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Yahoo
18 hours ago
- Business
- Yahoo
I'm an Economist: My Predictions for Inflation Under President Trump
In Donald Trump's second term, some experts believe the inflation trajectory could continuously point upward and go higher, especially when tariffs, deficits and other policies that would increase inflation are factored in. While forecasting economic conditions isn't an exact science, experts can speculate using knowledge about the past and some clues about the future. Find Out: For You: A report from Allianz Research provides insights into how inflation could unfold under Trump and his administration during round number two. The report shows that while some policies could increase inflation in the short term, the overall inflation path would be shaped by factors like the Federal Reserve's actions and broader economic conditions. GOBankingRates spoke to Maxime Darmet, senior U.S. economist at Allianz Trade, who co-authored a report by Allianz Trade research, titled 'Trumponomics: the Sequel' on this very subject. Here are some key insights. No matter the politics, President Trump has his work cut out for him when it comes to dealing with inflation. The U.S. economy was pretty sturdy before he took office for the second time, but it now shows interest rates climbing and general economic unrest. 'While the U.S. has remained remarkably resilient despite rising interest rates and global uncertainty, it has become more prone to inflation volatility, given a larger exposure to frequent supply shocks and structural labor shortages,' Darmet said. 'Against this backdrop, demand-boosting policies — such as tax cuts — or supply-hurting policies — such as tariff hikes — could re-ignite inflation faster and push up interest rates.' The White House administration should tread carefully with its economic plans. Big tax cuts might sound great at first — they put more cash in your wallet. However, if there are limited goods to spend that money on, it easily overheats the economy and spirals inflation even higher. Read Next: Trump never seems to miss the chance to double down on protectionist policies to boost U.S. manufacturing. He has proposed tariff increases, including 10% on all imports and 60% on Chinese goods. The Allianz report discusses two potential scenarios — one in which the U.S. tariff rate rises from 2.5% up to 4.3%. However, another scenario, in which Trump implements all the tariffs he has threatened, could push the rate to around 12%. 'However, in both cases, we would expect Trump to target goods that are not critical for the U.S. economy, equivalent to 55% of imported Chinese goods and 70% of EU goods,' Darmet wrote. 'China's textiles sector and the U.S. transportation equipment sector would be the hardest hit.' Despite some whiplash court decisions, Trump has successfully enacted a series of steep protective tariffs affecting nearly all goods imported into the United States. Between January and April 2025, the average effective U.S. tariff rate rose from 2.5% to an estimated 27% — the highest level in over a century. Of course, Trump isn't exactly working with a fresh economic slate in the White House, as he inherited the budget situation from Biden's term. Trump's bold promises of slashing taxes and ramping up spending quickly ran into some harsh fiscal realities. He'll have to perform some nifty accounting tricks to pull off his economic vision without sending bond market investors into a total panic over the stability of America's finances. One potential gambit would be to hike all those tariffs and trade taxes to fund the tax cut promises while scaling back Biden's pricier policy initiatives. So, unless the Trump 2.0 economy is some world-beater of growth, most forecasters see the new administration ultimately having to pump the brakes on fiscal loosening after maybe a year of smaller tax cuts or spending bumps. Otherwise, the whole economic agenda could wind up crumbling under the weight of unsustainable budgets and debt — something that fiscal conservatives in Trump's party would likely refuse to accept. That deficit dynamic keeps economic advisors up at night as they game-plan Trump's potential second term. Trump has said a goal is to ramp up U.S. manufacturing and reduce foreign manufacturing relationships. However, the report suggests that such policies need to be carefully designed. 'To yield benefits, industrial policy must avoid the risk of targeting too many objectives. In that respect, Trump's ambitious Strategic National Manufacturing Initiative (SNMI) may disappoint when set against its numerous goals and the reality that the U.S. does not have a competitive advantage in many sectors,' Darmet wrote. The Fed's response would shape inflation under the second Trump term. 'Against this backdrop, we would expect the Federal Reserve to be forced to pause its easing cycle in 2025 and the U.S. 10-year yield to stay above 4%,' Darmet wrote. This could control inflation but weigh on growth and markets initially. The report highlights the delicate balance the Fed would face between inflation and economic impacts. Caitlyn Moorhead contributed to the reporting for this article. Editor's note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on More From GOBankingRates 3 Luxury SUVs That Will Have Massive Price Drops in Summer 2025 9 Downsizing Tips for the Middle Class To Save on Monthly Expenses 8 Common Mistakes Retirees Make With Their Social Security Checks This article originally appeared on I'm an Economist: My Predictions for Inflation Under President Trump
Yahoo
15-05-2025
- Business
- Yahoo
US-China Trade Clash Risks Making Europe Dumping Ground for Cheap Goods
(Bloomberg) -- Supply Lines is a daily newsletter that tracks global trade. Sign up here. As Coastline Erodes, One California City Considers 'Retreat Now' How a Highway Became San Francisco's Newest Park Power-Hungry Data Centers Are Warming Homes in the Nordics Maryland's Credit Rating Gets Downgraded as Governor Blames Trump NYC Commuters Brace for Chaos as NJ Transit Rail Strike Looms China's widening trade surplus with the European Union is fueling fresh concerns that the 27-nation bloc risks becoming a dumping ground for cheap goods in the volatile tariff confrontation between Washington and Beijing. As European officials step up vigilance to ward off a flood of Chinese goods facing higher barriers to get into the US, data already indicate that China's surplus with the EU reached a record $90 billion in the first four months of this year. For now, most of the rerouting of Chinese goods is passing through Latin America and Southeast Asia. But the quantity of Chinese exports already flowing to Europe since the pandemic raises alarm bells that the influx may accelerate as America's higher import taxes take root. 'European and non-US markets are going to see an increase of Chinese shipments,' said Maxime Darmet, a senior economist at Allianz Trade. 'China will want to keep global market share at a high level so will try to increase share in other markets.' Europe and China's fragile relationship will be on display as China's Vice Premier He Lifeng meets with French officials in Paris on Thursday after he struck a temporary deal with US counterparts in Geneva to lower tariffs. Markets cheered the 90-day truce, though economists say it still leaves high barriers between the world's two largest economies. Even with both China and the US reducing their tariffs this week, Washington's levies on most Chinese goods are still 30 percentage points higher than they were in January. 'China and France oppose unilateralism and protectionism, support the multilateral trading system, and bringing more stability to the global economy,' China's He said in Paris. French Finance Minister Eric Lombard said after the meeting that France and China have well-known and long-established differences, notably over growing trade and investment imbalances. 'France and China, the EU and China have a responsibility to resolve their economic and trade differences in dialog and with respect,' Lombard said. Protectionist Pivot The shifting tides of global trade are testing Europe's strategy of moving carefully in the fast-evolving race to design new rules that run counter to a central tenet of the EU's existence — economic openness. While China responded to President Donald Trump's aggressive policies with tit-for-tat levies that initially escalated to prohibitive levels, the EU instead prepared targeted measures to deploy only if talks with Washington fail. Currency movements are compounding the challenge for Europe. Last month, the yuan slumped to the lowest level in more than a decade against the euro, making Chinese exports cheaper and more attractive to European buyers. More fundamentally, there are also concerns the swelling trade imbalance with China may reflect a stark loss of competitiveness in Europe as Chinese companies rapidly move up value chains and challenge market leaders both at home and abroad. 'In an era of protectionism, you cannot have open trade — it's just impossible, because it just destroys your industry,' said Alicia Garcia Herrero, chief Asia Pacific economist at Natixis SA. 'We have to have barriers for products — it doesn't have to be necessarily electric vehicles, but anything in which the EU thinks it wants to compete and it has a nascent industry' needs protection, she said. Paris and Beijing are already at odds over the EU's tariffs on Chinese EVs and Beijing's levies on spirits that are costing millions for French cognac makers. Chinese exports to the EU so far this year are the second-highest on record, according to data released Friday in Beijing, only surpassed by 2022's pandemic driven surge in goods. EU Monitoring Maros Sefcovic, the EU trade chief, last week said 'we are monitoring possible risks of trade diversion' and that the initial results are expected in mid-May. The topic also came up at the EU trade ministers meeting on Thursday in Brussels. Still, EU economy commissioner Valdis Dombrovskis told Bloomberg Television that 'it's important that China is showing some self restraint in terms of this trade diversion.' That's important, he said, because if it were to 'start flooding other markets' that would mean that as the EU 'we would also need to protect our market, our companies, our jobs and that would only mean that it would lead to further economic fragmentation and further closures of markets around the world,' he said. Meanwhile, Chinese purchases have steadily dropped as domestic demand slows and domestic companies become more competitive and push European suppliers out of the market. The EU was already concerned about the rapid increase in imports from China, especially as prices of those products were falling due to deflation at home. Even before Trump's return to the White House in January, the trading relationship between Europe and China was undergoing a transformation. That can be seen in the rapid change in German-Chinese trade ties, which flipped from a deficit for China of more than $18 billion in 2020 to a $12 billion surplus last year. If the trend of the first four months holds for the rest of this year, that surplus with Germany could exceed $25 billion. The car market has been one of the big drivers of the change, with Chinese exports of electric vehicles and conventional cars rising rapidly, while Europe's shipments to and sales in China fall quickly. Although exports of EVs have plateaued after Brussels imposed tariffs on them last year, China's automakers are selling more cars than ever in the region by throttling up deliveries of hybrids and combustion engine-powered models. According to Allianz's Darmet, the situation will push European policymakers to pursue more active measures to support domestic industry and put up tariff and non-tariff barriers. 'We initially thought that would be a stand-off between China and the US, but actually this is going to have implications for the rest of the world and Europe in particular because it will force major countries to be increasingly protectionist,' he said. --With assistance from Jorge Valero, Olivia Tam, Kriti Gupta and Zoe Schneeweiss. (Update with comments from EU economy commissioner starting in 18th paragraph) Cartoon Network's Last Gasp DeepSeek's 'Tech Madman' Founder Is Threatening US Dominance in AI Race Why Obesity Drugs Are Getting Cheaper — and Also More Expensive As Nuclear Power Makes a Comeback, South Korea Emerges a Winner Trump Has Already Ruined Christmas ©2025 Bloomberg L.P.
Yahoo
15-05-2025
- Business
- Yahoo
US-China Trade Clash Risks Making Europe Dumping Ground for Cheap Goods
(Bloomberg) -- Supply Lines is a daily newsletter that tracks global trade. Sign up here. As Coastline Erodes, One California City Considers 'Retreat Now' How a Highway Became San Francisco's Newest Park Power-Hungry Data Centers Are Warming Homes in the Nordics A New Central Park Amenity, Tailored to Its East Harlem Neighbors Maryland's Credit Rating Gets Downgraded as Governor Blames Trump China's widening trade surplus with the European Union is fueling fresh concerns that the 27-nation bloc risks becoming a dumping ground for cheap goods in the volatile tariff confrontation between Washington and Beijing. As European officials step up vigilance to ward off a flood of Chinese goods facing higher barriers to get into the US, data already indicate that China's surplus with the EU reached a record $90 billion in the first four months of this year. For now, most of the rerouting of Chinese goods is passing through Latin America and Southeast Asia. But the quantity of Chinese exports already flowing to Europe since the pandemic raises alarm bells that the influx may accelerate as America's higher import taxes take root. 'European and non-US markets are going to see an increase of Chinese shipments,' said Maxime Darmet, a senior economist at Allianz Trade. 'China will want to keep global market share at a high level so will try to increase share in other markets.' Europe and China's fragile relationship will be on display as China's Vice Premier He Lifeng meets with French officials in Paris on Thursday after he struck a temporary deal with US counterparts in Geneva to lower tariffs. Markets cheered the 90-day truce, though economists say it still leaves high barriers between the world's two largest economies. Even with both China and the US reducing their tariffs this week, Washington's levies on most Chinese goods are still 30 percentage points higher than they were in January. 'China and France oppose unilateralism and protectionism, support the multilateral trading system, and bringing more stability to the global economy,' China's He said in Paris. French Finance Minister Eric Lombard said after the meeting that France and China have well-known and long-established differences, notably over growing trade and investment imbalances. 'France and China, the EU and China have a responsibility to resolve their economic and trade differences in dialog and with respect,' Lombard said. Protectionist Pivot The shifting tides of global trade are testing Europe's strategy of moving carefully in the fast-evolving race to design new rules that run counter to a central tenet of the EU's existence — economic openness. While China responded to President Donald Trump's aggressive policies with tit-for-tat levies that initially escalated to prohibitive levels, the EU instead prepared targeted measures to deploy only if talks with Washington fail. Currency movements are compounding the challenge for Europe. Last month, the yuan slumped to the lowest level in more than a decade against the euro, making Chinese exports cheaper and more attractive to European buyers. More fundamentally, there are also concerns the swelling trade imbalance with China may reflect a stark loss of competitiveness in Europe as Chinese companies rapidly move up value chains and challenge market leaders both at home and abroad. 'In an era of protectionism, you cannot have open trade — it's just impossible, because it just destroys your industry,' said Alicia Garcia Herrero, chief Asia Pacific economist at Natixis SA. 'We have to have barriers for products — it doesn't have to be necessarily electric vehicles, but anything in which the EU thinks it wants to compete and it has a nascent industry' needs protection, she said. Paris and Beijing are already at odds over the EU's tariffs on Chinese EVs and Beijing's levies on spirits that are costing millions for French cognac makers. Chinese exports to the EU so far this year are the second-highest on record, according to data released Friday in Beijing, only surpassed by 2022's pandemic driven surge in goods. EU Monitoring Maros Sefcovic, the EU trade chief, last week said 'we are monitoring possible risks of trade diversion' and that the initial results are expected in mid-May. The topic is expected to come up when EU trade ministers meet on Thursday in Brussels. Meanwhile, Chinese purchases have steadily dropped as domestic demand slows and domestic companies become more competitive and push European suppliers out of the market. The EU was already concerned about the rapid increase in imports from China, especially as prices of those products were falling due to deflation at home. Even before Trump's return to the White House in January, the trading relationship between Europe and China was undergoing a transformation. That can be seen in the rapid change in German-Chinese trade ties, which flipped from a deficit for China of more than $18 billion in 2020 to a $12 billion surplus last year. If the trend of the first four months holds for the rest of this year, that surplus with Germany could exceed $25 billion. The car market has been one of the big drivers of the change, with Chinese exports of electric vehicles and conventional cars rising rapidly, while Europe's shipments to and sales in China fall quickly. Although exports of EVs have plateaued after Brussels imposed tariffs on them last year, China's automakers are selling more cars than ever in the region by throttling up deliveries of hybrids and combustion engine-powered models. According to Allianz's Darmet, the situation will push European policymakers to pursue more active measures to support domestic industry and put up tariff and non-tariff barriers. 'We initially thought that would be a stand-off between China and the US, but actually this is going to have implications for the rest of the world and Europe in particular because it will force major countries to be increasingly protectionist,' he said. --With assistance from Jorge Valero and Olivia Tam. (Update with comments from China's vice premier and French finance chief from seventh paragraph) Cartoon Network's Last Gasp DeepSeek's 'Tech Madman' Founder Is Threatening US Dominance in AI Race Why Obesity Drugs Are Getting Cheaper — and Also More Expensive As Nuclear Power Makes a Comeback, South Korea Emerges a Winner Trump Has Already Ruined Christmas ©2025 Bloomberg L.P. 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Business Times
15-05-2025
- Business
- Business Times
US-China trade clash risks making Europe dumping ground for cheap goods
[TOKYO] China's widening trade surplus with the European Union is fuelling fresh concerns that the 27-nation bloc risks becoming a dumping ground for cheap goods in the volatile tariff confrontation between Washington and Beijing. As European officials step up vigilance to ward off a flood of Chinese goods facing higher barriers to get into the US, data already indicate that China's surplus with the EU reached a record US$90 billion in the first four months of this year. For now, most of the rerouting of Chinese goods is passing through Latin America and South-east Asia. But the quantity of Chinese exports already flowing to Europe since the pandemic raises alarm bells that the influx may accelerate as America's higher import taxes take root. 'European and non-US markets are going to see an increase of Chinese shipments,' said Maxime Darmet, a senior economist at Allianz Trade. 'China will want to keep global market share at a high level so will try to increase share in other markets.' Europe and China's fragile relationship will be on display as China's Vice-Premier He Lifeng meets with French officials in Paris on Thursday (May 15) after he struck a temporary deal with US counterparts in Geneva to lower tariffs. Markets cheered the 90-day truce, though economists say it still leaves high barriers between the world's two largest economies. Even with both China and the US reducing their tariffs this week, Washington's levies on most Chinese goods are still 30 percentage points higher than they were in January. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Protectionist pivot Such shifting tides of global trade are testing Europe's strategy of moving carefully in the fast-evolving race to design new rules that run counter to a central tenet of the EU's existence – economic openness. While China responded to US President Donald Trump's aggressive policies with tit-for-tat levies that initially escalated to prohibitive levels, the EU instead prepared targeted measures to deploy only if talks with Washington fail. Currency movements are compounding the challenge for Europe. Last month, the yuan slumped to the lowest level in more than a decade against the euro, making Chinese exports cheaper and more attractive to European buyers. More fundamentally, there are also concerns the swelling trade imbalance with China may reflect a stark loss of competitiveness in Europe as Chinese companies rapidly move up value chains and challenge market leaders both at home and abroad. 'In an era of protectionism, you cannot have open trade – it's just impossible, because it just destroys your industry,' said Alicia Garcia Herrero, chief Asia-Pacific economist at Natixis. 'We have to have barriers for products – it doesn't have to be necessarily electric vehicles (EVs), but anything in which the EU thinks it wants to compete and it has a nascent industry' needs protection, she said. Paris and Beijing are already at odds over the EU's tariffs on Chinese EVs and Beijing's levies on spirits that are costing millions for French cognac makers. Chinese exports to the EU so far this year are the second-highest on record, according to data released on Friday in Beijing, only surpassed by 2022's pandemic driven surge in goods. EU monitoring Maros Sefcovic, the EU trade chief, last week said: 'We are monitoring possible risks of trade diversion' and that the initial results are expected in mid-May. The topic is expected to come up when EU trade ministers meet on Thursday in Brussels. Meanwhile, Chinese purchases have steadily dropped as domestic demand slows and domestic companies become more competitive and push European suppliers out of the market. The EU was already concerned about the rapid increase in imports from China, especially as prices of those products were falling due to deflation at home. Even before Trump's return to the White House in January, the trading relationship between Europe and China was undergoing a transformation. That can be seen in the rapid change in German-Chinese trade ties, which flipped from a deficit for China of more than US$18 billion in 2020 to a US$12 billion surplus last year. If the trend of the first four months holds for the rest of this year, that surplus with Germany could exceed US$25 billion. The car market has been one of the big drivers of the change, with Chinese exports of EVs and conventional cars rising rapidly, while Europe's shipments to and sales in China fall quickly. Although exports of EVs have plateaued after Brussels imposed tariffs on them last year, China's automakers are selling more cars than ever in the region by throttling up deliveries of hybrids and combustion engine-powered models. According to Allianz's Darmet, the situation will push European policymakers to pursue more active measures to support domestic industry and put up tariff and non-tariff barriers. 'We initially thought that would be a stand-off between China and the US, but actually this is going to have implications for the rest of the world and Europe in particular because it will force major countries to be increasingly protectionist,' he said. BLOOMBERG
Yahoo
30-01-2025
- Business
- Yahoo
French economy shrinks as political crisis eclipses Olympic boost
The French economy grew 1.1 percent in 2024 but shrank in the fourth quarter as a political crisis gripped the country after a boost from the Paris Olympic Games, official data showed Thursday. The eurozone's second biggest economy performed worse than expected in the fourth quarter as it contracted by 0.1 percent, figures from the INSEE statistics institute showed. The institute had expected the economy to post zero growth in the October-to-December period after growing by 0.4 percent in the third quarter, which includes the summer months of the Olympic games. "There was a significant post-Olympics pullback," Maxime Darmet, an economist at insurer Allianz, told AFP. "Despite some resilience, business investment remains weak. Without the political crisis, we might have expected a stronger recovery given lower European Central Bank interest rates and a slight easing in credit conditions," Darmet added. The economic downturn coincided with a period of political turmoil as Michel Barnier resigned as prime minister in December after his minority government failed to win support for an austerity budget to shore up the country's shaky finances. His successor, Francois Bayrou, is promising to bring the public deficit down to 5.4 percent of gross domestic product this year, with the goal of getting back under the European Union's three-percent limit in 2029. Household consumption slowed in the fourth quarter, growing by 0.4 percent, while investments retreated slightly. The full-year GDP growth was in line with the 1.1 percent forecast by INSEE and the French government. France's downturn is further bad news for the eurozone as its top economy, Germany, has been slumping. GDP data for the eurozone and Germany will be released later on Thursday. - US tariffs threat - Bayrou's government has lowered the 2025 growth forecast from 1.1 percent to 0.9 percent. Germany has also been roiled by political upheaval as Chancellor Olaf Scholz's coalition government collapsed late last year, setting the stage for elections next month. US President Donald Trump's trade tariff threats have added to worries about Europe's economic performance. "Domestic uncertainties, coupled with sluggish growth among (France's) main trading partners, do not inspire confidence for the coming quarters," said Sylvain Bersinger, an economist at Asterès, in a research note. "The threat of a trade war with the United States also poses a downside risk to forecasts," he added. mpa/fmp/lth/ach Sign in to access your portfolio
