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Yahoo
07-08-2025
- Business
- Yahoo
Analysis-Trump may look like he's winning the trade war, but hurdles remain
By Andrea Shalal WASHINGTON (Reuters) -At a glance, U.S. President Donald Trump appears to be winning the trade war he unleashed after returning to the White House in January, bending major trading partners to his will, imposing double-digit tariff rates on nearly all imports, narrowing the trade deficit, and raking in tens of billions of dollars a month in much-needed cash for federal government coffers. Significant hurdles remain, however, including whether U.S. trading partners will make good on investment and goods-purchase commitments, how much tariffs will drive up inflation or stymie demand and growth, and whether the courts allow many of his ad-hoc levies to stand. On inauguration day, the effective U.S. tariff rate was about 2.5%. It has since jumped to somewhere between 17% and 19%, according to a range of estimates. The Atlantic Council estimates it will edge closer to 20%, the highest in a century, with higher duties taking effect on Thursday. Trading partners have largely refrained from retaliatory tariffs, sparing the global economy from a more painful tit-for-tat trade war. Data on Tuesday showed a 16% narrowing of the U.S. trade deficit in June, while the U.S. trade gap with China shrank to its smallest in more than 21 years. American consumers have shown themselves to be more resilient than expected, but some recent data indicate the tariffs are already affecting jobs, growth and inflation. "The question is, what does winning mean?" said Josh Lipsky, who heads economic studies at the Atlantic Council. "He's raising tariffs on the rest of the world and avoiding a retaliatory trade war far easier than even he anticipated, but the bigger question is what effect does that have on the U.S. economy." Michael Strain, head of economic policy studies at the conservative American Enterprise Institute, said Trump's geopolitical victories could prove hollow. "In a geopolitical sense, Trump's obviously getting tons of concessions from other countries, but in an economic sense, he's not winning the trade war," he said. "What we're seeing is that he is more willing to inflict economic harm on Americans than other countries are willing to inflict on their nations. And I think of that as losing." Kelly Ann Shaw, a White House trade adviser during Trump's first term who is now a partner at Akin Gump Strauss Hauer & Feld, said a still-strong economy and near-record-high stock prices "support a more aggressive tariff strategy." But Trump's tariffs, tax cuts, deregulation and policies to boost energy production would take time to play out. "I think history will judge these policies, but he is the first president in my lifetime to make major changes to the global trading system," she added. DEALS SO FAR Trump has concluded eight framework agreements with the European Union, Japan, Britain, South Korea, Vietnam, Indonesia, Pakistan and the Philippines that impose tariffs on their goods ranging from 10% to 20%. That's well short of the "90 deals in 90 days" administration officials had touted in April, but they account for some 40% of U.S. trade flows. Adding in China, currently saddled with a 30% levy on its goods but likely to win another reprieve from even higher tariffs before an August 12 deadline, would raise that to nearly 54%. Deals aside, many of Trump's tariff actions have been mercurial. On Wednesday he ratcheted up pressure on India, doubling new tariffs on goods from there to 50% from 25% because of its imports of oil from Russia. The same rate is in store for goods from Brazil, after Trump complained about its prosecution of former leader Jair Bolsonaro, a Trump ally. And Switzerland, which Trump had previously praised, is facing 39% tariffs after a conversation between its leader and Trump derailed a deal. Ryan Majerus, a trade lawyer who worked in both the first Trump administration and the Biden government, said what's been announced so far fails to address "longstanding, politically entrenched trade issues" that have bothered U.S. policymakers for decades, and getting there would likely take "months, if not years." He also noted they lack specific enforcement mechanisms for the big investments announced, including $550 billion for Japan and $600 billion for the EU. PROMISES AND RISKS Critics lit into European Commission President Ursula von der Leyen after she agreed to a 15% tariff during a surprise meeting with Trump during his trip to Scotland last month, while gaining little in return. The deal frustrated winemakers and farmers, who had sought a zero-for-zero tariff. Francois-Xavier Huard, head of France's FNIL national dairy sector federation, said 15% was better than the threatened 30%, but would still cost dairy farmers millions of euros. European experts say von der Leyen's move did avert higher tariffs, calmed tensions with Trump, averting potentially higher duties on semiconductors, pharmaceuticals and cars, while making largely symbolic pledges to buy $750 billion of U.S. strategic goods and invest over $600 billion. Meeting those pledges will fall to individual EU members and companies, and cannot be mandated by Brussels, trade experts and analysts note. U.S. officials insist Trump can re-impose higher tariffs if he believes the EU, Japan or others are not honoring their commitments. But it remains unclear how that would be policed. And history offers a caution. China, with its state-run economy, never met its modest purchase agreements under Trump's Phase 1 U.S.-China trade deal. Holding it to account proved difficult for the subsequent Biden administration. "All of it is untested. The EU, Japan and South Korea are going to have to figure out how to operationalize this," Shaw said. "It's not just government purchases. It's getting the private sector motivated to either make investments or back loans, or to purchase certain commodities." And lastly, the main premise for the tariffs Trump has imposed unilaterally faces legal challenges. His legal team met with stiff questioning during appellate court oral arguments over his novel use of the 1977 International Emergency Economic Powers Act, historically used for sanctioning enemies or freezing their assets, to justify his tariffs. A ruling could come any time and regardless of the outcome seems destined to be settled ultimately by the Supreme Court.
Hindustan Times
05-08-2025
- Business
- Hindustan Times
Trump again threatens 'very substantial' tariff hikes for India over Russian oil
By Andrea Shalal and Aftab Ahmed Trump again threatens 'very substantial' tariff hikes for India over Russian oil WASHINGTON/NEW DELHI -U.S. President Donald Trump said on Tuesday he would increase the tariff charged on imports from India from the current rate of 25% "very substantially" over the next 24 hours, in view of New Delhi's continued purchases of Russian oil. He also said a "zero tariff" offer for imports of U.S. goods into India was not good enough, alleging that India was "fuelling the war" in Ukraine. Trump's threat to India over its purchases of Russian oil started on July 31, when he announced a 25% tariff for Indian goods, along with an unspecified penalty. "They're fuelling the war machine, and if they're going to do that, then I'm not going to be happy," Trump told CNBC in an interview on Tuesday, adding that the main sticking point with India was that its tariffs were too high. "Now, I will say this, India went from the highest tariffs ever. They will give us zero tariffs, and they're going to let us go in. But that's not good enough, because of what they're doing with oil, not good." An Indian government source said that India's purchases of Russian oil have helped to stabilise global oil prices by easing the pressure on supplies from other regions. India, the world's third biggest oil importer and consumer, buys more than a third of the oil it needs from Russia. "If we stop buying Russian oil, who will replace those barrels to maintain balance and at the same time prevent the prices from shooting up? We don't want a repeat of 2022 when prices shot up to $137 a barrel," the source said, referring to the oil market spike around the time when Moscow's invasion of Ukraine began. The official spoke on condition of anonymity because the source was not authorised to speak to the media. Trump's latest comment followed a similar threat on Monday, which prompted India's Foreign Ministry to say the country was being unfairly singled out over its purchases of Russian oil. "It is revealing that the very nations criticising India are themselves indulging in trade with Russia ," it said in a statement issued late on Monday. "It is unjustified to single out India," it added. The EU conducted 67.5 billion euros worth of trade with Russia in 2024, including record imports of liquefied natural gas that totalled 16.5 million metric tons, the Indian ministry said. The United States continues to import Russian uranium hexafluoride for use in its nuclear power industry, palladium, fertilisers and chemicals, it added, without giving a source for the export information. The U.S. embassy and the EU's delegation in New Delhi did not immediately respond to a request for comment. Both the United States and EU have reduced their trade ties with Russia since it launched its full-scale invasion of Ukraine. SUDDEN RIFT India imported about 1.75 million barrels per day of Russian oil from January to June this year, up 1% from a year ago, according to data provided to Reuters by trade sources. It has faced pressure from the West to distance itself from Russia over the Ukraine war. New Delhi has resisted, citing its longstanding ties with Moscow and economic needs. India's National Security Adviser Ajit Doval is likely to go ahead with a scheduled visit to Russia this week, two government sources said. Foreign Minister S. Jaishankar is expected to visit in the coming weeks. The sudden rift between India and the U.S. has been deepening since July 31. Trump has said that from Friday he will impose new sanctions on Russia as well as on countries that buy its energy exports, unless Moscow takes steps to end the war with Ukraine. The trade tensions have caused concern about the potential impact on India's economy. The equity benchmark BSE Sensex .BSESN closed down 0.38%, while the rupee dropped 0.17% versus the dollar. This article was generated from an automated news agency feed without modifications to text.
Yahoo
29-07-2025
- Business
- Yahoo
Loss of central bank independence could lead to instability, IMF warns
By Andrea Shalal (Reuters) -The International Monetary Fund on Tuesday warned that any loss of central bank independence could undermine efforts to keep inflation expectations in check, potentially triggering a wave of financial, monetary and macroeconomic instability. The IMF hammered home that message in an update to its World Economic Outlook, released Tuesday, and in a separate interview with IMF chief economist Pierre-Olivier Gourinchas. In the update, the IMF said the current economic climate of prolonged trade tensions and uncertainty over evolving tariffs heightened the need for robust policies to safeguard financial stability and ensure central bank independence. In some cases, if tariff shocks resulted in disruptive movements in foreign exchange and risk premiums, it said it might be suitable for countries to implement temporary foreign exchange interventions or capital flow management measures. "Crucially, the ambiguous and volatile landscape also requires clear and consistent messaging from central banks and the protection of central bank independence, not only in legal terms, but also in practice," the global lender said. U.S. President Donald Trump has repeatedly exhorted the U.S. Federal Reserve to cut interest rates while questioning the leadership and continued tenure of Chair Jerome Powell, whose term at the Fed's helm is due to end in May 2026. Those statements have unsettled markets, worried about a loss of the longstanding principle of Fed independence. The two men sparred over cost overruns on a Fed renovation project on Friday, as Trump repeated his call for lower rates. Asked about Trump's efforts to push Powell out of office, Gourinchas underscored the importance of maintaining central bank independence to keep inflation expectations anchored. "This is really a core plank for macroeconomic stability overall. That's one of the hard learned lessons of the last 40 years," the IMF chief economist told Reuters in an interview, without mentioning the Fed specifically. "We have a very, very clear message on this - it's very important to keep central bank independence and to implement it," he said. Central bank independence was foundational to macroeconomic frameworks in both advanced and emerging economies, he said. Despite the recent era of large price increases from 2021 to 2024, markets and consumers maintained confidence in policymakers' determination to keep inflation in check over the medium term, averting a broad de-anchoring of inflation expectations. "They think that someone is at the helm, someone is in the driving seat and is going to implement monetary policy to achieve price stability," he said. "That's the credibility." Should that credibility become called into question or threatened, the link from inflation to inflation expectations would become "much more brittle," he said. Inflation could rise again suddenly due to myriad shocks, and if people did not trust central banks to do their jobs, inflation expectations would start rising, triggering wage increases, which would beget higher prices, higher interest rates and ultimately a need to "crash the economy." "So now you have macroeconomic instability. You have monetary instability and you have financial instability," he said, underscoring the need to ensure consumers and financial markets were certain that central banks would act on their own. 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
Yahoo
22-07-2025
- Business
- Yahoo
IMF warns tariffs aren't the answer to global imbalances
By Andrea Shalal WASHINGTON (Reuters) -Global current account balances widened sharply in 2024, reversing a narrowing under way since the global financial crisis of 2008-2009, the International Monetary Fund said on Tuesday, warning that tariffs were not the answer. In its annual External Sector Report, which assesses imbalances in the 30 largest economies, the IMF noted that external surpluses or deficits were not necessarily a problem, but could cause risks if they became excessive. It said prolonged domestic imbalances, continued fiscal policy uncertainty, and escalating trade tensions could deteriorate global risk sentiment and elevate financial stress, hurting both debtor and creditor nations. The report took aim at U.S. President Donald Trump's imposition of higher import tariffs against nearly every trading partner, which his administration says is aimed at increasing revenues and righting longstanding trade deficits. "A further escalation of the trade war would have significant macroeconomic effects," it said, noting that higher tariffs would reduce global demand in the short term and add to inflationary pressures through rising import prices. Rising geopolitical tensions could also trigger shifts in the international monetary system (IMS), which in turn could undermine financial stability, it said. This year's report, based on 2024 data, showed the widening of global current account balances was due largely to increased excess balances in the world's three largest economies - the United States, China and the euro area. The deficit in the United States widened by $228 billion to $1.13 trillion or 1% of global gross domestic product (GDP), while China's surplus increased by $161 billion to $424 billion and the euro surpluses expanded by $198 billion to $461 billion. DOMESTIC SOLUTIONS In an accompanying blog, IMF chief economist Pierre-Olivier Gourinchas said excessive surpluses or deficits stemmed from domestic distortions, such as overly loose fiscal policy in deficit countries and insufficient safety nets that caused excessive precautionary savings in surplus countries. Changes aimed these domestic drivers - not tariffs - were needed, he said. That meant China should focus on boosting consumption, Europe should spend more on infrastructure and the U.S. needed to reduce large public deficits and rein in fiscal spending, he said. The report was based on data collected before approval of a massive tax cut and spending bill, which the Congressional Budget Office on Monday said would add $3.4 trillion to the U.S. deficit over 10 years, causing further pressure. "Public deficits in the United States remain excessively large and the recent broad depreciation of the Chinese yuan - together with the U.S. dollar - runs the risk of widening current account surpluses in China," he wrote. Rising tariffs had little impact on global imbalances, Gourinchas said since they tended to reduce both investment and savings in the tariffing country, leaving current account balances little changed. 'SOFTENING' US ROLE AS WORLD BANKER Uncertainty about tariffs could also undermine consumer and business confidence, increase financial market volatility and lead to persistent appreciations of the U.S. dollar, the IMF report said. However, it noted the dollar had depreciated 8% since January, its largest half-year decline since 1973. It acknowledged the continued dominance of the U.S. dollar, but said growing geoeconomic fragmentation could pose risks in the future, and recent weaker demand for U.S. Treasuries could reflect concerns about the U.S. fiscal trajectory. Increased use of China's yuan in international trade and finance, a "softening in the United States' role as world banker and insurer" and the emergence of alternative payment systems and private digital assets could eventually lead to changes in the use of international currencies. "While the risks of serious dislocation in the IMS remain moderate, rapid and sizable increases in global imbalances can generate significant negative cross-border spillovers," Gourinchas wrote in the blog. "A major risk for the global economy is that countries will instead respond to rising imbalances by further raising trade barriers, leading to increased geoeconomic fragmentation. And while the impact on global imbalances will remain limited, the harm to the global economy will be long-lasting." 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
Yahoo
10-07-2025
- Business
- Yahoo
IMF says new US tariffs keep trade uncertainty running high
By Andrea Shalal WASHINGTON (Reuters) -The IMF said on Thursday it was closely monitoring the latest U.S. tariffs announcements, saying uncertainty about the global economic outlook remained high and urged countries to work constructively to facilitate a stable trade environment. The IMF said it would offer more details when it releases an update to its April World Economic Outlook in late July, ahead of the new August 1 deadline for trade negotiations. U.S. President Donald Trump on Wednesday expanded a global trade war with a new 50% tariff on U.S. copper imports and a 50% duty on goods from Brazil, both to start on August 1. He also announced higher tariffs for 21 other countries. "Trade-related developments are evolving and uncertainty remains high," an IMF spokesperson said in response to a query from Reuters. "Countries should continue to work constructively to facilitate a stable trade environment, and address shared challenges." Worries over future U.S. tariffs are clouding the outlook for factories across much of the United States, Asia and Europe, according to surveys released on Tuesday, although they showed some were able to shrug off the uncertainty and keep growing. Analysts said the underlying softness in surveys highlights the challenges facing businesses and policymakers as they try to navigate Trump's moves to shake up the global trade order. Trump administration officials argue that tariffs imposed thus far have not fueled inflation, and say a tax-cut law approved last week will more than offset any temporary negative impact from the additional duties being imposed on trade. The IMF in April slashed its growth forecasts for the United States, China and most countries, citing the impact of U.S. tariffs now at 100-year highs and warning that rising trade tensions would further slow growth. Economic activity has increased since then amid stockpiling ahead of tariffs, and the U.S. and China have backed off steep reciprocal tariffs, which could point to a slight - if temporary - upward revision. Economists say uncertainty remains high and higher tariffs will bite harder in the second half of the year. 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
