Latest news with #Smoot-HawleyActof1930
Washington Post
10-04-2025
- Business
- Washington Post
Can the Fed clean up Trump's mess?
As President Donald Trump's seesawing tariff edicts roil stock and bond markets, they are also making it much harder for the Federal Reserve to calibrate monetary policy. Trump has demanded rate cuts. 'CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!' he wrote to Fed Chair Jerome H. Powell on Truth Social. But Trump's capricious back and forth on imposing crushing 'reciprocal' tariffs on countries around the world is making the Fed's job impossible. In the days after the president announced his barrage of tariffs on April 2, Wall Street traders increasingly came to expect rate cuts from the Fed. This prediction abruptly receded on Wednesday, when a rout in the Treasury bond market spooked Trump into 'pausing' many of his tariffs for 90 days. Bets are off, however, on what will happen when the pause is over. Trump's repeated blows to the economy raise a complex question: Should the Fed assume that the prospects of a recession are now low enough that it can focus on the likelihood of higher inflation from the tariffs that Trump has kept in place? Or is an economic slowdown still on the cards? Maybe the Fed should wait to act in case a new economic blow comes when the tariff pause ends in July. Each of these scenarios pulls the Fed in a different direction. The odds it will choose wrong are not small. In a sensible world, rising tariffs might not cause such a headache. Economic efficiency would be hit, as businesses and consumers replaced some imports with pricier or otherwise less appealing domestic supplies. But tariffs would not necessarily pummel consumption and investment, causing a recession. Inflation would rise. As Powell noted last week 'both survey- and market-based measures of near-term inflation expectations have moved up.' Measures of inflation expectations by both businesses and consumers, whether from the University of Michigan, the Conference Board or the Atlanta Fed, had been moving upward even before Trump's so-called Liberation Day. Nevertheless, the Fed would be left with one primary job: Contain the inflationary impulse. This isn't easy, but it is doable, by gradually raising interest rates. However, Trump has complicated the situation. Tariffs of the magnitude and scope that he unveiled on April 2 had not been seen since the 19th century, when imports amounted to a much smaller share of the U.S. economy. (The 10 percent tariff increase that Trump left in place on most countries exceeds the increase in average rates resulting from the infamous Smoot-Hawley Act of 1930, which deepened the Great Depression.) What's even more disruptive is that businesses and consumers still have no idea where or when the trouble will end. Trump is evidently not yet finished with his tariff maneuvers. Will he reimpose them at the same level when the pause ends? Might some be negotiated lower, while others are raised to serve some presidential whim? And, as foreign countries retaliate against U.S. aggression, to what extent will American businesses lose access to their markets? Market uncertainty has gone through the roof. The Cboe Volatility Index has surged to its third highest level on record, below only the levels reached during the coronavirus pandemic and the global financial meltdown of 2008. Economic policy uncertainty is also nearing historic highs. This is a threat to economic growth. Businesses can no longer predict prices, so they will not be inclined to invest in new products or expand capacity. They now have reason to slow hiring and hold back on raising capital. Consumers, for their part, will be caught between an urge to accelerate purchases to get ahead of price hikes and the fear of buying stuff lest they soon lose their jobs. While a sagging economy calls for Powell to cut interest rates, rising inflation suggests he should raise them. Powell cannot see what conditions are coming any more than businesses and consumers can. 'Uncertainty remains elevated,' he noted two days after the tariffs were announced. Until more details are known, 'such as what will be tariffed, at what level and for what duration, and the extent of retaliation from our trading partners,' he said, it will be difficult to assess the effects. Of course, since he spoke, Trump moved the goal posts again. The Fed has been criticized for having been late to attack the bout of inflation that emerged in the wake of covid. This time around, though, it is due some sympathy. Rather than demand that Powell fix the mess Trump has made, the president and his team could try to contain the damage. Step 1 would be to undo the reciprocal tariffs for good, including the 10 percent blanket tariff that remains in place. They make no sense to anyone outside the administration. Step 2 is just as vital: Stop changing course. Uncertainty is everyone's problem.
Yahoo
08-04-2025
- Business
- Yahoo
Trump is trying to reinvent 1950 with his tariffs. He should be planning for 2050
President Donald Trump is overhauling the wrong economic policies, industry experts say, and it could cost America the high-stakes artificial intelligence race against China. Trump last week announced sweeping tariffs to reinvigorate US manufacturing, an industry that's been in decline for decades. But the tariffs — along with gutting funding for universities and calls to dismantle the CHIPS Act — could sabotage America's momentum in the AI race. While the Trump administration says it recognizes the importance of remaining a global leader in AI — even announcing hundreds of billions in investments for the development of AI infrastructure — some of the administration's actions are counterproductive. Stiff tariffs won't usher in the economic success Trump is seeking, according to most economists. Meanwhile, the competition in the AI race has only been heating up, as Chinese startup DeepSeek unveiled a powerful model in January. 'Trump and his advisers see the world in a 19th century perspective, wanting to return to a manufacturing economy,' Susan Ariel Aaronson, research professor of international affairs at George Washington University, told CNN. 'AI now underpins a lot of other technologies that could be even more important, and the United States really needs to invest in that.' Employment in the US manufacturing industry began to decline after reaching a peak in the late 1970s, according to Labor Department data, shrinking by an even faster pace around the turn of the century. Researchers say it wasn't just globalization and free trade that slowed down US manufacturing over the past few decades, but also increased automation and stiff global competition. Meanwhile, the US services industry — from finance to software engineering — blossomed: About four in five US jobs are in the services sector, according to Labor Department data. According to the World Economic Forum, the jobs of the future won't be in manufacturing, but will rather be driven by 'demand for roles driven by technological advancements such as artificial intelligence.' Yet Trump has plunged America into a global trade war to bring back the long-gone days of peak US manufacturing. Economists have warned against falling into the same pitfall as the Smoot-Hawley Act of 1930, when Congress slapped tariffs on all countries that shipped goods to America in an effort to shield US workers. The move worsened the Great Depression, as European countries hit back with retaliatory tariffs and total US imports dropped by 40% in two years. Now in 2025, business leaders have taken pause amid the lingering uncertainty over Trump's tariffs and growing recession fears. Markets around the world have also experienced extreme volatility over concerns about how the tariffs could impact the global economy. 'Bearish market sentiment and tariff applications and costs have dominated discussions over the past month and should continue to dominate markets until a clear path forward is determined,' a primary metals manufacturer said in the Institute for Supply Management's latest survey released last week. In the middle of all this tariff chaos, Trump's AI strategy remains unclear. His administration is currently reviewing thousands of suggestions from tech companies on the plan, after he signed an executive order seeking input. But so far, Trump has taken some counterproductive steps. His administration has put on hold billions in grants and contracts for major universities such as Harvard, Brown and Princeton over antisemitism concerns. Secretary of State Marco Rubio said he has revoked the visas of hundreds of foreign students in the US over their alleged ties to the pro-Palestinian movement. 'The majority of PhD students in artificial intelligence are foreign-born students,' said Andres Sawicki, a law professor at the University of Miami and director of the school's Business of Innovation, Law, and Technology concentration. 'You are cutting off the supply of the human talent that you need in order to develop the best possible technology.' Trump's tariffs if they're kept in place, could weigh on the US manufacturing industry by causing a recession and jacking up prices, an outcome known as 'stagflation.' Trump last month also called on Congress to scrap the 'horrible, horrible' CHIPS and Science Act, passed in 2022 under President Joe Biden. The CHIPS Act is a bipartisan law that authorized nearly $300 billion in funding to boost semiconductor research and manufacturing. Eliminating it wouldn't help America win the AI race. 'The CHIPS Act has been immensely successful, far beyond expectations, at attracting investment all across the CHIP supply chain into the United States,' said Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics. In early March, Trump and Taiwan semiconductor company TSMC announced a $100 billion plan to build five US factories. Chorzempa said that investment 'would not have been possible without the groundwork the CHIPS Act laid.' As AI continues to reshape the world, including how humans work and communicate, many countries are vying to assert dominance in the industry. If the US wants to stay ahead of the game, the Trump administration will have to rethink some of its policies that might be hindering its AI progress.
CNN
08-04-2025
- Business
- CNN
Trump is trying to reinvent 1950 with his tariffs. He should be planning for 2050
President Donald Trump is overhauling the wrong economic policies, industry experts say, and it could cost America the high-stakes artificial intelligence race against China. Trump last week announced sweeping tariffs to reinvigorate US manufacturing, an industry that's been in decline for decades. But the tariffs — along with gutting funding for universities and calls to dismantle the CHIPS Act — could sabotage America's momentum in the AI race. While the Trump administration says it recognizes the importance of remaining a global leader in AI — even announcing hundreds of billions in investments for the development of AI infrastructure — some of the administration's actions are counterproductive. Stiff tariffs won't usher in the economic success Trump is seeking, according to most economists. Meanwhile, the competition in the AI race has only been heating up, as Chinese startup DeepSeek unveiled a powerful model in January. 'Trump and his advisers see the world in a 19th century perspective, wanting to return to a manufacturing economy,' Susan Ariel Aaronson, research professor of international affairs at George Washington University, told CNN. 'AI now underpins a lot of other technologies that could be even more important, and the United States really needs to invest in that.' Employment in the US manufacturing industry began to decline after reaching a peak in the late 1970s, according to Labor Department data, shrinking by an even faster pace around the turn of the century. Researchers say it wasn't just globalization and free trade that slowed down US manufacturing over the past few decades, but also increased automation and stiff global competition. Meanwhile, the US services industry — from finance to software engineering — blossomed: About four in five US jobs are in the services sector, according to Labor Department data. According to the World Economic Forum, the jobs of the future won't be in manufacturing, but will rather be driven by 'demand for roles driven by technological advancements such as artificial intelligence.' Yet Trump has plunged America into a global trade war to bring back the long-gone days of peak US manufacturing. Economists have warned against falling into the same pitfall as the Smoot-Hawley Act of 1930, when Congress slapped tariffs on all countries that shipped goods to America in an effort to shield US workers. The move worsened the Great Depression, as European countries hit back with retaliatory tariffs and total US imports dropped by 40% in two years. Now in 2025, business leaders have taken pause amid the lingering uncertainty over Trump's tariffs and growing recession fears. Markets around the world have also experienced extreme volatility over concerns about how the tariffs could impact the global economy. 'Bearish market sentiment and tariff applications and costs have dominated discussions over the past month and should continue to dominate markets until a clear path forward is determined,' a primary metals manufacturer said in the Institute for Supply Management's latest survey released last week. In the middle of all this tariff chaos, Trump's AI strategy remains unclear. His administration is currently reviewing thousands of suggestions from tech companies on the plan, after he signed an executive order seeking input. But so far, Trump has taken some counterproductive steps. His administration has put on hold billions in grants and contracts for major universities such as Harvard, Brown and Princeton over antisemitism concerns. Secretary of State Marco Rubio said he has revoked the visas of hundreds of foreign students in the US over their alleged ties to the pro-Palestinian movement. 'The majority of PhD students in artificial intelligence are foreign-born students,' said Andres Sawicki, a law professor at the University of Miami and director of the school's Business of Innovation, Law, and Technology concentration. 'You are cutting off the supply of the human talent that you need in order to develop the best possible technology.' Trump's tariffs if they're kept in place, could weigh on the US manufacturing industry by causing a recession and jacking up prices, an outcome known as 'stagflation.' Trump last month also called on Congress to scrap the 'horrible, horrible' CHIPS and Science Act, passed in 2022 under President Joe Biden. The CHIPS Act is a bipartisan law that authorized nearly $300 billion in funding to boost semiconductor research and manufacturing. Eliminating it wouldn't help America win the AI race. 'The CHIPS Act has been immensely successful, far beyond expectations, at attracting investment all across the CHIP supply chain into the United States,' said Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics. In early March, Trump and Taiwan semiconductor company TSMC announced a $100 billion plan to build five US factories. Chorzempa said that investment 'would not have been possible without the groundwork the CHIPS Act laid.' As AI continues to reshape the world, including how humans work and communicate, many countries are vying to assert dominance in the industry. If the US wants to stay ahead of the game, the Trump administration will have to rethink some of its policies that might be hindering its AI progress.
CNN
08-04-2025
- Business
- CNN
Trump is trying to reinvent 1950 with his tariffs. He should be planning for 2050
President Donald Trump is overhauling the wrong economic policies, industry experts say, and it could cost America the high-stakes artificial intelligence race against China. Trump last week announced sweeping tariffs to reinvigorate US manufacturing, an industry that's been in decline for decades. But the tariffs — along with gutting funding for universities and calls to dismantle the CHIPS Act — could sabotage America's momentum in the AI race. While the Trump administration says it recognizes the importance of remaining a global leader in AI — even announcing hundreds of billions in investments for the development of AI infrastructure — some of the administration's actions are counterproductive. Stiff tariffs won't usher in the economic success Trump is seeking, according to most economists. Meanwhile, the competition in the AI race has only been heating up, as Chinese startup DeepSeek unveiled a powerful model in January. 'Trump and his advisers see the world in a 19th century perspective, wanting to return to a manufacturing economy,' Susan Ariel Aaronson, research professor of international affairs at George Washington University, told CNN. 'AI now underpins a lot of other technologies that could be even more important, and the United States really needs to invest in that.' Employment in the US manufacturing industry began to decline after reaching a peak in the late 1970s, according to Labor Department data, shrinking by an even faster pace around the turn of the century. Researchers say it wasn't just globalization and free trade that slowed down US manufacturing over the past few decades, but also increased automation and stiff global competition. Meanwhile, the US services industry — from finance to software engineering — blossomed: About four in five US jobs are in the services sector, according to Labor Department data. According to the World Economic Forum, the jobs of the future won't be in manufacturing, but will rather be driven by 'demand for roles driven by technological advancements such as artificial intelligence.' Yet Trump has plunged America into a global trade war to bring back the long-gone days of peak US manufacturing. Economists have warned against falling into the same pitfall as the Smoot-Hawley Act of 1930, when Congress slapped tariffs on all countries that shipped goods to America in an effort to shield US workers. The move worsened the Great Depression, as European countries hit back with retaliatory tariffs and total US imports dropped by 40% in two years. Now in 2025, business leaders have taken pause amid the lingering uncertainty over Trump's tariffs and growing recession fears. Markets around the world have also experienced extreme volatility over concerns about how the tariffs could impact the global economy. 'Bearish market sentiment and tariff applications and costs have dominated discussions over the past month and should continue to dominate markets until a clear path forward is determined,' a primary metals manufacturer said in the Institute for Supply Management's latest survey released last week. In the middle of all this tariff chaos, Trump's AI strategy remains unclear. His administration is currently reviewing thousands of suggestions from tech companies on the plan, after he signed an executive order seeking input. But so far, Trump has taken some counterproductive steps. His administration has put on hold billions in grants and contracts for major universities such as Harvard, Brown and Princeton over antisemitism concerns. Secretary of State Marco Rubio said he has revoked the visas of hundreds of foreign students in the US over their alleged ties to the pro-Palestinian movement. 'The majority of PhD students in artificial intelligence are foreign-born students,' said Andres Sawicki, a law professor at the University of Miami and director of the school's Business of Innovation, Law, and Technology concentration. 'You are cutting off the supply of the human talent that you need in order to develop the best possible technology.' Trump's tariffs if they're kept in place, could weigh on the US manufacturing industry by causing a recession and jacking up prices, an outcome known as 'stagflation.' Trump last month also called on Congress to scrap the 'horrible, horrible' CHIPS and Science Act, passed in 2022 under President Joe Biden. The CHIPS Act is a bipartisan law that authorized nearly $300 billion in funding to boost semiconductor research and manufacturing. Eliminating it wouldn't help America win the AI race. 'The CHIPS Act has been immensely successful, far beyond expectations, at attracting investment all across the CHIP supply chain into the United States,' said Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics. In early March, Trump and Taiwan semiconductor company TSMC announced a $100 billion plan to build five US factories. Chorzempa said that investment 'would not have been possible without the groundwork the CHIPS Act laid.' As AI continues to reshape the world, including how humans work and communicate, many countries are vying to assert dominance in the industry. If the US wants to stay ahead of the game, the Trump administration will have to rethink some of its policies that might be hindering its AI progress.
CNN
08-04-2025
- Business
- CNN
Trump is trying to reinvent 1950 with his tariffs. He should be planning for 2050
President Donald Trump is overhauling the wrong economic policies, industry experts say, and it could cost America the high-stakes artificial intelligence race against China. Trump last week announced sweeping tariffs to reinvigorate US manufacturing, an industry that's been in decline for decades. But the tariffs — along with gutting funding for universities and calls to dismantle the CHIPS Act — could sabotage America's momentum in the AI race. While the Trump administration says it recognizes the importance of remaining a global leader in AI — even announcing hundreds of billions in investments for the development of AI infrastructure — some of the administration's actions are counterproductive. Stiff tariffs won't usher in the economic success Trump is seeking, according to most economists. Meanwhile, the competition in the AI race has only been heating up, as Chinese startup DeepSeek unveiled a powerful model in January. 'Trump and his advisers see the world in a 19th century perspective, wanting to return to a manufacturing economy,' Susan Ariel Aaronson, research professor of international affairs at George Washington University, told CNN. 'AI now underpins a lot of other technologies that could be even more important, and the United States really needs to invest in that.' Employment in the US manufacturing industry began to decline after reaching a peak in the late 1970s, according to Labor Department data, shrinking by an even faster pace around the turn of the century. Researchers say it wasn't just globalization and free trade that slowed down US manufacturing over the past few decades, but also increased automation and stiff global competition. Meanwhile, the US services industry — from finance to software engineering — blossomed: About four in five US jobs are in the services sector, according to Labor Department data. According to the World Economic Forum, the jobs of the future won't be in manufacturing, but will rather be driven by 'demand for roles driven by technological advancements such as artificial intelligence.' Yet Trump has plunged America into a global trade war to bring back the long-gone days of peak US manufacturing. Economists have warned against falling into the same pitfall as the Smoot-Hawley Act of 1930, when Congress slapped tariffs on all countries that shipped goods to America in an effort to shield US workers. The move worsened the Great Depression, as European countries hit back with retaliatory tariffs and total US imports dropped by 40% in two years. Now in 2025, business leaders have taken pause amid the lingering uncertainty over Trump's tariffs and growing recession fears. Markets around the world have also experienced extreme volatility over concerns about how the tariffs could impact the global economy. 'Bearish market sentiment and tariff applications and costs have dominated discussions over the past month and should continue to dominate markets until a clear path forward is determined,' a primary metals manufacturer said in the Institute for Supply Management's latest survey released last week. In the middle of all this tariff chaos, Trump's AI strategy remains unclear. His administration is currently reviewing thousands of suggestions from tech companies on the plan, after he signed an executive order seeking input. But so far, Trump has taken some counterproductive steps. His administration has put on hold billions in grants and contracts for major universities such as Harvard, Brown and Princeton over antisemitism concerns. Secretary of State Marco Rubio said he has revoked the visas of hundreds of foreign students in the US over their alleged ties to the pro-Palestinian movement. 'The majority of PhD students in artificial intelligence are foreign-born students,' said Andres Sawicki, a law professor at the University of Miami and director of the school's Business of Innovation, Law, and Technology concentration. 'You are cutting off the supply of the human talent that you need in order to develop the best possible technology.' Trump's tariffs if they're kept in place, could weigh on the US manufacturing industry by causing a recession and jacking up prices, an outcome known as 'stagflation.' Trump last month also called on Congress to scrap the 'horrible, horrible' CHIPS and Science Act, passed in 2022 under President Joe Biden. The CHIPS Act is a bipartisan law that authorized nearly $300 billion in funding to boost semiconductor research and manufacturing. Eliminating it wouldn't help America win the AI race. 'The CHIPS Act has been immensely successful, far beyond expectations, at attracting investment all across the CHIP supply chain into the United States,' said Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics. In early March, Trump and Taiwan semiconductor company TSMC announced a $100 billion plan to build five US factories. Chorzempa said that investment 'would not have been possible without the groundwork the CHIPS Act laid.' As AI continues to reshape the world, including how humans work and communicate, many countries are vying to assert dominance in the industry. If the US wants to stay ahead of the game, the Trump administration will have to rethink some of its policies that might be hindering its AI progress.
