InvestMacro

Analytics by JustForex

The EUR/USD currency pair

• Prev Open: 1.16627
• Open: 1.16720
• % chg. over the last day: +0.06
• Day’s range: 1.16836 – 1.16980
• 52 wk range: 1.0571 – 1.2557

There is a variety of trends on the EUR/USD currency pair. Trade conflict between the US and China is still in the focus of attention. At the moment, the key support and resistance levels are 1.16750 and 1.17100, respectively. We recommend opening positions from these marks.

• – Philadelphia Fed manufacturing index at 15:30 (GMT+3:00);
• – Existing home sales in the US at 17:00 (GMT+3:00)

The price has fixed above 50 MA and 200 MA, which signals the power of buyers.

The MACD histogram has moved to the positive zone, which indicates the EUR/USD quotes growth.

Stochastic Oscillator is in the neutral zone, the %K line is above the %D line, which signals to buy EUR/USD.

• Support levels: 1.16750, 1.16400, 1.16000
• Resistance levels: 1.17100, 1.17400

If the price fixes below 1.16750, the EUR/USD quotes are expected to decline. The movement is tending to 1.16400-1.16000.

An alternative may be the further growth of the EUR/USD currency pair to the level of 1.17400-1.17600.

The GBP/USD currency pair

• Prev Open: 1.31469
• Open: 1.31339
• % chg. over the last day: -0.07
• Day’s range: 1.31513 – 1.31783
• 52 wk range: 1.2361 – 1.4345

Yesterday, there was a variety of trends on the GBP/USD currency pair. At the moment, quotes are growing. Local support and resistance levels are: 1.31450 and 1.31900, respectively. The positions should be opened from these marks. The trading instrument has the potential for further growth.

At 11:30 (GMT+3:00) a report on the volume of retail sales will be published in the UK.

Indicators point to the power of buyers: the price has fixed above 50 MA and 200 MA.

The MACD histogram moved into the positive zone, which indicates the GBP/USD quotes growth.

Stochastic Oscillator is in the neutral zone, the %K line is above the %D line, which signals to buy GBP/USD.

• Support levels: 1.31450, 1.31000, 1.30500
• Resistance levels: 1.31900, 1.32300

If the price fixes above the resistance level of 1.31900, the GBP/USD quotes are expected to rise. The movement is tending to 1.32300-1.32500.

An alternative may be the decrease of the GBP/USD currency pair to 1.31000-1.30700.

The USD/CAD currency pair

• Prev Open: 1.29783
• Open: 1.29160
• % chg. over the last day: -0.42
• Day’s range: 1.29075 – 1.29256
• 52 wk range: 1.2059 – 1.3795

The bearish sentiment is observed on the USD/CAD currency pair. During yesterday’s trading, quotes decreased by more than 70 points. At the moment, the key support and resistance levels are 1.29000 and 1.29300, respectively. We recommend opening positions from these marks. In the near future, technical correction is not ruled out.

The news feed on the economy of Canada is calm.

Indicators point to the power of sellers: the price is being traded below 50 MA and 200 MA.

The MACD histogram is in the negative zone, but above the signal line, which gives a weak signal to sell USD/CAD.

Stochastic Oscillator is located in the neutral zone, the %K line has crossed the %D line. There are no accurate signals.

• Support levels: 1.29000, 1.28700
• Resistance levels: 1.29300, 1.29800, 1.30200

If the price fixes below the round level of 1.29000, the USD/CAD quotes are expected to decline. The movement is tending to 1.28700-1.28500.

Alternative option. If the price fixes above 1.29300, it is necessary to consider purchases of USD/CAD. The target movement level is 1.29800-1.30200.

The USD/JPY currency pair

• Prev Open: 112.354
• Open: 112.254
• % chg. over the last day: -0.02
• Day’s range: 112.183 – 112.258
• 52 wk range: 104.56 – 114.74

The technical pattern on the USD/JPY currency pair is ambiguous. Quotes are in a sideways trend. Investors expect additional drivers. At the moment, the local support and resistance levels are: 112.100 and 112.300, respectively. The positions should be opened from these marks. We recommend paying attention to the 10-year US government bonds yield.

The news feed on the economy of Japan is calm.

Indicators do not send accurate signals: the price is being traded between 50 MA and 200 MA.

The MACD histogram is located in the negative zone, below the signal line, which gives a strong signal to sell USD/JPY.

Stochastic Oscillator is located in the neutral zone, the %K line is above the %D line, which gives a signal to buy USD/JPY.

• Support levels: 112.100, 111.800, 111.500
• Resistance levels: 112.300, 112.550

If the price fixes above the resistance level of 112.300, the USD/JPY quotes are expected to rise. The movement is tending to 112.550-112.800.

Alternative option. If the price fixes below the support of 112.100, we recommend looking for entry points to the market to open short positions. The target movement level is 111.800-111.500.

Analytics by JustForex

by JustForex

Yesterday, the US dollar weakened slightly against the basket of major currencies. The US dollar index (#DX) closed in the negative zone (-0.12%). Trade conflict between the US and China continues. As it became known, from September 24, Chinese duties on American goods $60 billion worth will come into effect in response to the US actions. Also, China intends to file a complaint to WTO against the US.

The British pound weakened against the US currency after it became known that Prime Minister of the United Kingdom Theresa May intended to reject the deal with the EU regarding the Irish border. The EU suggested conducting more checks on the border with Northern Ireland after Brexit. However, Theresa May insists that the laws should be the same for the entire territory of the UK.

Yesterday, a number of economic data was also published in the United Kingdom and the United States. Thus, the consumer price index in the UK rose to 2.7% in August and was better than the forecasted value of 2.4%. The number of building permits issued in the US dropped to 1.229M in August, while investors forecasted 1.310M. Today, a report on GDP of New Zealand has been published, which counted to 1.0% and was higher than the forecasted value of 0.8%. We expect important statistics from the UK and the US.

The “black gold” prices show positive dynamics. At the moment, futures for the WTI crude oil are testing a mark of $71.25 per barrel.

Market Indicators

Yesterday, there was a variety of trends in the US stock market: #SPY (+0.11%), #DIA (+0.57%), #QQQ (-0.08%).

At the moment, the 10-year US government bonds yield is at the level of 3.06-3.07%.

– The volume of retail sales in the UK at 11:30 (GMT+3:00);
– Philadelphia Fed manufacturing index at 15:30 (GMT+3:00);
– Existing home sales in the US at 17:00 (GMT+3:00)

by JustForex

By Gabriel Ojimadu, Alpari

The stock market leads the economy, not the other way around

By Elliott Wave International

It’s a wonderful thing when jobs are added to the U.S. economy.

But, as far as investing goes, history shows that you should not bet your stock market portfolio on it. Conversely, even a series of weak jobs reports doesn’t mean you should bet against stocks.

This is worth mentioning because many pundits believe big economic factors like jobs determine the stock market’s trend.

Consider this from CNN Money:

Solid corporate earnings coupled with continued demand for new technology bode well for the major U.S. stock indexes. So do expectations of a buoyant economy at home and a recovering one overseas. [emphasis added]

When do you think this article was published?

Well, it’s hard to tell because the narrative could fit different timeframes in recent history. Plus, correlating strong earnings and the economy with gains in stocks is all too common.

That article was published on Dec. 31, 1999 — just two weeks before the DJIA hit a milestone high and then went on to shed nearly 40% of its value through October 2002.

We saw a similar narrative near the 2007 peak. By the time June 2007 rolled around, the Elliott Wave Financial Forecast noted:

Just as advocacy of the New Economy blossomed in early 2000, a wide array of rosy long-term scenarios are now proclaiming “a special time in market history.” “This group of extreme optimists believes that global economic strength will keep shares rising for much longer than has been common in previous eras.” [emphasis added]

Again, the DJIA topped soon after and went into the worse bear market since the Great Depression.

Now, let’s look at what happened when job numbers were weak. On Feb. 6, 2009, a headline said (Center for American Progress):

Job Losses Continue at Accelerated Pace

Wouldn’t you know it — just a month later, the stock market bottomed and went on to quadruple through January 2018. So much for the shrinking U.S. economy in 2009 and the unemployment that hit 10% in October of that year.

Even this brief overview of recent market tops and bottoms makes clear that jobs and the economy FOLLOW the stock market, not lead it.

The belief that jobs reports lead the market is just one myth.

Learn about others in our special, free report, “Market Myths Exposed.”

Did you know that the vast majority of portfolios are built on false assumptions? These false assumptions — or Market Myths — have been passed down across generations. They are so baked into investor psyche that no one ever thinks to challenge them… but we do. Do earnings really drive stock prices? Can the FDIC actually protect you? Is portfolio diversification a smart move? Download Market Myths Exposed now and find out whether your portfolio is built on flawed foundations. We guarantee you’ll be shocked to find the truth.

Sign up now and get FREE access to The Market Myths Exposed eBook.

By Amie Parnaby

Reddit and its devotees are becoming keyboard detectives, gossip-mongers and conspiracy theorists at the merest hint of large numbers of coins moving around the crypto space. The very fact that all transactions are public has made everyone into curtain-twitchers without having to be surreptitious about it.

Whales on the move, but really what does that mean?

No one with an interest in Bitcoin and cryptocurrency will have missed the rumours flying around cyberspace, relating to the dormant wallet that suddenly started moving large amounts of coins around to different exchanges.

This never happens when people, countries or companies start moving their money around because those transactions are private and (usually) kept so by the banks involved. If some country suddenly started selling large amounts of US dollars for Euros and it was public knowledge, it would cause the forex industry to unravel completely. Big public corporations and companies do have the need to keep things above board, legal and transparent, but they don’t have to publish everything as and when it happens. Do we really need to ‘know’ what everyone is doing with their holdings? Does everyone really need to know that I spent 2 BTC on new computer components for my spouse? Because those addresses will be approximately traceable.

Continual speculation fuels fake news

So, firstly we had the dormant wallet – potentially linked to the Silk Road and “Dread Pirate Roberts” – then there was the news about Goldman Sachs backtracking on their crypto dealing desk (not true), and all the while Bitcoin was losing ground quickly.

By no means am I suggesting that the reason Bitcoin lost value was that of nosy parkers with too much time on their hands. However, the constant and detailed analysis of a single wallet coin redistribution is enough to fuel paranoia within the realms of the crypto space.

The news that 50,500 BTC had been moved from a wallet to several exchanges was enough to create the idea that someone would be selling large amounts of BTC and BCH, enough to cause some to start selling. It was also enough to start speculating on internal Bitcoin sabotage and cause the sell-off to escalate.

Frustrated detectives and watercooler gossip.

When it comes to our investments, we become extremely focused. In a world still reeling from a financial disaster, where retirement funds were slashed and decimated, and savings requisitioned to offset bailouts, it is understandable that we are significantly more cautious.

It’s part of the human condition to speculate, question, and judge. We are so very curious, that when something interesting happens, we have a tendency to look deeper. In some ways, it is a good thing. However, with the digital age came the internet and now whatever we find out we can share it with millions of others around the world, irrespective of the validity of our discovery.

I can’t detract from the impressive detective work displayed by the redditor who first announced the dormant wallet activity. The impressive galaxy-like diagrams representing coin movements in the crypto space were very interesting, the analyses of the coin movements were articulate and considered. However, the significance of the coin movement means nothing unless you know the motivation behind it.

Making allusions to the Silk Road is libellous (if untrue), and potentially damaging to a person or group. The owner of this wallet is probably doing everything they can to get every coin away from this over-watched address. Can anyone blame them? Then there are the conspiracy theorists (who have just got worse since the internet became a ubiquitous commodity), speculating on bitcoin sabotage, market manipulation and more.

Where the report about Goldman Sachs’ reversal of interest in a Bitcoin trading platform came from is probably down to someone getting overexcited by the news of development, but frustrated by the lack of a definitive timeline for the project.

Curiosity Killed the Coin

Speculation among the crypto community is rife and for a good reason. Everyone involved is looking for the edge that will see their investment in this fledgeling market blossom into a fortune. No one can blame the curious crypto-investor for keeping close tabs on their investments.

However, some people don’t feel the need to verify their discoveries or suppositions before creating a tidal wave of speculation on the internet.

I wonder if any of the keyboard warriors, perpetuating rumour and gossip in their search for the ‘truth’, realised they were fuelling the “sell” tide? Perhaps they did. Maybe they were just waiting for the nadir of the trough before picking up Bitcoin that little bit cheaper. It is possible that the originators of ‘fake news’ and bad-news rumours are the very people manipulating the markets for their own gains.

What is certain is that perpetuating rumours of sabotage, manipulation and messages of gloom and doom across the community is one way of guaranteeing the failure of the cryptocurrency project. The only way that crypto will prevail is by welcoming and inviting new investors and adopters to the community.

Terrifying newcomers to the crypto space with the knowledge that anyone with the know-how can spy on your wallet spending habits, or spreading theories of market manipulation, is not the way to grow the community of cryptocurrency adopters and enthusiasts.

About the Author:

Amie Parnaby is a professional writer and her experience spans a broad range of industries, from I.T. to training and optics to banking. Currently, Amie is the content writer for Terrexa – your entry point for crypto.

By George Prior

The UK Treasury Select Committee’s conclusion that crypto-assets should be regulated demonstrates cryptocurrencies are part of mainstream finance and the sector is likely to rally as a result.

This is an observation from Nigel Green, founder and CEO of deVere Group, which launched the exchange app deVere Crypto earlier this year following a unanimously-agreed report by the Commons Select Committee on crypto-assets for its Digital Currencies Inquiry.

The report concludes: “Regulation [is] needed for…crypto-asset market” and that the “ambiguity of the UK Government and regulators’ position is clearly not sustainable.”

Mr Green affirms: “Cryptocurrencies are here to stay. In fact, in today’s increasingly digitalised, globalised world, demand for these digital, global currencies is only set to soar in the coming years.

“As such, I welcome the Treasury Select Committee’s proactive and progressive approach, which could be the first step to providing regulations to protect consumers and prevent illicit activity.

“The conclusion made by the Committee about cryptocurrencies puts them on the right side of history.  Its findings that these assets should be brought into a regulatory framework demonstrates once again that they are now a part of mainstream finance.”

He continues: “As I have said previously, regulation of the crypto sector is now I believe inevitable.

“Regulation of cryptocurrencies will give investors even more protection and, therefore, confidence in the burgeoning market is likely to drive prices higher – and today’s signal from the Treasury Select Committee could have the same effect.”

This Inquiry follows the Financial Stability Board (FSB), the international watchdog chaired by Bank of England Governor, Mark Carney, releasing a report in the summer that concluded Bitcoin and cryptocurrencies do not pose a risk to the global financial system.

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.

Article By RoboForex.com

EURUSD

The EURUSD got inside the first downward impulse, and is now correcting. The pair may rise to 1.1686, and then go down to reach 1.1616, i.e. its local target.

GBPUSD

The GBPJPY is consolidating after going up. The pair may reach 1.3185, then fall till 1.3074, and finally rise, reaching 1.3111. Upon each of these levels, a new consolidation or reversal range may form. Meanwhile, in case the lower boundary gets broken out, the price may fall down to reach 1.2922.

USDCHF

The USDCHF went up and is now correcting. This may lead to a fall towards 0.9622, and then the uptrend is likely to continue, with a local target at 0.9696.

USDJPY

The pair is being pushed upwards and may reach 112.46, but then fall till 111.65, and finally rise, reaching 112.06. Upon each of these levels, a new consolidation or reversal range may form. Meanwhile, in case the lower boundary gets broken out, the price may continue its downtrend to reach 110.65.

AUDUSD

The AUD/USD was able to head upwards, but today it is likely to fall to 0.7130, although then it might rise to 0.7187. Upon these levels, a consolidation range with a reversal pattern may form. Conversely, once the lower boundary gets broken out, the price may head down towards 0.7085, i.e. a local target.

USDRUB

The pair is being pushed upwards, with the target at 67.00, although then it might rise to 67.96. After that, it may go back to 65.65 again, i.e. a local target.

GOLD

The first part of the downward wave is over, and the gold is now correcting, forming a consolidation triangle-like range. Today, gold is likely to fall to 1188.90, although then it might rise to 1200.80. After that, it may go back to 1178.78 again.

BRENT

Brent crude is trying to break out the upper consolidation range boundary. Today, the crude price may reach 80.50, then fall till 79.20, and then the trend might continue, with the price going to 82.00.

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

Article By RoboForex.com

The Japanese yen is strengthening against the US dollar, with the pair trading around 112.27. Today’s morning, August export data came out and beat the previous month data thanks to more exports to the US, as the latter keep imposing new customs duties on China. The export figure rose by 6.6% YoY compared to 3.9% in July and the expected value at 5.6%. Meanwhile, export to the US only rose by 5.3% YoY, while the import skyrocketed by 21.5% because of natural gas and aircraft shipments.

The US has also some tensions with Japan, too, but Tokyo hopes to resolve all issues via talks in late September.

Meanwhile, the Bank of Japan meeting was quite neutral, just as expected. The interest rate was left unchanged at -0.10%, and the QE is still here to stay: the BoJ buys assets worth 80T yens every year, and this is not going to change in the near future. At the same time, BoJ managers say some slight corrections may be made depending on the demand.

The overall assessment of the Japanese economy did not change either, which supported the yen a bit and it slightly increased its value against the greenback.

Article By RoboForex.com

Attention!
Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.

Analytics by JustForex

The EUR/USD currency pair

• Prev Open: 1.16827
• Open: 1.16627
• % chg. over the last day: -0.04
• Day’s range: 1.16732 – 1.17050
• 52 wk range: 1.0571 – 1.2557

The technical pattern on the EUR/USD currency pair is ambiguous. Investors expect additional drivers. At the moment, the key support and resistance levels are 1.16750 and 1.17100, respectively. We recommend opening positions from these marks. The euro has the potential for further growth.

• – Statistics on the real estate market in the US at 15:30 (GMT+3:00).

We also recommend paying attention to the speech by the ECB president Draghi.

The price has fixed above 50 MA and 200 MA, which signals the power of buyers.

The MACD histogram is near the 0 mark. There are no signals.

Stochastic Oscillator is located in the overbought zone, the %K line has started crossing the %D line. There are no accurate signals.

• Support levels: 1.16750, 1.16400, 1.16000
• Resistance levels: 1.17100, 1.17400

If the price fixes below 1.16750, the EUR/USD quotes are expected to decline. The movement is tending to 1.16400-1.16000.

An alternative may be the further growth of the EUR/USD currency pair to the level of 1.17400-1.17600.

The GBP/USD currency pair

• Prev Open: 1.31328
• Open: 1.31469
• % chg. over the last day: +0.07
• Day’s range: 1.31470 – 1.31758
• 52 wk range: 1.2361 – 1.4345

There is a variety of trends on the GBP/USD currency pair. At the moment, the technical pattern is ambiguous. The trading instrument is in a sideways trend. The GBP/USD quotes are testing local support and resistance levels: 1.31300 and 1.31700, respectively. The positions should be opened from these marks.

At 11:30 (GMT+3:00), the consumer price index will be published in the UK.

Indicators point to the power of buyers: the price has fixed above 50 MA and 200 MA.

The MACD histogram is located in the positive zone, but below the signal line, which gives a weak signal to buy GBP/USD.

Stochastic Oscillator is in the neutral zone, the %K line is above the %D line, which indicates an increase in quotes.

• Support levels: 1.31300, 1.31000, 1.30600
• Resistance levels: 1.31700, 1.32000

If the price fixes above the resistance level of 1.31700, the GBP/USD quotes are expected to rise. The movement is tending to 1.32000-1.32200.

An alternative may be the decrease of the GBP/USD currency pair to 1.31000-1.30600.

The USD/CAD currency pair

• Prev Open: 1.30330
• Open: 1.29783
• % chg. over the last day: -0.54
• Day’s range: 1.30312 – 1.30373
• 52 wk range: 1.2059 – 1.3795

The bearish sentiment is observed on the USD/CAD currency pair. At the moment, quotes are testing local support of 1.29500. A mark of 1.29800 is already a “mirror” resistance. We recommend opening positions from these marks. The trading instrument has the potential for further reduce.

The news feed on the economy of Canada is calm.

Indicators point to the power of sellers: the price is being traded below 50 MA and 200 MA.

The MACD histogram is in the negative zone, below the signal line, which gives a strong signal to sell USD/CAD.

Stochastic Oscillator is located in the oversold zone, the %K line is crossing the %D line. There are no accurate signals.

• Support levels: 1.29500, 1.29000
• Resistance levels: 1.29800, 1.30200, 1.30600

If the price fixes below the support of 1.29500, the USD/CAD quotes are expected to decline. The movement is tending to the round level of 1.29000.

Alternative option. If the price fixes above 1.29800, it is necessary to consider purchases of USD/CAD. The target movement level is 1.30200-1.30600.

The USD/JPY currency pair

• Prev Open: 111.839
• Open: 112.354
• % chg. over the last day: +0.39
• Day’s range: 112.348 – 112.388
• 52 wk range: 104.56 – 114.74

Yesterday, the bullish sentiment was observed on the USD/JPY currency pair. At the moment, quotes are consolidating. Local support and resistance levels are 112.250 and 112.500, respectively. The positions should be opened from these marks. Investors expect additional drivers. In the near future, technical correction is not ruled out.

The Bank of Japan has kept the main marks of monetary policy at the same level.

Indicators point to the power of buyers: the price is being traded above 50 MA and 200 MA.

The MACD histogram is located in the positive zone, but below the signal line, which gives a weak signal to buy USD/JPY.

Stochastic Oscillator is located in the neutral zone, the %K line is above the %D line, which gives a signal to buy USD/JPY.

• Support levels: 112.250, 111.900, 111.600
• Resistance levels: 112.500, 112.800

If the price fixes above the resistance level of 112.500, further growth of the USD/JPY quotes is expected. The movement is tending to 112.800-113.000.

Alternative option. If the price fixes below the already “mirror” support of 112.250, we recommend looking for entry points to the market to open short positions. The target movement level is 111.900-111.600.

Analytics by JustForex

Trump tariffs penalize US multinationals as US taxation fails Americans

By Dan Steinbock

Trump tariffs are based on flawed pre-global doctrines, which penalize US multinationals, as evidenced by Apple. It is not China that fails Americans, but US taxation, as evidenced by Apple.

In the pre-1914 era and during the protectionist interwar period, global economic integration declined drastically. As major corporations competed largely in home markets, their value activities were mainly domestic. Following World War II, the US-led Bretton Woods system ensured a greater degree of internationalization – including systemic US trade deficits since 1971, decades before deficits with China.

Thereafter in the ‘80s, US multinationals began to cut costs through offshoring as large chunks of productive capacity were transferred to emerging markets, especially in Asia. So today the “eco-systems” of US multinationals are increasingly global.

Here’s Trump’s dilemma in a nutshell: While tariffs and tariff wars were typical to the era of domestic competition a century ago, they do not work in a more global era. Even “made in China” products feature diverse value-added inputs by multinational companies producing in, exporting from and selling in China.

In a recent tweet, Trump urged Apple to manufacture in the US, not China. It’s a bad advice. As prices would soar, Apple’s profitability would plunge since it makes 60%-70% of its revenues abroad. If the company would comply, its manufacturing price would soar because of higher labor costs, and loss of advanced manufacturing, logistics and infrastructure in China.

The iPhone is not a marginal example. It alone accounts for an estimated $16 billion of the U.S. trade deficit with China.

“Made in China” does not capture value-added

Since iPhone alone accounts for some $16 billion of the U.S. trade deficit with China, let’s use it as an example. According to data, the initial sale price of Apple’s iPhone X (64BG) was $999. The Trump administration’s tariffs are based on the idea that since this smart phone is made in China, all value-added is captured in China and by China and thus it must be penalized by heavy tariffs.

The breakdown of the iPhone X costs comprises both manufacturing costs ($378) and value shared between distributors and Apple ($621), which accounts for almost two-thirds of total costs. Another fourth of the total consists of various components made in South Korea, Japan, the US, UK, Switzerland, and Singapore.

China’s key contribution is in the basic manufacturing costs ($8) plus battery packs ($6), which is less than 4 percent of the manufacturing cost and 1.4 percent of the total cost of iPhone X (Figure).

Figure How Apple Captures the Smartphone Value-Added, Not China

iPhone X (64GB): Breakdown of Full Costs

Black = Value shared between distributors and Apple  

Green = Modules made in several advanced economies  

Red = Basic manufacturing, battery packs in China

White = Information not available

Source: DifferenceGroup, IHS Markit and Reuters

Is the iPhoneX an exception? No. Before the fall of Nokia, Europe captured 51% of the value-added of the Nokia N95 smart phone, even when it was “Made in China,” because the final assembly (read: China) involved 2% of the overall value-added.

Obviously, the share of Chinese value-added differs by industries and companies, yet it tends be very low in the case of multinational companies operating in China, particularly in advanced technology. The same goes for such companies operating in India or other emerging markets. “Made in China” value-added does not go to China.

That’s precisely why Beijing seeks China’s rapid transition from exports and investment toward innovation and consumption. After all, like Apple and Nokia, Chinese industry giants – from Huawei and Xiaomi to Oppo and Vivo – capture far more of the value-added. As Vice Premier Liu He has urged, China must innovate if it wants to be a world leader in science and technology.

US taxation fails Americans, not China

There is one critical difference, however. Through taxation, Nokia’s success benefited Finnish taxpayers and its European investors. Most EU multinationals are constrained by similar taxation rules. In contrast, Apple’s success does not necessarily accrue to American taxpayers because many US multinationals, unlike their European counterparts rely on creative tax accounting or tax havens.

Theoretically, Apple should be the largest taxpayer in the world and pay $38 billion in taxes brought home from overseas and “create” 20,000 new jobs. But as Fortune has reported, that’s all spin. Instead, Apple plans to collect a huge windfall from the Republicans’ corporate tax handout. Currently it holds about $252 billion – more than 90% of its cash – in profits offshore, where it can avoid paying US taxes.

Indeed, before Trump’s tax code overhaul, Apple would have paid $79 billion in taxes if it had brought the money home. But it didn’t. Instead, it let the cash sit offshore for years. So its offshore profits will be taxed at a one-time, 15.5% repatriation rate. All other corporate profits will be taxed at 21% (down from the pre-Trump rate of 35%).

In the postwar era, the old adage was “What’s good for General Motors is good for America.” What Apple and many other US multinationals are doing today may not be illegal, but it is part of a broader problem associated with America’s decline.

Here’s the bottom line: Chinese share of 2%+ of the value-added pie is not the problem. Trump’s tariffs are a misguided solution to a wrong problem.

The real question is why US companies’ lucrative profits yield so few benefits to ordinary Americans but such great benefits to few and wealthy corporate insiders.

About the Author:

Dan Steinbock is the founder of Difference Group and has served as research director of international business at the India, China and America Institute (US) and a visiting fellow at the Shanghai Institute for International Studies (China) and the EU Center (Singapore). For more, see http://www.differencegroup.net/