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Bloomberg
22-04-2025
- Business
- Bloomberg
Bloomberg Surveillance: Dollar Dominance
Watch Tom and Paul LIVE every day on YouTube: Bloomberg Surveillance hosted by Tom Keene & Paul Sweeney April 22nd, 2025 Featuring: 1) Jeff deGraaf, Chairman and Head: Technical Research at Renaissance Macro Research, joins for a discussion on Jay Powell, market risks, and tariffs. US stocks were higher in futures trading this morning as equities are set to bounce back from Monday's losses as investors weigh progress on trade talks with India and Tesla's upcoming earnings. 2) Brian Belski, Chief Investment Strategist at BMO Capital Markets, brings us into the market open and discusses whether he remains a US equity bull. President Trump's demands on Jerome Powell to cut rates have raised concerns about the president's willingness to meddle with central bank policy and the impact on the economy. 3) Alicia Garcia-Herrero, Chief Economist for Asia Pacific at Natixis, joins for a discussion on the dollar as the globe's reserve currency and how the trade war will harm China and the US. This morning, gold topped $3,500 for the first time, and other markets such as stocks, currencies, and commodities experienced mixed movements amid ongoing trade tensions and uncertainty. 4) Warwick McKibbin, non resident Senior Fellow at the Peterson Institute for International Economics, talks about his piece from the fall outlining the costs of Trump's tariff and deportation policies as well as his newest analysis released today on the US revenue implications of Trump's tariff plan. 5) Margaret Franklin, CEO of the CFA Institute, joins from our DC studio to discuss the CFA program, how it's evolving, and the impact of AI on the investing profession. 6) Lisa Mateo joins with the latest headlines in newspapers across the US, including a Financial Times report on the marketing campaign of plant-based eggs and the Washington Post's look into the changing economics of college football and how it's affecting the NFL draft.
Bloomberg
11-04-2025
- Business
- Bloomberg
Lots More on Why Neil Dutta Is Sticking With His Recession Call
Listen to Odd Lots on Apple Podcasts Listen to Odd Lots on Spotify Subscribe to the newsletter On Wednesday, President Trump put a 90-day pause on reciprocal tariffs for every country except China. The market, which had been in a state of deep panic, surged massively on the announcement. But then on Thursday, stocks sold off hard again as people woke up to the reality of massive tariffs on China and the new baseline tariffs on everyone else. Plus, even before all this tariff drama, there were plenty of reasons to be anxious about the US economy. On this episode of Lots More, we speak with Neil Dutta of Renaissance Macro Research. He explains all the moving parts and why he's sticking with his call for a downturn this year.
Bloomberg
04-04-2025
- Business
- Bloomberg
Bloomberg Surveillance: Jobs and Tariffs
Watch Tom and Paul LIVE every day on YouTube: Bloomberg Surveillance hosted by Tom Keene & Paul Sweeney April 4th, 2025 Featuring: 1) Claudia Sahm, Chief Economist at New Century Advisors, Neil Dutta, Head: US Research at Renaissance Macro Research, and Jamie Patton, Co-Head of Global Rates at TCW, react to today's jobs figures and discuss the outlook for the Fed and Jay Powell. Traders have increased their expectations for the Federal Reserve to cut interest rates this year, with money markets now showing 100 basis points of reductions by year-end. 2) Dan Ives, Global Head of Technology at Wedbush Securities, discusses the "worse than worse case scenario" tariff announcement as it relates to tech. President Trump announced sweeping tariffs on imports from virtually every US trading partner, affecting tech companies like Dell, Apple, Sonos, and HP. The tariffs will increase costs, slow demand, and strain global supply chains, with levies ranging from 10% to 46% on imports from countries like China, Taiwan, and South Korea. 3) David Blanchflower, economics professor and labor economist at Dartmouth University, on labor and wages in a high tariff America. As tariffs set into the American economy, it's unclear how they will affect wages and the labor market. It comes as Republicans are considering creating a new tax bracket for those earning $1 million or more, with a top rate of around 39% to 40%, to offset the costs of their tax bill. 4) Gautam Mukunda, professor at Yale University School of Management and Bloomberg Opinion columnist, on the short and long-term political impact of tariffs. It comes as a new poll shows President Trump's approval rating slipping ahead of his tariff announcement. 5) Lisa Mateo joins with the latest headlines in newspapers across the US, including the Wall Street Journal story on the domino affect from the trade war and the New York Times' look at the grocery aisle and the impact of tariffs
Asia Times
04-04-2025
- Business
- Asia Times
Trump's tariff onslaught headed for self-defeating recession
Skip to content Donald Trump has upended the global trading order. Image: X Screengrab It takes a truly epic shock to push the global economy into recession. Did Donald Trump's reciprocal tariff gambit just shove the world into one?Asian policymakers can't help but fear the worst as the region bears the disproportionate brunt of the US president's global revenge tour. Liberation Day? More like 'Obliteration Day,' quips Neil Dutta, economist at Renaissance Macro Research, as about US$2.5 trillion was erased from the S&P 500 Index on Thursday (April 3) alone. Already, economists at JPMorgan fear a Trump recession is likely. 'This impact alone could take the economy perilously close to slipping into recession,' says JPMorgan economist Michael Feroli. 'And this is before accounting for the additional hits to gross exports and to investment spending.'Feroli thinks Trump's tariffs will add as much as 1.5% to already rising prices this year, using the core personal consumption expenditures (PCE) index, the Federal Reserve's preferred inflation gauge. The tariffs also will slam personal incomes and consumer spending in the US, he predicts. Any big downshift in the US would reverberate Asia's way almost instantaneously. Yet Trump's almost linear focus on Asia is as self-defeating as it is dangerous. Trump's grievances are very much on display. China, for example, now faces a 54% tax on all shipments to the US. On April 2, Trump slapped an additional 34% tariff on top of an earlier 20%. Vietnam, meanwhile, faces a 46% place in the line of fire stems from the failures of the Trump 1.0 era. Most of the jobs that Trump thought would pivot from China to the US went to Vietnam instead. It was the China alternative of choice for companies from American Eagle to Deckers to Hasbro to Nike to Nguyen, senior economist at Natixis, speaks for many when she calls the taxes 'devastating for Vietnam.' As such, Trump may have just raised the costs of apparel, furniture and toy makers everywhere. Price hikes for consumers around the globe are all but many developing Asian economies, Vietnam is far more likely to negotiate than retaliate. 'Vietnam is very unlikely to follow Canada or Europe in applying reciprocal tariffs. At present, it imports too few US goods to impose any real pain,' says Craig Martin, chairman of Dynam Capital. Japan and South Korea got off easier with tariffs of 24% and 25%, respectively. But without moves by Tokyo and Seoul to placate Trump, it's unclear how Asia's No 2 and No. 4 economies avoid bigger levies. The question now is whether Trump's truly epic shock causes a catastrophic global downturn. There have been two such events since the 1990s: the 2008-09 global financial crisis and the Covid-19 pandemic. Though the 1997 Asian financial crisis came close, it didn't send the West into a Trump 2.0 assault on the global trading system could indeed be the third such economic earthquake in 17 years – and an inflection point for the global financial system. If these actions are 'implemented, the effective US tariff rate would be higher than the Smoot-Hawley Act rate,' says Priyanka Kishore, economist and founder of consultancy Asia Decoded. 'The estimates range between 26%-29% compared to around 20% in the 1930s.' This, she notes, 'challenges our view of resilient US growth this year. While we expected the Trump administration to act swiftly on tariffs, the scale and scope have exceeded our expectations. With heightened policy uncertainty and rising downside risks to investments, we now anticipate US growth to falter in the coming months.'Part of that problem – and the disorientation – is that the logic behind it is completely nonsensical.'If a 9th grader in high school presented this tariff chart to a teacher in a basic economics class, the teacher would laugh and say sit down and work on the assignment,' says Dan Ives, an analyst at Wedbush Securities. Jeffries analyst W Brad Bechtel adds that 'our textbooks tell us that tariffs are inflationary if the currency market does not adjust to offset. The dollar dropping 2% amid the addition of tariffs around the world on US imported goods is very inflationary.' Kevin Thozet, an investment committee member at Carmignac, notes that 'this is the US economy flirting with recession this year and inflation reaccelerating. And this is before we get the next wave of sectoral tariffs, which Trump mentioned again on chips, pharmaceuticals, copper, timber and shipping services.' Analysts are counting the ways that Trump's tariffs will backfire. In 2024, the US exported $2.1 trillion in goods and $1.1 trillion in services. If his taxes on imports send other top economies into recession or even crisis, the fallout for US growth could be devastating. And that's even before America's biggest trading partners hit back with retaliatory tariffs.'This is a game-changer for the global economy,' says Fitch Ratings economist Olu Sonola. 'Many countries will likely end up in a recession.' Japan, for example, may seem to have gotten off easy relative to China. But the 25% tax Trump slapped on all imports of automobiles and car parts already has economists upping the odds of Japanese stagflation. It's not just Japan facing a scenario where growth flatlines and inflation accelerates, though. Stagflation scenarios now stalk the US as well. 'An increasing probability of stagflation risk in the US may see further narrowing of the two-year sovereign yield premium spread between US Treasuries and Japanese government bonds,' says Kelvin Wong, senior market analyst at brokerage adds that recent policy shifts 'suggest a rising risk of stagflation in the US economy due to uncertainties in growth prospects and the cost of living, which are exacerbated by the current US White House's erratic and aggressive trade tariff policy.' China, though, is grappling with deflationary pressures. Trump turning the screws tighter on China could send mainland prices even lower. The latest US tariffs 'limit China's ability to rely on stimulus and raise long-term export costs,' says Lauren Gloudeman, an analyst at Eurasia Group. 'The usual playbook of domestic stimulus will be constrained. More spending will risk inflating local government debt while deeper rate cuts could hurt banks. Beijing will opt for central government-led infrastructure investment.'Beijing has been preparing exporters through low-cost financing and tax rebates. 'But,' Gloudeman says, 'the removal of the de minimis rule will deal a heavy blow to employment, as it affects the labor-intensive segment of the export sector.'Though China's share of global trade is rising, headwinds bearing down on US households raise question marks on the $3.3 trillion the US imported last year. If US imports disappear under the weight of Trump's tariffs, so would a key driver of global growth. That's the last thing export-dependent economies from China to Germany concern is the so-called 'wealth effect' kicking into reverse. Just as rising stocks make average households more confident, plunging shares often slam sentiment. UBS Group analyst Bhanu Baweja thinks the S&P 500, which is now at 5,396, could be headed even lower.'We see 5,300 as the near-term target for the S&P 500, but if tariff uncertainty persists or negotiations with trading partners don't go well, risks of downside through 5,000 become real,' Baweja says. 'The probability of US stocks entering a bear market is going higher.' The huge drop in shares of financial companies is ringing alarm bells of their own. They include Citibank (down 12% on Thursday alone), Bank of America (-11%), Morgan Stanley (-9.5%) and JPMorgan (-7%). 'Although financials don't have direct exposure to tariffs, the uncertainty and ensuing market volatility around the indirect impact of broad-based tariff increases on the economy and activity levels is likely to dominate bank stocks in the near term,' says Jim Mitchell, an analyst at Seaport Research Partners. The violent stock selloff that shook the region on Thursday dramatized Asia's place in Trump's trade destruction. Japan's benchmark Nikkei 225 Stock Index tumbled more than 4% at one point yesterday; Korea's Kospi index dropped 2.7%. Japan's Chief Cabinet Secretary Yoshimasa Hayashi called the new levies 'extremely regrettable,' warning they're likely to have a 'significant impact on the economic relationship between the US and Japan.' Wishful thinking, perhaps, but Hayashi said Tokyo would 'take all necessary measures' to ensure its economy isn't hobbled by such acting President Han Duck-soo called on the government to 'exert all its capabilities to overcome the trade crisis' at an emergency meeting on Thursday, calling the related uncertainty 'extremely serious.' China's Communist Party slammed Trump's move as a 'typical unilateral bullying practice' and said it would 'resolutely take countermeasures to safeguard its own rights and interests.' Beijing 'urges the United States to immediately cancel its unilateral tariff measures and properly resolve differences with its trading partners through equal dialogue,' the Commerce Ministry said in a statement. 'As we had worried, Asian economies have been hit hard by the new tariff announcements,' said Decoded's Kishore. Outside of China and Vietnam, Trump's tariffs hit Taiwan (32%), Thailand (36%) and Indonesia (32%). Malaysia's 24% was in line with Japan and Korea, as was India at 26%. The Philippines (17%), Singapore (10%) and Australia (10%) fared slightly better. 'Whatever be the outcome, the increased economic uncertainty is likely to take a toll on sentiments and spending in the foreseeable future,' Kishore says. 'We will be following up with a more detailed note on the channels through which the tariff shock will likely flow through Asian economies and to what degree. Several indirect and spillover impacts need to be considered.' Former Treasury Secretary Lawrence Summers worries Trump's latest tariff hikes could trigger an oil crisis-like shock to the globe's biggest economy. 'This is the kind of thing you discuss in the way we would usually discuss an oil-price spike or earthquake or a drought, as a supply shock,' Summers tells Bloomberg. 'The question is mostly how much damage is going to be done.' Follow William Pesek on X at @WilliamPesek
Politico
04-03-2025
- Business
- Politico
‘He Finally Shot the Hostage': Trump's Trade War Is a Brutal Reality Check
Investors and consumers expected President Donald Trump to be a pro-business billionaire. What they got instead was Tariff Man. As Trump was preparing for his second term in office, stocks were soaring, consumers were buoyant and economists were feeling optimistic about the year ahead, their hopes fed by potential pro-growth policies like tax cuts and deregulation. Fast forward to now, when Trump has imposed 25 percent duties on imports from Canada and Mexico and increased existing tariffs on China. Americans have gotten gloomier about what tariffs might mean for their wallets, consumer surveys show. The odds of a recession have risen. And stocks are roughly where they stood on Election Day, facing a punishing rout as Trump's new tariffs took effect and largely erasing the gains since he took office. Everyone should have seen this coming. Trump often talked about tariffs on the campaign trail. He also threatened tariffs after he was elected. Then, he threatened more tariffs after he was sworn in. And yet, investors — like everyone else — weren't sure how seriously to take those warnings until this week. 'They're believing him more now,' said Neil Dutta, head of U.S. economic research at Renaissance Macro Research. 'He finally shot the hostage.' Trump's move to shatter supply chains across North America is a stunning development, no matter how foreseeable, and it's changing the U.S. outlook fast. The U.S. economy was not entirely out of the inflation woods when Trump took office, but steady consumer spending and a low unemployment rate normally provide a healthy buffer against smaller economic shocks. But throwing new tariffs on top of broader policy uncertainty and potential economic ripple effects from Elon Musk's Department of Government Efficiency will mean a hit to growth. The question is how large of a hit it will ultimately be. 'People who would never even think about recession now suddenly have to consider it,' said Mohamed El-Erian, chief economic adviser at Allianz, the parent company of asset management giant PIMCO. 'It's been an incredible transformation in the last four weeks.' Essentially, Trump, who seems to care about economic stats and the stock market more than almost any other barometer of success, may be knee-capping his own record. Of course, administration officials argue that's not the case. Though Trump told reporters in early February that Americans could feel 'some pain' from the trade wars, he and his advisers have argued tariffs aren't a barrier to growth. In a speech last week, Treasury Secretary Scott Bessent said tariffs would boost investment, improve national security and increase government revenues. Stephen Miran, nominated to be Trump's chief economist, said at his confirmation hearing Thursday that 'the American economic story has seen periods of high tariff rates coincide with extraordinary economic success,' citing the 1800s and the post-World War II period. But some level of slowdown is essentially guaranteed. Even in Trump's first term, when tariffs he imposed were much smaller in scope, business investment suffered and the manufacturing sector fell into contraction, prompting the Federal Reserve to cut interest rates in late 2019 amid concern for slowing growth. This time around, the additional tariffs on Canada, Mexico and China alone could shave a percentage point off of GDP growth, according to Brad Setser, a senior fellow at the Council on Foreign Relations who served in economic roles under both Presidents Barack Obama and Joe Biden. That estimate is based on the 'just-pay-it' cost that assumes trade flows stay the same and companies merely pay the tariff, though there could be less damage if companies absorb the higher import costs, or there could be more if some firms decide to stop producing in certain countries altogether. The trade actions so far could take a huge bite out of consumer spending, which is the main engine of growth. But they likely won't be enough, on their own, to shrink the economy. Still, Trump's tariff wars are far from over. 'There's a quite significant tariff escalation that seems to be built in in early April,' and the scope of those tariffs could 'clearly threaten a recession,' Setser said. Now, Trump's tariffs will cause a dilemma for Fed Chair Jerome Powell, who has kept borrowing costs at elevated levels in an attempt to bring inflation to heel but has also committed to trying to keep the economic expansion going. If Trump doesn't reverse course soon, economic activity will likely weaken, putting pressure on the Fed to lower rates to provide relief to the economy even if tariffs push up prices faster and reignite inflation fears. Renaissance Macro's Dutta told me it's telling that Trump still followed through even though markets were shaky before he committed to tariffing Mexico and Canada. He pointed to the expectation that Powell will only let markets drop so much before intervening — known in investor circles as 'the Fed put,' a reference to a type of bet known as a put option — and said there was also a 'Trump put.' 'We're trying to figure out, where is the Trump put, and where is the Fed put?' Dutta said. 'In both cases, they might be a little lower than where we think.' In other words, Trump's financial pain tolerance is probably higher than we all thought. Adjust your expectations accordingly.
