Swiss Economy Slows Sharply as Tariffs Weigh
Gross domestic product rose 0.1% in the three months to the end of June, down from the 0.8% growth of the first quarter, statistical agency SECO said in a flash estimate on Friday.
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Yahoo
27 minutes ago
- Yahoo
I Asked ChatGPT About Tariffs — And Here's Who It Said Is Impacted Most
You can't scroll through your phone without seeing the word tariffs. It appears in every other headline. Everyone from TV pundits to social media stars are duking it out over whether they're good for the country and for consumers' wallets. At this point, you're sort of embarrassed to admit that you don't know what a tariff is, how it works or who it's going to really hit. Find Out: Read Next: Instead of asking your one know-it-all friend, who will give you an unnecessarily complex explanation, there's another route you can take: ChatGPT. While you don't want to use ChatGPT as the end-all, be-all of your investigation, it can provide a baseline of information that will help guide you in deeper research. To get a foundation into tariffs, your friendly neighborhood GOBankingRates writer (that would be me) asked ChatGPT to explain tariffs to me in very rudimentary terms — along with who should expect to be impacted the most. A Definition in a Nutshell ChatGPT's basic definition of a tariff is very simple, which is exactly what I wanted: 'A tariff is a kind of tax a government puts on products that come from other countries. It makes those foreign products more expensive so that people might buy stuff from their own country instead.' Just to double-check this information before moving on, I visited the Tax Foundation website. Its definition aligns with what ChatGPT gave me: 'Tariffs are taxes imposed by one country on goods imported from another country.' The Tax Foundation website concurred with ChatGPT's definition but offered greater specifics about the function of tariffs in trade: 'Tariffs are trade barriers that raise prices, reduce available quantities of goods and services for US businesses and consumers, and create an economic burden on foreign exporters.' Learn More: Tariffs in Action To give me an idea of how tariffs work in practice, ChatGPT gave me a real-world example — one that feels like it could come to a news broadcast near you sooner than you'd think. So, the U.S. imports steel from China, let's say for $100 per ton. Without tariffs, U.S. businesses buy Chinese steel at that set price. Pretty easy, right? Now, here's a wrinkle in that situation (or should we say, a dent in the steel): The U.S. government puts a 25% tariff on that Chinese steel. At $100 plus a $25 tariff, that same steel now costs $125 per ton. If the same American businesses balk at the new expense, they might go to U.S.-made steel that costs $110 — because it's now cheaper than imported steel. Why Are Tariffs Imposed? Ostensibly, tariffs are imposed to protect local businesses. As ChatGPT put it, 'tariffs make imported goods more expensive, so local products seem cheaper in comparison.' It gives me another real-world scenario: 'If cheap clothes from another country flood the market, local clothing companies might go out of business. A tariff helps them compete.' Needless to say, if tariffs can help local businesses keep their doors open, that's good news for employees. And when I asked ChatGPT why tariffs are imposed, it did mention that, when local companies are protected, they might be more likely to keep or hire more workers. ChatGPT offered another scenario, which is that tariffs can be implemented as a means to influence, or even outright punish, other governments. It returned to the theme of tensions between the U.S. and China to offer another example. 'The U.S. imposed tariffs on Chinese goods during trade tensions to pressure China on trade practices,' it wrote. What's the Controversy? Even if you haven't fully understood what tariffs are, you're still likely aware that they can be controversial. Some pundits tout their ability to make American businesses more competitive, while others say that they're only passing higher costs of popular goods onto consumers. ChatGPT shared that tariffs also have the potential to limit the choice that everyday shoppers enjoy. 'If tariffs make foreign products too expensive, stores might stop selling them,' it wrote. 'So you have fewer brands or types of products to choose from.' Another concern involves trade wars. According to ChatGPT, sometimes countries respond to tariffs with retaliatory tariffs of their own, which can make a wider range of products more expensive for all consumers while putting the hurt to businesses that rely on overseas sales. Who Gets Impacted the Most? Tariffs impact a broad swath of people and organizations, some more positively than others. Of course, domestic producers face less competition from cheaper imports, while consumers find their options limited and more expensive. Importers and retailers also take it on the chin, according to ChatGPT, since they have to pay more for goods or even switch suppliers. There's also the possibility that they can lose out on business if customers don't want to pay higher prices. With their products becoming more expensive, exporters could potentially lose sales because their products become too expensive — however, other countries have the option to retaliate with their own tariffs. To explain, ChatGPT offered the following example: 'After U.S. tariffs on Chinese goods, China imposed tariffs on U.S. soybeans — hurting U.S. farmers.' There isn't really one type of person who will be hit hardest by tariffs — and some of the impact depends on what other countries do. More From GOBankingRates 5 Ways Trump Signing the GENIUS Act Could Impact Retirees4 Affordable Car Brands You Won't Regret Buying in 2025 This article originally appeared on I Asked ChatGPT About Tariffs — And Here's Who It Said Is Impacted Most Solve the daily Crossword
Forbes
an hour ago
- Forbes
Why The ‘Buy Europe' Trade Is About To Slam Into A Wall
Remember a few months ago, when the 'buy Europe' trade was red hot? Well, if you're like me, you're wondering where all the hype went! Now 'buy America' is back on, but European markets are still sky-high—well ahead of their American cousins. That spells trouble for anyone with a portfolio that's still tilted too much toward Europe. So today we're going to look into where things are headed (hint: back to the US in a big way!). We'll also delve into three funds with European exposure (two of which are closed-end funds sporting double-digit dividends) that I urge you to hold off on now. Headlines Drove 'Buy Europe,' But Corporate Profits Failed to Materialize The Financial Times was one of many outlets cheerleading a shift to Europe from America back in the spring. At the time, this sentiment was driven by tariffs, seemingly overextended US tech stocks and surging US markets. 'There's all sorts of reasons to like Europe, all sorts of reasons to hate the US,' contributor Katie Martin said in an April 25 FT podcast. The buy Europe trade was working well as recently as June, when the FT again reported that 'European small-caps outshine US rivals as investors bet on growth revival.' Note the phrase growth revival here: The idea was that European stocks were overlooked and would gain attention when their earnings grew. Except that didn't happen, with European firms posting disappointing earnings, as shown in the table below (more on this in a moment). Meanwhile in the US, companies saw 9% year-over-year earnings gains in Q2, meaning their average profit growth was much higher than the best sector in Europe (financials). And if you compare the best sector in the US—communication services (see chart below), which includes firms like Alphabet (GOOGL), Meta Platforms (META) and Netflix (NFLX)—to its cousins in Europe, the difference is staggering. As you can see at left above, the US sector's 40.7% earnings growth is many times greater than the best European companies can produce. Meantime, Europe's tech and telecom companies combined can't even muster more than 1% average growth between them. Where does that leave the European markets? Well, they're simply not reflecting this reality. With S&P 500 benchmark SPDR S&P 500 ETF Trust (SPY)—in purple above—far behind the Vanguard European Stock Index Fund (VGK), in orange, as of this writing, it's clear, based on our look at earnings, that European stocks are overbought. This makes VGK a fund to avoid. But ETFs aren't our main focus at CEF Insider. So let's turn to two CEFs that could face similar pressure. That, by the way, doesn't mean these are bad funds—quite the contrary. But now is not the time to buy them, as they do have significant European holdings likely to weigh on them in the coming months. The first one is a good example of a fund I've liked in the past and will surely like again at some point: the abrdn Global Infrastructure Income Fund (ASGI). This fund yields a rich 11.8%, and its payout has been steady—it's even moved up recently (though the dividend varies based on management's assessment of the market and other factors). Moreover, the fund isn't inherently European—in fact, it has 55% of its portfolio in US stocks, including cornerstone infrastructure players like Norfolk Southern Corp. (NSC) and NextEra Energy (NEE). Still, it has 22% of its holdings in continental European stocks, plus another 2.6% in the UK. That's enough to put a drag on the fund's portfolio when European stocks snap back to reality. Plus there's ASGI's rich valuation. ASGI has been riding the enthusiasm about foreign assets, causing its discount to net asset value (NAV, or the value of its underlying portfolio), which was averaging around 12% going into 2025, to evaporate. When European stocks correct, this fund will likely see a discount—and a consequent drop in its share price. Our second, and final, CEF to be wary of now is the PIMCO Income Strategy II Fund (PFN). This corporate-bond fund yields 11.5% and has held its payout steady since the pandemic days of 2021. However, as I write this, PFN trades at a 5.6% premium to NAV. And while it does have about 77% of its portfolio in the US, its largest allocations by country include European nations—France (3.2%), Spain (3%) and Germany (2.4%), to be precise—and Brazil (2.5%), which faces particularly steep tariffs from the US. To be sure, these are conservative allocations, but throw in PFN's premium and you get a real risk of a pullback, in both the fund's NAV and its market price, on any significant European selloff. And lower returns, especially in the fund's NAV, could put pressure on PFN's payout. The bottom line on all three of these funds? While geographic diversification is key for any portfolio, it's only a matter of time until European stocks drop to reflect their meager earnings growth. Until European firms start booking bigger profits, we're best to look elsewhere for growth. Michael Foster is the Lead Research Analyst for Contrarian Outlook. For more great income ideas, click here for our latest report 'Indestructible Income: 5 Bargain Funds with Steady 10% Dividends.' Disclosure: none
Yahoo
an hour ago
- Yahoo
This week in Trumponomics: Everybody's worried about stocks
Two contradictory things can happen at the same time. But maybe not indefinitely. Investors are contemplating what seem to be contradictory trends in financial markets and wondering how long they can last. President Trump's tariffs are beginning to cause tremors in the real economy. But the stock market keeps drifting higher, as if boom times are nigh. Does it make sense? Investors must think so, for now, anyway. Buyers keep buying, with the broad S&P 500 (^GSPC) index hanging out near record highs and the narrower Dow (DOW) index near its first record close since last December. Stocks have been on a tear since Trump backed away from steep tariffs in early April and instead pursued a more modest country-by-country approach to trade deals. But all is not well. An Aug. 15 New York Times headline told readers, "The stock market is getting scary." Economist Burton Malkiel pointed out that stock valuations are near the highest levels in 230 years, warning that "there are worrisome signs that investor optimism may have gotten out of hand." It's not just the mainstream press that's worried. Money managers at Morgan Stanley, Deutsche Bank, and Evercore are preparing clients for a possible 10% to 15% drop in stock values, according to Bloomberg. Goldman Sachs sees a "latent risk of unwinds" if anything upsets a fragile "Goldilocks" setup. In an Aug. 14 video for clients, Tom Lee, co-founder of investing firm Fundstrat, highlighted the recent jump in wholesale inflation and said, "yet the stock market barely cared." What seems to be happening is that the stock market is diverging from the real economy. The signs of an economic slowdown include sharply slowing job growth and a surge in wholesale inflation caused largely by all of Trump's new taxes on imports. Consumers expect higher producer costs to push up retail costs in the coming months, pushing overall inflation from 2.7% now to around 4.5%. That's depressing overall consumer not alarming for the stock market and the economy to go in slightly different directions. As Sam Ro points out in his TKer newsletter, the stock market often functions as a "discounting mechanism" assessing future growth and earnings. And some Wall Street analysts think the early 2025 swoon — with the S&P down 21% from late February to early April — represented stocks pricing in the slowdown we're undergoing now. If so, the current run-up might be telling us the economy will do better by the end of the year than the meek 1% GDP growth many economists are forecasting. Economist Ed Yardeni of Yardeni Research asked, "Why are stock prices still rising?" in his Aug. 11 newsletter. Then he answered the question, providing four reasons for optimism about stock values. One is the growing likelihood that the Federal Reserve will cut interest rates, the normal remedy for a slowing economy. Lower rates make borrowing cheaper and help boost corporate earnings. Investors put nearly 90% odds on a quarter-point rate cut in September, according to the CME Group's FedWatch tool. Read more: How jobs, inflation, and the Fed are all related Yardeni also thinks the US economy remains resilient, with strong productivity growth offsetting a slowing pace of job growth. And there's increasing evidence that artificial intelligence and other digital advances are real drivers of earnings growth rather than a passing fad. He forecasts another 55% rise in the S&P by the end of the decade. If there is a near-term correction, it would obviously undermine Trump's claim that a new "Golden Age" has arrived in America. Voters are already skeptical of the Trump economy, with his approval rating on the issue falling from 42% in February to 37% now. His tariffs are unpopular, and worries about the job market are rising. But a stock market correction would hardly be unprecedented, and most investors would simply ride it out. Trying to buy and sell stocks to time market ups and downs is a notoriously bad investing strategy, because markets often move unpredictably. Even the New York Times, while warning of a scary market, said the only thing a typical investor can really do about it is occasionally rebalance assets, which is evergreen advice. So is this: Invest smartly, then find something else to worry about. Rick Newman is a senior columnist for Yahoo Finance. Follow him on Bluesky and X: @rickjnewman. Click here for political news related to business and money policies that will shape tomorrow's stock prices. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
