03/06/2025

BIZ & FINANCE TUESDAY | JUNE 3, 2025

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US debt market crisis looming: Dimon

China rejects claim it violated tariff deal BEIJING: China said yesterday it “firmly rejects” US claims that it had violated a sweeping tariffs deal, as tensions between the two economic superpowers showed signs of ratcheting back up. Beijing and Washington last month agreed to slash staggeringly high tariffs on each other for 90 days after talks between top officials in Geneva. But top Washington officials last week accused China of violating the deal, with Commerce Secretary Howard Lutnick saying Beijing was “slow-rolling” the agreement in comments to Fox News Sunday . China hit back yesterday, saying Washington “has made bogus charges and unreasonably accused China of violating the consensus, which is seriously contrary to the facts”. “China firmly rejects these unreasonable accusations,“ its Commerce Ministry said in a statement. US President Donald Trump said last week that China had“totally violated”the deal, without providing details. Beijing’s Commerce Ministry said it “has been firm in safeguarding its rights and interests, and sincere in implementing the consensus”. It fired back that Washington“has successively introduced a number of discriminatory restrictive measures against China” since the Geneva talks. The ministry cited export controls on artificial intelligence chips, curbs on the sale of chip design software and the revocation of Chinese student visas in the United States. “We urge the US to meet China halfway, immediately correct its wrongful actions, and jointly uphold the consensus from the Geneva trade talks,” the ministry said. If not, “China will continue to resolutely take strong measures to uphold its legitimate rights and interests”, it added. US officials have said they are frustrated by what they see as Chinese foot-dragging on approving export licences for rare earths and other elements needed to make cars and chips. But Washington’s Treasury Secretary Scott Bessent looked to ease the pressure on Sunday, saying the two sides could arrange a call between their respective heads of state to resolve their differences. “I’m confident ... this will be ironed out” in a call between Trump and Chinese President Xi Jinping, Bessent said on CBS’s Face the Nation . He added, however, that China was “withholding some of the products that they agreed to release”, including rare earths. On when a Trump-Xi call could take place, he said: “I believe we will see something very soon.” China has been less forthcoming, and the Commerce Ministry’s statement yesterday did not mention any planned conversations between the two leaders. – AFP “The goal is to bring it down over the next four years, (and to) leave the country in great shape in 2028.” – AFP US Treasury Secretary Scott Bessent on Sunday downplayed Dimon’s predictions of a debt market crisis. “I’ve known Jamie a long time, and for his entire career he’s made predictions like this,” Bessent said during an interview on CBS. “Fortunately, not all of them have come true.” Bessent acknowledged that he “was concerned about the level of debt”. But he said “the deficit this year is going to be lower than the deficit last year, and in two years, it will be lower again”. “We are going to bring the deficit down slowly,” Bessent added, insisting that addressing the deficit was a “long process”.

the gigantic tax breaks introduced during Trump’s first term, spurring fears of a ballooning federal deficit. In mid-May, for the first time ever, the United States lost its triple-A credit rating from Moody’s. When it announced the downgrade to Aa1, the ratings agency warned that it expects US federal deficits to widen dramatically over the next decade. The White House’s back-and-forth announcements of towering tariffs slapped on countries around the world are also creating considerable uncertainty and thus market volatility. Dimon already warned in April of “considerable turbulence” facing the American economy, pointing to the impact of tariffs, trade wars, inflation and budget deficits.

Dimon cautioned that once investors become aware of the impact of rising debt levels, interest rates would skyrocket and markets would be disrupted – a dangerous scenario for the world’s biggest economy. “People vote with their feet,” he stressed. Investors “are going to be looking at the country, the rule of law, the inflation rates, the central bank policies”, he said, warning that “if people decide that the US dollar isn’t the place to be”, financing US debt will become more expensive. Historically, the United States has been able to rely on market appetite for low-interest US Treasury bonds to support its economy. Yields briefly climbed last week, amid concerns about Trump’s divisive budget plan. The plan would among other things extend

SAN FRANCISCO: JPMorgan Chase chief executive Jamie Dimon voiced concern on Sunday at the risk of a looming US debt market crisis sparked by President Donald Trump’s economic policies. “It’s a big deal. It is a real problem,” Dimon told Maria Bartiromo on FOX Business Network’s Mornings with Maria show. “The bond market is going to have a tough time. I don’t know if it’s six months or six years,” he said. o Federal deficits expected to widen dramatically over next decade

A factory near palm oil plantations in Meulaboh, west coast of Aceh province. – AFPPIC

Indonesia’s trade surplus shrinks to lowest in five years JAKARTA: Indonesia booked a trade surplus of around US$160 million in April, the lowest since April 2020, amid a surge in imports, while the country’s inflation cooled in May, data from the statistics bureau showed on Monday. A Reuters poll of analysts had predicted a surplus of US$3.04 billion. billion, matching the poll’s median forecast. Shipments of mining products slid more than 20%, hurt by weak coal prices. Shipments to the United States in the reported month reached US$2.08 billion, with some of it being affected by Washington’s 10% tariff imposed in early April.

Meanwhile, the bureau’s data showed Indonesia’s annual inflation rate in May decelerated more than expected to 1.60%, compared with 1.95% in April. A Reuters poll had predicted inflation would remain steady at 1.94%. The April core inflation rate also came in slightly below forecast at 2.4%. The poll had estimated a 2.5% rate. The April rate was close to the lower end of the local central bank’s 1.5%-3.5% target range. Taking advantage of low inflation, the central bank has cut interest rates three times since September. The factor keeping inflation low was an increase in rice output. Rice production in the January-July period is estimated to reach 21.76 million metric tons, up nearly 15% year-on-year, the bureau said. – Reuters

The US is one of Indonesia’s biggest trade partners, and Jakarta is currently negotiating with Washington to reduce tariffs set to take effect in July. Barra Kukuh Mamia, Bank Central Asia’s economist, said the higher-than-consensus import growth was due to an influx of products from China and Singapore. “All these indicate temporary disruptions related to Donald Trump’s tariffs, which may reverse in May as Trump suspended the tariff on China.”

Southeast Asia’s biggest economy has recorded a trade surplus every month for five years, supporting its external balance. But the April print was the narrowest in that period; the surplus in March was US$4.33 billion. Last month, imports jumped 21.84% on a yearly basis to US$20.59 billion, with capital goods rising the most. The median forecast in the poll was for a 7.75% rise. Exports from the resource-rich country rose 5.76% in April from a year earlier to US$20.74

New World’s securities tumble after coupon payments deferred HONG KONG: New World Development , a major Hong Kong property developer, saw its shares and bonds tumble yesterday after announcing it would defer coupon payments on its perpetual bonds, increasing concerns about its liquidity. The market has been watching whether New World’s debt woes might be a harbinger of a sector crisis similar to the one in mainland China that started in 2021. defer coupon payments worth US$77.2 million on four perpetual bonds scheduled for June. Its shares slid 7.5% in morning trade while its 4.8% perpetual bond was bid at 19.090 cents on the dollar, down from 25.4 cents on Friday before the company’s announcement. That said, New World is the second Hong Kong property developer in recent years after Road King Infrastructure to defer perpetual bond coupon payments. The industry has been under pressure since 2019 due to price falls, lower sales and office occupancy rates as well as higher borrowing rates.

Hong Kong’s property sector’s financial woes have yet to reach the level of mainland China where many firms have defaulted on debt payments and former industry behemoth Evergrande has been ordered by a Hong Kong court into liquidation.

Perpetual bonds have no maturity date and are regarded as a form of equity in accounting. Postponing a senior bond coupon payment would, however, count as a default. – Reuters

New World, which has one of the highest debt ratios among its peers and also had two CEO changes last year, said on Friday it would