Latest news with #PIIE
Fibre2Fashion
24-04-2025
- Business
- Fibre2Fashion
Global GDP to slow to 2.7% amid US trade tariffs: PIIE
The global economy remains on track to grow this year, but the outlook has deteriorated significantly in recent months. Real global GDP is projected to increase by just 2.7 per cent in 2025 and 2.8 per cent in 2026, down from a 3.2 per cent gain last year, according to the Peterson Institute for International Economics (PIIE). Major policy shifts in the United States—particularly the introduction of new tariffs—are weighing on activity and fuelling a high level of uncertainty across economies. US tariffs are raising prices, disrupting supply chains, and eroding real incomes, as per the PIIE report titled 'Spring 2025 Global Economic Prospects'. The report mentioned that these direct effects are being compounded by a volatile and unpredictable policy environment, as frequent changes to announced tariffs have made it harder for businesses to plan and invest. The global economy is projected to grow at 2.7 per cent in 2025, down from 3.2 per cent in 2024, with the US economy stalling due to new tariffs and policy uncertainty. Inflation is expected to peak at 4.5 per cent, while unemployment rises. Canada and Mexico face challenges from US trade actions, and China's growth falls short of targets. Risks to the outlook remain, including a potential US recession. Meanwhile, US economic growth is expected to stall this year, with average annualised growth projected to slow from 2.5 per cent in 2024 to just 0.1 per cent in 2025, as per PIIE's non-resident senior fellow, Karen Dynan. Inflation in the US is projected to peak at around 4.5 per cent later this year and unemployment to rise to a bit above 5 per cent before improving in 2026. Financial markets have responded negatively to recent policy changes, although hard data on spending and employment remain relatively strong. This resilience may partly reflect a shift in timing, with households and businesses bringing forward purchases in anticipation of higher prices. Other recent policy actions are adding to the drag on the US economy. Federal layoffs and operational disruptions tied to the new Department of Government Efficiency are reinforcing uncertainty without meaningfully improving the fiscal position. A large fiscal legislative package expected later this year also is likely to do little to reduce the Federal budget deficit relative to current policies, added the report. Canada and Mexico are being hit hard by new US trade actions. Mexico faces added challenges from weaker economic fundamentals and anticipated revisions to the terms of the US-Mexico-Canada agreement (USMCA)—though movement of some production to Mexico from other countries may offer some offsetting benefits. In Europe and the United Kingdom, moderate growth is expected, with the euro area supported by coordinated debt issuance and increased defence spending, as per the report. In China, economic growth is expected to fall well short of the government's 5 per cent target. Structural challenges, fragile consumer sentiment, and heightened tensions with the United States are all weighing on the outlook, while fiscal and monetary stimulus have so far had only limited effect. Elsewhere in Asia, prospects vary widely and remain highly sensitive to further developments in trade policy. Many economies are exposed to the risk of additional US tariffs. India, however, continues to attract foreign investment and remains a regional bright spot. There are still significant risks to the outlook. The likelihood of a US recession within the next 12 months is now estimated at 40 per cent. Several factors could exacerbate the current slowdown, including a deeper correction in the equity markets, rising interest rates due to fiscal concerns, or further monetary tightening if inflation expectations become unanchored. Any additional weakness in the US economy would have a substantial impact on global growth, especially for US trading partners. The report concluded that the outcomes could also turn out better than currently projected if policy shifts. A meaningful reversal of recent tariff hikes would relieve some of the inflationary pressure and help restore business confidence. Coupled with continued advances in artificial intelligence, deregulation, and investment incentives, such a change could support stronger productivity growth. Fibre2Fashion News Desk (SG)
Yahoo
29-03-2025
- Business
- Yahoo
Trump wants to replace income tax with tariffs — how would this affect middle-class Americans?
U.S. President Donald Trump plans to replace income taxes with tariffs, but what does that mean for the average middle-class American? I'm 49 years old and have nothing saved for retirement — what should I do? Don't panic. Here are 5 of the easiest ways you can catch up (and fast) Nervous about the stock market in 2025? Find out how you can access this $1B private real estate fund (with as little as $10) Americans with upside-down car loans owe more money than ever before — and drivers can't keep up. Here are 3 ways to cut your monthly costs ASAP 'Donald Trump announced the External Revenue Service, and his goal is very simple: to abolish the Internal Revenue Service and let all the outsiders pay,' U.S. Commerce Secretary Howard Lutnick told Fox News on Feb. 19. The idea is that once the budget is balanced, taxes will be waived for Americans earning less than $150,000 a year. However, the flaw in this plan is that tariffs are not paid by 'outsiders.' Rather, tariffs are a tax placed on imported goods and services. 'When the U.S. imposes tariffs on imports, businesses in the United States directly pay import taxes to the U.S. government on their purchases from abroad,' according to the Tax Foundation. During Trump's first term, 'the economic evidence shows American firms and consumers were hardest hit by the Trump tariffs.' At the same time, it would be hard to replace the revenue collected from income taxes with revenue from the planned tariffs. According to a study by the Peterson Institute for International Economics (PIIE), a non-partisan research group, the U.S. imported $3.1 trillion in goods in 2023 while raising about $2 trillion through individual and corporate income taxes. This means it would be nearly impossible to replace income taxes with tariffs, since the tariff rate would have to be 'implausibly high,' according to PIIE. The institute determined that even at a 'revenue-maximizing tariff rate,' the U.S. could raise only a fraction of what it raises with income taxes. Additionally, Trump's policy could become a victim of its own success. If the result of the policy is that most manufacturing moves to the U.S., there will be fewer imports to tariff, making the replacement of income taxes even more difficult. The Tax Policy Center speculated there could also be a new consumption tax to help with the revenue shortfall. "Congress isn't going to vote any time soon to explicitly replace the income tax with a consumption levy. But aggressive efforts to dismantle the IRS combined with a hollowing out of the income tax base could render the existing revenue system unsustainable. And drive lawmakers to replace it with something else," wrote Howard Gleckman a senior fellow at the Tax Policy Center. Here are 3 potential impacts on America's middle class if tariffs replaced income taxes: It's difficult to quantify the effects of Trump's tariff proposals since they're continually changing. But research has shown that during the last Trump trade war in 2018, tariffs resulted in price increases of 10% to 30% for goods subject to tariffs and that much of the tariffs were passed on to U.S. importers and consumers. The Federal Reserve of Boston looked at an additional 25% tariff on goods from Canada and Mexico with an additional 10% tariff on goods from China, and estimated they would add 0.8 percentage points to core inflation (excluding food and energy). The policy proposed during Trump's campaign (an additional 60% tariff on imports from China and an additional 10% tariff on imports from the rest of the world) would add 2.2 percentage points to core inflation. Read more: Are you rich enough to join the top 1%? Here's the net worth you need to rank among America's wealthiest — plus 2 ways to build that first-class portfolio These price increases will have a greater impact on middle- and lower-income Americans since these demographics tend to have less disposable income. To test these effects, PIIE studied what would happen if tariffs were maximized in an attempt to replace income taxes. The result? The tax cut for the middle quintile of income earners would not compensate for the tariff increase and they'd see a net after-tax income loss of about 5%. This loss in income would be 8.5% for the lowest quintile, while the top quintile would come out 2% ahead. The top 1% would see an increase of 11.6%. Those losing net income to the tariff-income tax trade-off are unlikely to find much help from improved economic and employment conditions. Oxford Economics estimates that Trump's 2018 tariffs on Chinese goods and the resulting trade war cost 0.5% of U.S. GDP. 'At its peak, the trade war cost the U.S. economy an estimated 245,000 jobs and on a cumulative basis, real household income was $88 billion lower over 2018–2019 (in 2020 prices), or around $675 per household,' it said. An argument for tariffs is that domestic companies would become more productive and innovative, but one University of California, Davis study of a past era of high tariffs found that they had the opposite effect. 'Less competitive industries are less innovative, and less innovative industries are less productive,' said author Christopher Meissner. 'Tariffs probably weakened the incentives to innovate and come up with streamlined processes that keep companies on their toes and productivity high.' All told, these forces have the potential to be a drag on the economy and employment that may outweigh any jobs created by the tariffs. A study of 151 countries from 1963 to 2014 found that, in the medium term, tariffs have only small effects on the trade balance but lead to lower domestic output and productivity, higher unemployment and greater inequality. Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan 'works every single time' to kill debt, get rich in America — and that 'anyone' can do it Rich, young Americans are ditching the stormy stock market — here are the alternative assets they're banking on instead Protect your retirement savings with these 5 essential money moves — most of which you can complete in just minutes This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
South China Morning Post
21-03-2025
- Business
- South China Morning Post
Western sanctions on China and Russia have done little to change their minds: analysts
Despite a torrent of Western sanctions imposed on Beijing and Moscow, there is little evidence they have had any success in altering Chinese or Russian policies, analysts said on Friday. Advertisement The punitive measures have not convinced China to reduce its civilian-military integration or augment its policies towards ethnic Uygurs in Xinjiang , said Martin Chorzempa of the Peterson Institute for International Economics, nor have they convinced Moscow to roll back its war on Ukraine 'It is very hard to think of cases where China has said, 'because of the sanctions, we're going to change',' added Chorzempa, speaking at a PIIE event in Washington on Friday. 'Can we actually change other countries' policies? I think we should be quite bearish.' However, such pressure succeeded in making it more difficult for China and Russia to carry out effective policies over time, analysts said.
