a nation guiding the boat, globalization is adrift.

Watch his Quick Take here.

 
 

 
 
   

18.7: Cities and regions of China that produce 18.7% of the country’s GDP are currently under COVID-related lockdowns as the BA.5 variant spreads. That’s up from 17.5% a week ago. China’s recent economic slowdown has already fanned fears of a global recession.


15: The average cost of a gallon of gasoline in the US fell 15 cents this week to $4.52. Prices have been easing for a couple of reasons in recent weeks: sticker shock has scared off some consumers, while recession fears have driven down oil prices. But supply remains tight, and analysts warn that fresh oil sanctions on Russia could set prices soaring again this fall.

6: The UN is pushing the warring parties in Yemen to extend their ceasefire for six months. The current shaky truce, the longest since the war started in 2014, was inked in April and has been extended once since then. It expires on Aug. 2.

5 million: Earlier this year, Russian President Vladimir Putin decreed that the families of Russian soldiers killed in Ukraine would get a lump sum of 5 million rubles (about $70,000). On Sunday, Russian state TV highlighted the upside of that benefit by profiling a man who spent the money on a white Lada sedan. “Alexei always dreamed of a white car,” the man says of his deceased son. Guess where the car’s first trip was …
 
 

 
 

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This edition of Signal was written by Beatrice Catena, Alex Kliment, Carlos Santamaria, and Willis Sparks. Edited by Tracy Moran. Art by Ari Winkleman, Annie Gugliotta, and Jess Frampton.