Latest news with #BarryEichengreen
Bloomberg
23-05-2025
- Business
- Bloomberg
Single Best Idea: Eichengreen & Roland
Tom Keene breaks down the Single Best Idea from the latest edition of Bloomberg Surveillance Radio. In this episode, we feature conversations with Barry Eichengreen & Emily Roland. Watch Tom and Paul LIVE every day on YouTube:
Bloomberg
23-05-2025
- Business
- Bloomberg
Bloomberg Surveillance: Equity Pullback
Watch Tom and Paul LIVE every day on YouTube: Bloomberg Surveillance hosted by Tom Keene & Paul Sweeney May 23rd, 2025 Featuring: 1) Sebastien Page, head of Global Multi-Asset and Chair of the Asset Allocation Steering Committee at T. Rowe Price, joins for an extended discussion on whipsawing markets and where money managers are allocating their money in an increasingly uncertain economic environment. The S&P 500 remains on course for its worst weekly performance since the selloff following President Donald Trump's tariff announcements at the beginning of the April. 2) Barry Eichengreen, professor at University of California-Berkeley, talks about the Trump administration's international economic policies and whether they serve both global and domestic interests. It comes as US businesses are the most worried about the impact of President Donald Trump's shifting tariff policies on their revenues, with more than half projecting a hit of at least 25% to their revenue, according to a survey by HSBC. 3) Emily Roland, Co-Chief Investment Strategist at John Hancock Investment Management, talks about continued signals from global bonds about US debt and whether it's just another warning signal that will pass. Many investors believe Trump has learned his lesson and will implement a more modest tariff plan, which is why they are no longer worried about the impact of tariffs on the market, but the market is still susceptible to macro shocks, and investors are now focusing on fundamentals. 4) Joe Lavorgna, Chief Economist at SMBC Nikko Securities, joins to discuss President Trump's tweets on tariffs that would affect Apple and the EU. 5) Lisa Mateo joins with the latest headlines in newspapers across the US, including a WSJ story on expensive mocktails and a Bloomberg News story on Tom Cruise receiving an aircraft carrier for one of his missions.
Mint
19-05-2025
- Business
- Mint
America's credit rating slip: How serious?
As political rhetoric gives way to reality, what is emerging isn't looking too great for America. On Friday, it was stripped of the last of its top-notch sovereign ratings by big global credit-risk tracking agencies, with Moody's downgrading its debt to Aa1 from Aaa. Standard & Poor's had notched it down in 2011 and Fitch Ratings in 2023. Also Read: Kaushik Basu: America's capacity for self-harm is breathtaking In effect, US debt is no longer the gold standard, though America's unique position as the world's reserve-currency issuer still affords it the exorbitant privilege of borrowing cheaply. Also Read: Barry Eichengreen: The end of American exceptionalism? This ability, however, may weaken if the US doesn't find fiscal solutions to curtail its public debt. Global confidence in US economic policies has been rattled on many fronts lately. Also Read: Barry Eichengreen: The sterling's past may offer clues to the dollar's future Over the weekend, supermarket chain Walmart was asked by US President Donald Trump to 'eat the tariffs" imposed by his administration, instead of hiking prices. This attempt at interfering with the decisions of a private profit-oriented company suggests a preference for micro-management that's unlikely to work in the interests of America Inc. As seen in the past, rating agencies might be behind the curve—this time on assessing risks borne by US capitalism if Trump's new policy paradigm takes effect.
CBC
24-04-2025
- Business
- CBC
A 'madman' penalty: Are Trump's actions eroding U.S. economic power?
Here's some candid, non-academic language to describe an unusual pattern in American markets, brought to you by a monetary-policy historian. Stocks? Down. The U.S. dollar? Same. Demand for U.S. bonds? Also sinking. This isn't supposed to happen — not all three at once. But Barry Eichengreen sees a historic reaction where there's really one common theme: a collapse in faith in the United States. "Global investors have concluded that there is a madman in the White House, and that the lunatics have gained control of the asylum," said Eichengreen, a historian at the University of California at Berkeley who studies currencies and central banks. "The damage is clearly beyond repair." Washington is trying to glue back the pieces of a humpty-dumpty month — when U.S. President Donald Trump introduced the highest tariffs in over a century, then walked some back, then, unhappy with interest rates, threatened to fire the head of the U.S. Federal Reserve, before ruling it out, even as White House staff were reportedly studying replacement options. WATCH | Calculated or not? Did Trump really just levy a 245% tariff on China? 7 days ago Duration 25:31 Recent history has shown that political interference in the central bank, and interest rates, can have a catastrophic effect on inflation. It's just not supposed to happen in the United States of America — the world's largest economy; holder of the world's most important currency, a currency that supports the safest investment on Earth: U.S. debt bonds. In recent weeks, investors fleeing the stock market did not do what they normally do: Leap into the safe embrace of the U.S. dollar and U.S. government debt. Some analysts compared the combination of events to what you'd normally see in a developing economy. Risky assets, safe assets and the currency, all struggling at the same time. "The United States was more than just a nation. It's a brand. It's a universal brand — whether it's our culture, our financial strength, our military strength," said Ken Griffin, a Republican mega-donor and the CEO of Citadel, to the World Economy Summit in Washington on Wednesday. "And we're eroding that brand right now.… We put that brand at risk," he said. WATCH | An 'evermore unbalanced' global economy: 'China needs to change' its economic model, U.S. treasury secretary says 16 hours ago Duration 3:39 U.S. Treasury Secretary Scott Bessent, speaking at an event hosted by the Institute of International Finance, says the 'persistent overreliance' on the U.S. for consumer demand is creating an 'evermore unbalanced' global economy, citing China's export-heavy economy as an 'unsustainable' model. ceo "It can take a very long time to remove the tarnish on a brand.… It can be a lifetime to repair the damage." Here, there are differences of opinion. Clearly, the Trump administration is trying to repair that damage. All those above-mentioned indicators have eased up a bit the last couple of days, as the administration softens the tone on its global trade war and on the Federal Reserve. The administration is reportedly considering cutting back some of the China tariffs, which are massive, surpassing 140 per cent on some products, triggering an eye-watering collapse in shipping over recent days. On Wednesday, Trump told reporters that negotiations are "active" with China. "Tariff negotiations are going very well. We're dealing with many, many countries," he said. But on the same day his treasury secretary told reporters the U.S. and China aren't actually talking yet. Meanwhile, some countries say it's unclear what the U.S. actually wants. So the tremors won't end overnight. "This isn't a short-term adjustment; it's a paradigm shift that we expect will extend well beyond the president's four-year term," said a research briefing this week from Oxford Economics, referring to the newer, more protectionist era. "Indeed, history shows that even when protectionist measures such as tariffs and non-tariff barriers are removed, it can take decades to roll them back fully as niche groups that stand to gain from protectionism form powerful lobbies." It's not just that stocks are down — with the S&P 500 down over eight per cent this year, even after a little rally this week. The U.S. dollar has plunged a staggering nine cents against the Euro since Trump took office. It's even down two cents against the Canadian dollar, against all expectations. Shockingly, and most disturbingly, the demand for U.S. debt appeared shaky, with the 10-year U.S. treasury bonds up half a cent, though it's softened a bit. There are different views on how bad this actually is. Another expert, Steven Kamin, a fellow at the American Enterprise Institute think-tank, agrees with other diagnoses about what unleashed the unusual trading patterns. Things got "so crazy," he said, "that investors got scared and pulled away from the [U.S.] dollar as well." But he's not certain about how far things will go. Kamin's not so worried about stock-market fluctuations. And as for bonds, he's watching the broader economy to assess whether its current valuations are normal. Then there's a fundamental issue at the heart of the global financial system: the status of the U.S. dollar, for generations the world's reserve currency. The widespread use of the greenback in international transactions and in foreign central bank holdings has created an inexhaustible appetite for it. That inexhaustible appetite allows the U.S. to spend more money than it has, run up monster debt, and keep issuing bonds with confidence there will always be buyers. Kamin, a former director of the Federal Reserve's division of international finance, isn't worried about that status ending. "Clearly the dollar dominates," he said. "Some people are saying this current episode rings the death knell for its particular role. That's very unlikely.… The world can't turn on a time." The U.S. dollar is still king. It still accounts for 57 per cent of the currencies held by foreign central banks. Its share has receded a bit over the decades, and again in recent years, but there is no evident replacement candidate for transactions and bond investments. There's a bit of a debate in Washington about whether the U.S. should actually welcome, at the least, a cheaper dollar, on the belief it would help its manufacturing workers produce goods at more competitive prices. But that's a minority view. The prevailing consensus in Washington is that the U.S. gains more than it loses from a mighty dollar. "We continue to have a strong-dollar policy," Treasury Secretary Scott Bessent said Wednesday, voicing that view. "I think the U.S. will always, in my lifetime, be the reserve currency. I'm not sure anyone else wants it.… For export economies, it's a lot of pressure." Eichengreen may not be a fan of the Trump administration's handling of the economy. But here he agrees with Trump's treasury secretary: the strong dollar helps, more than hurts, the U.S. The benefits, he said, include lower debt costs for the government, convenience value for U.S. banks and firms trading in their own currency, insurance in a crisis where it's a rare asset that grows, and the power to levy sanctions against using your banks. And he fears American politicians are messing it all up. When asked whether the U.S. was in real danger of losing the reserve-currency status, he said: "We are." "When the competence and even rationality of a country's policymakers is cast into doubt, its currency loses its safe haven and reserve currency status," he said, noting that the dollar's share in central bank reserves has already been slowly declining, about 0.5 per cent per year, for a quarter-century.
Mint
22-04-2025
- Business
- Mint
Trade upheavals: Vietnam is in a tight corner. How resilient is India?
New Delhi: The imposition of 'reciprocal' tariffs across the board by US President Donald Trump plunged the world economy into deep uncertainty. Even their partial withdrawal, driven by sharp sell-offs in equity and bond markets, has lifted that uncertainty only somewhat. Underlying this is a deeper sense that the world economy and global trading system have undergone a fundamental structural shift away from the dominance of the US. China's imposition of export embargoes on a range of crucial inputs into global value chains, such as rare earth metals, has only exacerbated this sense of uncertainty. It's unclear whether a new global trading system will actually materialize, but the events of the past couple of weeks are a major test of a country's economic resilience, and its ability to withstand a downturn in, and shifts across, global trade. Many countries, especially those in Asia, learnt this lesson the hard way. In 1997, the Asian financial crisis —fuelled by hot money flows, all-too-liberal capital accounts, and low levels of foreign exchange reserves—almost brought the then Asian 'tiger' economies to their knees. As a recent paper by Barry Eichengreen on economic resilience pointed out, this was a wake-up call to all economies in the region. Countries strengthened banking systems, focused on building a large stockpile of foreign exchange reserves and became much more cautious about portfolio capital flows, which could flow out of a country at the first sign of trouble. These lessons stood those countries in good stead—when the covid-19 crisis hit in 2020, Asian economies recovered relatively fast. The restructuring of global trade, away from the US, is a subject that economists and analysts have speculated about for years, and Trump's tariffs mean that this restructuring is more likely to happen. If it happens, in the short term at least, it will lead to a severe disruption of global trade. How well prepared are economies, including India, to deal with such a disruption? When talk of the US 'decoupling' from China began a few years ago, a number of countries were identified as being alternate sources of manufacturing for companies like Apple —the so-called 'China+1' strategy. Close to the top of the list, if not at the very top, was Vietnam. Over the years, the Vietnamese government has worked hard, with companies like Apple, Samsung and Nike, to build supply chains and final production facilities. This coupled with cheap labour meant that the country became a major alternative hub for cheap Asian manufacturing and exports to the US. Indeed, Vietnam was a de facto ' China+1 ' long before the term became popular. With talk of decoupling, the importance of Vietnam only grew. Between 2005 and 2022, the share of Vietnam's imports coming from China doubled from 16% to over 32%. At the same time, the share of the US in Vietnam's total exports grew steadily—from 18% in 2005 to 29.5% in 2022. Over the same period, Vietnam's dependence on trade as an engine of growth soared. Total merchandise trade (exports plus imports) as a share of its gross domestic product (GDP) rose from 96% in 2000 to 158% in 2023. In contrast, India's total merchandise trade as a share of its GDP in recent decades has never crossed 43%. But this strategy carried huge risks as well. Vietnam had effectively tied its economic fortunes to the fractious relationship of two superpowers—China and the US. The dangers of doing so were made patently clear over the last two weeks, when Trump raised tariffs for goods coming to the US from all countries. Vietnam was hit with higher tariffs than most other countries. Saddled with a tariff of 46%, it faced the possibility of an economic shutdown, a possibility that has only been averted, for now, with Trump withdrawing his tariff hikes for 90 days. But even Vietnam is nowhere as high as Mexico, whose exports to the US comprise 80% of its total exports. In the 1940s, economist Albert Hirschman identified precisely this risk—that a country could tie its fortunes too closely to that of another, either by sourcing a major share of its imports from that country (as China is for Vietnam ) or that country being its biggest export market (as the US is for Vietnam). This gave a country's trading partner major leverage over its own economic fortunes at a time of war or geopolitical conflict. World War II, and the global trade shutdown during the depression of the 1930s, were subjects very much at the top of Hirschman's mind. The canonical example he had was that of the relationship of Nazi Germany with its trade partners in Eastern Europe in the 1930s, or that of a country like Britain with its colonies such as India. He developed a measure of concentration of such trade, reflecting the extent to which a country was dependent on only a few trade partners, or equivalently, on only a few commodities. This measure is in use by economists even today. A value of 100% on the index (the highest possible value) indicates that a country trades with just one partner and exports only to, or imports only from, that partner. A value of zero, on the other hand. indicates that the country's exports or imports are highly diversified and much less dependent on a single trading partner. So, values closer to zero indicate a country is much less dependent on a single partner or set of partners for its trade. In the 1960s, Marxist economists would come up with similar insights into the nature of trade between developing countries and developed economies. They described it as highly unequal, with poor, underdeveloped economies trapped in a state of 'dependence' on developed economies, which were both a source of manufactured goods and markets for underdeveloped countries' primarily agricultural and mineral exports. The weakness of this theory was that it was static. It didn't, and couldn't, account for the evolution of at least some of these economies, especially those in Asia, into manufacturing powerhouses in their own right. What about India? Indian policy planners, over the decades, have been much castigated for their inability to turn the country into an export success story like the countries of Southeast Asia. In recent years, criticism has been levelled at the Indian government for not taking advantage of the China-plus strategy to the extent that Vietnam has. Ironically, at a time of global trade shifts , it is precisely these policy failures that have meant that India stands to be relatively more insulated from global trade disruption. India's goods trade as a share of its GDP is currently around 40%. In 2024-25 (April to January), the share of the US in India's total exports was 17% and the share of China in India's total imports was 15.7%. Hirschman's index of export concentration for India is 5.7% (remember lower values are better) for 2022, a value which has remained relatively steady since 2000, according to UN trade data. In contrast, Vietnam's index has risen to 12%, up from 6% in 2000. Mexico, in the aftermath of the implementation of the North American Free Trade Agreement (NAFTA) in the mid-1990s, has soared to a whopping 56%. The global benchmark is around 4.2%. Incidentally, in his research, Hirschman had computed the values for India in the 1930s, when it was still a colony. In 1938, this index value for exports was 37.8%. There are issues with this index. It only takes into account bilateral trade. It doesn't account for a country's place in global value chains (much less important at Hirschman's time), where a single product, like an iPhone assembled in India, may require inputs sourced from multiple countries. Thus, a disruption in one part of the supply chain, in one country, may cause ripple effects elsewhere in the world, even though that country may not be a major trading partner with any of its export markets . During the covid lockdowns, this disruption to global supply chains was especially relevant. Shipping costs rose, crucial inputs could not be supplied, and global trade in goods took a sharp fall. Delays and shortages in the supply of chips from China and East Asia hit Indian auto manufacturers hard, leading to domestic shortages of several car models for months. Over the years, India's trade has moved up the value chain, with consumer goods accounting for 48% of exports in 2022 (the latest data available), compared with 40% in 2000. The share of intermediate and raw materials in its exports has fallen to 35% in 2022, from 52% in 2000. At the same time, its share of imports of raw materials and intermediate goods in 2022 was 67%, down from 72% in 2000. An RBI study in 2022, on the impact of global supply chain disruptions during covid, developed a measure of supply chain disruptions (Index of Supply Chain Pressures for India or ISPI). It found that imports into India during the covid lockdowns in China had a serious impact: 'As India imports a significant amount of intermediate inputs and raw materials from China, supply disruptions in that country impact the ISPI more than supply bottlenecks in advanced economies like the US," the study stated. 'The pandemic has starkly revealed that while GVCs (global value chains) were designed for efficiency, cost-saving and proximity to markets, they were not calibrated to risk exposure, especially of the overwhelming type that is being experienced today," the study concluded. It's unclear for now whether Trump's tariff imposition, and the resulting market nervousness, will persist. In a few months, this may all seem like a bad dream, or it could be the beginning of a historic shift, and even a shrinkage in global trade, which could persist for years. If that happens, countries with large domestic markets will be able to weather the storm better than those more dependent on, and exposed to, global trade. In that sense, a country like China is much more likely to weather the storm better than, say, Vietnam. Thus, the shutting off of rare earth supplies to the global market, and other Chinese embargoes on its own exports, suggest that the Chinese government is confident it can withstand any disruption to global trade. On the flip side, though, analysts for years have stressed the importance of China pivoting away from a reliance on exports to its domestic market, but this shift has happened only to a limited extent. Trade as a share of Indian GDP, at 30%, is much lower than the global average of 46%. This implies that India could withstand a global trade 'shock' better, in the long term. But if domestic markets become much more important, domestic consumer sentiment, income growth, and employment become even more critical than in the past. And this is where government policy to address such gaps could have far-reaching consequences. is a search engine for public data
