AFP

A steep drop in imports, especially of consumer goods, narrowed the US trade deficit in July to its lowest level since October, the government reported Wednesday.

Exports rose only slightly, boosted by an increase in international travel, but the gain was enough to set yet another record, the Commerce Department reported.

The overall trade deficit fell by more than $10 billion to $70.6 billion compared to June, almost entirely due to the decline in imports, the report said.

Companies in recent months rushed to replenish depleted inventories amid strong demand from American shoppers — but sky-high inflation has raised concerns that consumers will pull back, causing firms to become more cautious.

The Federal Reserve is raising interest rates aggressively to dampen demand and cool inflation, and many families are having to spend a greater share of their incomes on staple goods.

Higher interest rates have strengthened the US dollar, making American goods relatively more expensive, which could trim exports, but so far the data are likely to boost growth in the world’s largest economy.

Goods and services exports edged up to $259.3 billion, just enough to beat the record set in June, according to the report.

Imports fell $8.5 billion, including a $3 billion plunge in pharmaceuticals, and $1.8 billion drop in industrial supplies including crude oil, while auto imports jumped $1.8 billion.

Exports are likely to again contribute to economic growth in the third quarter, said Rubeela Farooqi of High Frequency Economics. 

But she cautioned “a strong dollar, dimming global growth prospects, and slowing domestic demand should have implications for trade flows going forward.”

The US deficit with China decreased $3.9 billion to $33.0 billion in July due largely to falling imports, the data showed.

Liz Truss on Wednesday faced her first parliamentary grilling as British Prime Minister, ruling out a windfall tax to fund any freeze on energy bills to offset huge rises in the cost of gas and electricity. 

Truss, who formally took over from Boris Johnson on Tuesday, said she would spell out her plans on Thursday for an economic support package to forestall a growing crisis in the months ahead.

She is preparing measures reportedly worth upwards of £130 billion ($150 billion) to freeze energy bills for hard-pressed households and businesses, many of whom risk going to the wall this winter.

But when asked by opposition Labour leader Keir Starmer if this would be funded by a windfall tax on energy companies’ profits, Truss responded: “I am against a windfall tax.

“I believe it is the wrong thing to be putting companies off investing in the United Kingdom, just when we need to be growing the economy.”

She added: “This country will not be able to tax its way to growth.”

The exchange set the tone for the debate over how to tackle the predicted economic pain ahead, with inflation already in double digits at 40-year highs.

Truss campaigned on a promise to cut taxes, despite warnings that it could further fuel inflation and questions over where funds will come from.

Truss was bullish about the economic outlook as she entered Downing Street for the first time as premier on Tuesday.

“I am confident that together we can ride out the storm,” she said.

But Starmer said that ordinary people faced paying for her policies.

– Biden call –

Truss convened her new-look cabinet earlier Wednesday, which includes the most diverse top team in British history: Kwasi Kwarteng as finance minister, James Cleverly as foreign secretary and Suella Braverman as interior minister.

Along with the urgent issue of energy prices, Truss’s government must also navigate the combustible problem of post-Brexit trading arrangements in Northern Ireland. 

In her first contacts with foreign leaders, the new Conservative leader spoke late Tuesday by phone to Ukraine’s Volodymyr Zelensky and then US President Joe Biden.

According to Downing Street, she agreed with Biden “on the importance of protecting” peace in Northern Ireland.

In parliament, Truss said she was “determined” to break through the impasse, and favoured a “negotiated settlement” with the EU.

To Zelensky, Truss vowed to maintain the full-throated support for Ukraine against Russia given by her scandal-tainted predecessor, Boris Johnson.

Truss, 47, won an internal ballot of Tory members on Monday, securing 57 percent of the vote, after a gruelling contest against former finance minister Rishi Sunak that began in July.

But the initial stage of the contest saw her net the support of less than a third of the parliamentary party.

She now faces a tough challenge reuniting the ruling Tories following a bitter leadership battle, but observers noted that she had expelled almost every Sunak supporter from the cabinet.

Ex-soldier Johnny Mercer said he was “disappointed” to be sacked as veterans affairs minister.

His wife Felicity Cornelius-Mercer went further, calling Truss an “imbecile” as she tweeted a picture mocking the new prime minister as a dim-witted character from “The Muppets”.

Conservative MPs are “almost ungovernable” and have “no appetite to cope with difficult decisions”, one government insider told the Financial Times.

“They did for Boris, and they may do for Liz, too,” the source told the paper.

The Times quoted one of her incoming ministers as saying: “I doubt she’ll last two years.”

Labour has a double-digit lead in the polls but may have to wait two years to test their popularity.

A general election is due by January 2025 at the latest. Truss on Monday vowed to lead the Conservatives to victory “in 2024”.

– ‘Dreadful policy’ –

Truss pitched herself to the Tory grassroots as a tax-cutting free-trade champion ready to slash taxes immediately to turbo-charge growth.

Under her mooted plans, gas and electricity bills for both households and businesses would be capped near current levels for the coming winter at least.

The government would lend or guarantee private sector loans to energy providers to make up the difference they pay with soaring global wholesale prices.

It remains unclear whether the government will pay for the plan through extra borrowing or ask consumers to pick up the tab over the coming years through levies on their energy bills.

Paul Johnson, of the respected Institute for Fiscal Studies think-tank, said it was “a dreadful policy” but likely necessary. 

Digital investigators from the Bellingcat group have spent eight years exposing the lies of the powerful and gathering evidence of their crimes – work that has a grave human cost, the organisation’s chief told AFP in an interview.

Bulgarian journalist Christo Grozev said he and his colleagues received regular threats but he was driven to continue by “adrenalin” and “the feeling you can do something that law enforcement does not do”.

The investigative group has been closely associated with uncovering misdeeds by Russian agents across Europe, including intelligence involvement in the poisoning of opposition figure Alexei Navalny.

“When you get stopped in the street by Russian citizens, telling you thank you for what you are doing once a day, I think that it is enough to continue,” he said.

During a meeting in Paris earlier this week, he described the organisation as the “Kremlin’s biggest nightmare” though he stressed to AFP that Russia was not the main focus of their work.

“Russia today produces a lot of government crime and that’s why a lot of our investigations are focused on Russia,” he said.

“But we equally try to pay attention to bad actors from wherever they come.”

He cites investigations into the Syrian war, EU police agency Europol and others focused on Greece, Turkey, Hungary and the far right in the United States and Europe.

– ‘Undesirable’ in Russia –

Bellingcat was founded in July 2014 by a British blogger, Eliot Higgins, along with a band of internet “nerds”, said Grozev, who joined later and brought a wealth of journalism experience from his career in the Bulgarian media.

They used information freely available to the public –- anything from satellite images to telephone directories -– to piece together evidence of wrongdoing.

Their work on the downing of Air Malaysia flight MH17 over Ukraine in 2014 — which killed 298 people and sparked global outrage — won plaudits around the world and brought the group to the attention of the Kremlin.

The investigators pieced together photos, videos and public documents that supported the theory that the plane was shot down by a Russian missile from an area controlled by pro-Russian separatists.

Since then, the group has identified Russian agents responsible for poisoning opposition figure Alexei Navalny and other dissidents, exposed alleged war crimes in Ukraine and helped uncover many more scandals.

One of its main focuses right now is the war in Ukraine, where it has a two-track approach.

Grozev said one approach uses journalistic methods to debunk false information, the other is more judicial, gathering evidence of war crimes for eventual use in the courts.

The Netherlands-based platform, which takes its name from a fable in which mice join forces to hang a bell around a cat’s neck, has rarely been out of the Kremlin’s firing line.

Russia recently described it as a security threat and deemed it “undesirable”.

– Legal challenges –

One of the main lines of attack has been to accuse Bellingcat of being funded by Western governments or NGOs, particularly the US National Endowment for Democracy.

Grozev said in its early years the group took some money from American NGOs for training, but later decided to stop.

He said it had not taken any money from governments since last year and relied instead on smaller funders.

“Most of our funders are individuals who spend 100 euros to 5,000 euros,” he said.

Beyond the financial constraints, Grozev pointed to the difficult legal environment.

“International law is handicapped because it assumes that governments look out for their citizens,” said Grozev.

Even a tribunal like the International Criminal Court, which seeks to hold individuals to account rather than countries, has long been hobbled by disagreements over its remit and powers of investigation.

And national governments are hamstrung by the idea of national sovereignty, so if a poisoning happens on Russian territory, only Russia can investigate.

It is precisely in this legal blackhole that Bellingcat finds the greatest need.

“We investigate generally bad actors, governments who commit crimes, because we think nobody else is investigating them,” said Grozev.

“There are no tribunals, no law enforcement agencies that investigate governments.”

The yen slumped to a 24-year low against the dollar and shed more than one percent versus the euro Wednesday as Japan refuses to hike interest rates to combat sky-high inflation.

The European Central Bank is Thursday forecast to deliver another bumper rate increase, mirroring aggressive moves by the US Federal Reserve and Bank of England.

Elsewhere Wednesday, oil prices climbed as Russia’s President Vladimir Putin said his country would stop delivering oil and gas supplies to countries that introduce price caps.

G7 industrialised powers have vowed to move urgently towards implementing a price cap on Russian oil imports to cut off a major source of funding for Moscow’s military action in Ukraine.

In stock market trading, European and Asian indices mostly retreated but Shanghai closed slightly up.

On foreign exchange markets, one dollar was worth 144.38 yen — the Japanese currency’s weakest showing since 1998.

“The reason that we are seeing this much strength in the dollar against the yen is purely because of the difference in two central banks’ policies,” noted Naeem Aslam, chief market analyst at AvaTrade. 

“The Fed is as hawkish as it can be, and the BoJ still doesn’t seem to be bothered much about inflation or changing its stance on monetary policy.”

Japan’s finance minister, Shunichi Suzuki, on Wednesday expressed concern about the yen’s drop.

“For now, we’re monitoring with a sense of urgency how it’s developing, but if this continues, it makes sense that we will take necessary measures,” he added.

The dollar continues to gain strength from expectations of a third-straight blockbuster hike to US interest rates next month.

Several top Fed officials — including head Jerome Powell — have lined up in recent weeks to say their main focus is bringing inflation down from four-decade highs, even if that means tipping the economy into recession.

The euro remained lodged below parity with the dollar, despite the European Central Bank preparing to further ramp up rates.

And the greenback was also pushing towards a 37-year peak against sterling, which saw a brief rally Tuesday on reports new UK Prime Minister Liz Truss was planning a £130 billion ($150 billion) package to freeze a looming surge in household energy costs.

– Key figures at around 1045 GMT –

Dollar/yen: UP at 144.50 yen from 142.80 yen on Tuesday

Euro/yen: UP at 143.10 yen from 141.43 yen

Euro/dollar: DOWN at $0.9902 from $0.9905 

Pound/dollar: DOWN at $1.1475 from $1.1519

Euro/pound: UP at 86.33 pence from 85.97 pence

Brent North Sea crude: UP 0.7 percent at $93.43 per barrel

West Texas Intermediate: UP 0.5 percent at $87.33 per barrel

London – FTSE 100: DOWN 0.7 percent at 7,252.44 points

Frankfurt – DAX: DOWN 0.4 percent at 12,818.98

Paris – CAC 40: DOWN 0.4 percent at 6,077.91

EURO STOXX 50: DOWN 0.5 percent at 3,484.33

Tokyo – Nikkei 225: DOWN 0.7 percent at 27,430.30 (close)

Hong Kong – Hang Seng Index: DOWN 0.8 percent at 19,044.30 (close)

Shanghai – Composite: UP 0.1 percent at 3,246.29 (close)

New York – Dow: DOWN 0.6 percent at 31145.30 (close)

burs-bcp/rfj/lth

Chancellor Olaf Scholz voiced confidence Wednesday that Germany was well prepared to “survive” the winter despite turmoil in the energy markets in the wake of Russia’s invasion of Ukraine.

In a speech heavily critical of his predecessor chancellor Angela Merkel’s energy policies that left Germany dependent on Russia for power, Scholz said Germany will keep moving “at great speed” to shed the reliance in the wake of Moscow’s invasion of Ukraine.

Germany has not only raced to fill up its gas storage tanks, but also sped up the building of terminals to receive liquefied natural gas, Scholz told parliament.

“Because we started so early, when it wasn’t even such a big awareness of the problem in Germany, we are now in a situation that we can head into the winter courageously and bravely — our country can survive,” he said.

As Germany turns its back on Russian supplies, it was sealing new cooperation with its closest European partners, said Scholz. 

“We have spoken with our friends on the west European coast, with the Netherlands and Belgium for them to expand (LNG) terminals and pipeline capacities with France which will for the first time deliver gas to us.

“What we have achieved with the terminals in the north and with those on the German west European coasts, we will guarantee a secure energy supply for Germany,” he said.

Europe’s biggest economy has also restarted mothballed coal power plants, and this week decided to keep two nuclear plants on stand-by through mid-April instead of completely ending the usage of atomic energy by the end of the year.

But Friedrich Merz, the leader of Merkel’s CDU conservatives, said it was “insanity” to keep the atomic plants only on standby and not on the grid.

The power plants needed to be active “in order for us to bring down prices and costs for companies,” he said.

Merz’s criticisms earned a sharp rebuke from Scholz, who said it was under the conservatives leadership that Germany had failed to make the right decision for its future.

The conservatives, who were in power from 2005 to 2021, are “completely responsible for the fact that Germany made decisions to exit coal and nuclear but without engaging in anything else,” said Scholz, who was finance minister in Merkel’s coalition.

Rather, the conservatives “fought against every wind power installation,” said Scholz, saying it was “irresponsible CDU policies that have brought us to our current situation”.