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Globe and Mail
4 days ago
- Business
- Globe and Mail
Trump's economic meddling suggests a new kind of pay-to-play corporatism
U.S. President Donald Trump has long taken a transactional approach to economic management. He has threatened tariffs against trading partners to extract concessions, and pushed them to purchase American energy, soybeans and Boeing Co. BA-N jets to maintain access to the world's largest consumer market. Recently, the President has found a new group to shake down: American companies. This week chipmakers Nvidia Corp. NVDA-Q and Advanced Micro Devices Inc. AMD-Q agreed to pay the U.S. Treasury 15 per cent of the profits earned from selling certain advanced semiconductors in China in return for export licences. With never-ending tariff drama, the Canadian economy limps along Earlier this year, Mr. Trump demanded the U.S. government get a 'golden share' – giving it certain veto powers – as a condition for approving Nippon Steel Corp.'s NPSCY takeover of U.S. Steel Corp., and the administration is in talks to take a direct stake in Intel Corp. INTC-Q, according to media reports. The President has also called for Intel's chief executive officer to step down and said Goldman Sachs should fire its chief economist. These interventions in the private sector are happening alongside attacks on institutions that underpin well-functioning markets. Mr. Trump has threatened to fire Federal Reserve chair Jerome Powell for not lowering interest rates. And he sacked the head of the U.S. Bureau of Labor Statistics last week following an unflattering jobs report and is seeking to install a MAGA loyalist. The United States is not about to abandon market capitalism for state-centric planning, economists say. But the President does seem to favour a pay-to-play economy in which foreign countries and domestic companies pay tribute to the White House for special privileges, and business decisions are increasingly influenced by political considerations. That, economists warn, is a recipe for slower economic growth, less innovation and lower living standards over time. Past American presidents, from both parties, have used their bully pulpit alongside more aggressive measures, such as antitrust investigations, to bend the private sector, said Ryan Bourne, an economist at the Cato Institute, a libertarian-oriented think tank. 'The difference this time is that we've got to a position where the President is making deals with specific firms and demanding specific individuals resign, and telling specific companies how they can advertise their prices, and tying licences to export, effectively, to direct payments to the Treasury,' Mr. Bourne said. 'I think that the best way to think about this as a kind of economic framework is kind of like maximalist corporatism,' he said. That model is more familiar in emerging-market economies, in which weak institutions let politicians skim off the top and direct business to well-connected insiders, or in state-centric systems, such as China, where governments play a major role in allocating capital. The U.S. is hardly China – although Mr. Trump has said he'll personally direct the hundreds of billions of dollars' worth of investments other countries have promised to make in the U.S. as part of recent trade deals. And American institutions, particularly the courts, remain a check on government overreach. But there is a risk that President Trump's private-sector deal-making will distort business decisions and undercut smaller companies. 'I really worry about the competitive landscape with this,' said Mr. Bourne. 'You can come to a deal with Nvidia, AMD, Apple, these massive global companies. But the idea that some small manufacturer being squashed by tariffs is going to be able to get an audience with the President, specific exemptions or carveouts, is for the birds.' Economists also worry about Mr. Trump's attempt to exert more control over institutions, such as the Fed and the BLS, which help create the conditions for private markets to operate. Mr. Trump has walked back his threats to fire Mr. Powell, whose term as Fed chair ends in May, and financial markets have largely discounted the possibility. But the President and his top officials continue to call for huge interest rate cuts, muddying the water for the independent central bank as it tries to balance the inflationary impact of tariffs against a possible economic slowdown. Meanwhile, Mr. Trump's decision to fire the BLS Commissioner Erika McEntarfer – after a monthly employment report that revised down recent job creation numbers – and replace her with E.J. Antoni, chief economist of the Trump-aligned Heritage Foundation, has led some economists to worry about the quality of U.S. government data going forward. Opinion: How the new policy elite have caricatured the dismal science John Sabelhaus, a visiting fellow at the Brookings Institution and a former Fed statistician, said it would be difficult for a Trump loyalist, or anyone else, to rig U.S. economic data. Information about the labour market comes from too many different sources, at the state and national level, as well as from the private sector, to fudge over an extended period, he said. The bigger concern is 'that they're going to gut the BLS, and that they'll just stop producing the numbers that you need, and we lose the ability to measure the economy,' he said. Statistical agencies have already been starved of funding for years, and that trend could accelerate, he said. 'Operating in a market environment involves having the information, and we're destroying that. So, the ability of companies to make good rational decisions is really at risk.' In all of this, it's not clear whether Mr. Trump is pursuing an ideological agenda or simply trying to shore up his power and secure 'wins' he can sell to the American public, said Michael Strain, director of economic policy studies at the American Enterprise Institute, a conservative, market-oriented think tank in Washington. 'Xi Jinping wanted to create a model of corporatism, state capitalism, and was very good at doing that … I think it's going beyond the evidence to argue that President Trump wants to inaugurate a state capitalist regime,' said Dr. Strain, referring to China's President. 'It's probably more likely that President Trump doesn't have strong views on different economic systems and just kind of wanted to shake down Nvidia.' Dr. Strain said that Mr. Trump's approach to the economy is currently ascendant in Washington, but it doesn't necessarily run deep within the rest of the Republican Party. 'If you put all 53 Republican senators in a room and you ask them in an anonymous poll: 'How many of you think that Nvidia should be shaken down to hand over 15 per cent of their Chinese sales revenue? How many of you think the U.S. should have a golden share in Nippon Steel? How many of you think the President should be able to ignore the law and not enforce the TikTok legislation that passed both houses?' You get 52 of them who would say this is all crazy,' said Dr. Strain. But publicly, politicians formerly committed to free markets and private enterprise have largely kept their heads down and avoided criticizing the powerful President. 'If you look, you can already see people standing up,' Dr. Strain said. 'But it's not most of them.'
Yahoo
17-07-2025
- Business
- Yahoo
Will Donald Trump fire Jerome Powell? What you need to know about the White House showdown with the Fed chair
United States President Donald Trump and members of his cabinet have intensified attacks against Federal Reserve chairman Jerome Powell in recent weeks in what many see as an effort to force Powell to resign, with some reports suggesting Trump may even outright fire the central bank chief. It's a campaign that flies in the face of what has been one of the hallmarks of U.S. economic management: the independence of the central bank from direct political interference or pressure. Here, the Financial Post breaks down the latest developments in the clash and what it could mean for markets and the global economy. Why has Trump turned on Powell? Since appointing Jerome Powell as chairman of the Federal Reserve in 2018, Trump has never been shy about his disapproval of the central banker's performance. Not even a year into Powell's tenure, Trump said he was 'not even a little bit happy' with the job Powell was doing. At the time, the Fed had raised interest rates as the U.S. economy picked up. Powell was appointed again for another four-year term by former U.S. President Joe Biden in 2021. Trump has renewed his criticism in his own second term, complaining that the central bank should be lowering interest rates. Among the negative comments, Trump has resorting to calling Powell names, everything from a 'knucklehead' to 'a stupid person' to 'low IQ.' This week, the White House intensified its attack, zeroing in on a renovation project at the Fed headquarters which has ballooned in cost to $2.5 billion, accusing Powell of mismanaging the project. Most believe the White House is mounting the campaign in a bid to force the central banker to resign or to create a pretext to fire him. In a post on X earlier this week, White House Deputy Chief of Staff James Blair posted a picture of Powell dressed up as Marie Antoinette with the caption, 'Let them eat basis points.' According to U.S. reports, Trump held a meeting with Republican lawmakers on Tuesday, floating the idea of dismissing Powell. But on Wednesday, Trump told reporters in the Oval Office that it's 'highly unlikely' he would fire Powell, unless 'he has to leave for fraud.' 'He's always been too late, hence his nickname, 'Too late,'' he said. 'He should have cut interest rates a long time ago.' Over the course of the last several months, Powell has continued to defend the independence of the U.S. central bank. 'As a practice, I never comment on what the president says, but I think people can be confident that we will continue to keep our heads down, do our work, and make our decisions based on what's happening in the economy, the outlook and the balance of risks,' said Powell, during committee testimony last month. Can Trump really fire the federal reserve chair? Trump is not the first president to criticize monetary policy and the decisions made by the Fed, but he is the first to openly consider firing its head. The U.S. Supreme Court set a precedent in a 1935 case titled Humphrey's Executor v. U.S, which put limits on the ability of U.S. presidents to fire heads of independent agencies. Earlier this year, Trump fired Democratic-appointed Gwynne A. Wilcox at the U.S. National Labor Relations Board and Cathy Harris from the Merit Systems Protection Board. Wilcox and Harris have legally challenged their firings in court, with case going all the way to the U.S. Supreme Court. Wilcox and Harris have contended their case has broader implications for the independence of the Fed. But in May, the nine justices reaffirmed the distinct position of the U.S. central bank. 'We disagree,' the May 22 decision read. 'The Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States.' The court added that the Fed chair could only be fired if there is 'cause.' Setting aside the legalities, firing Powell could have broad implications for the global economy, the independence of the central bank, and the bond market. 'What matters more to bond markets is the direction of travel when it comes to Fed independence, especially in the context of the U.S.' ultra-loose fiscal policy and growing concerns about fiscal dominance,' said analysts from Capital Economics, in a note. 'Unlike raising tariffs, which can be withdrawn before the real damage is done, the reputational costs from firing Powell would be harder to undo,' the note added. How are the markets reacting? After reports surfaced that Trump was considering outright firing Powell, markets at first reacted negatively. The U.S. dollar Index decreased by one per cent and equities dropped sharply. Meanwhile, two-year bond yields dropped by 10 basis points on the expectation of lower near-term interest rates, while the 30-year yield increased by 10 basis points. 'Markets caught their breath after this initial shock, but investors remain skeptical about what comes next,' said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank, in a note Markets regained most of their losses Wednesday, with the S&P 500 still managing to close with gains. Ozkardeskaya said the consequences of an attack on the Fed's independence could be dramatic, noting the loss of credibility would have serious implications for the Fed's ability to conduct monetary policy. 'Not only would the U.S. dollar and Treasuries tumble, but the Fed would lose a superpower: the one that helps it support turmoiled financial markets by buying billions of dollars in U.S. debt,' she said. Analysts at Deutsche Bank said given the current context of higher tariffs, the removal of Powell would create an even bigger inflationary risk. 'Taking a step back, central bank independence is a critical pillar for the achievement of price stability,' they said, in a note. Why hasn't Powell lowered rates? The Fed has elected to keep its benchmark interest rate unchanged at 4.25-4.5 per cent since January. Powell has said Trump's trade war, which started earlier this year, has caused uncertainty for businesses and the outlook for the U.S. economy, but it's the inflationary potential that has the Fed worried. Powell said during committee testimony last month that the reason the Fed has held rates is because the forecasts 'do expect a meaningful increase in inflation over the course of this year.' The White House has denied tariffs are costly to American consumers. U.S. inflation numbers for June also showed tariffs starting to have an impact on U.S. consumer prices, which rose 2.7 per cent year-over-year for the month, up from 2.4 per cent in May. Analysts do not expect the Fed to cut this month, but remain divided on what will happen at its September decision. Who is in the running to replace Powell? Even if Trump decides not to fire Powell, his term as chair will be up in May 2026. Some contenders who have been floated as successors include Kevin Hassett, who currently serves as director of Trump's National Economic Council and who is seen as a Trump loyalist. Another name that has been floated is Kevin Warsh, who served as a member of the Federal Reserve Board of Governors from 2006 to 2011. Speaking to CNBC on Thursday, Warsh said the Fed needs a 'regime change' and called for coordination between the central bank and the U.S. Treasury. While Powell's term is up as Chair in May, his term on the Federal Reserve Board of Governors will last until 2028. Earlier this week, U.S. Treasury Secretary Scott Bessent said Powell should resign from his post on the board of governors as well. Analysts have noted that even if Powell is removed, putting in a chair who is more in line with Trump's vision of the Fed would not necessarily give the results the White House desires. 'A new Fed Chair will not give Trump carte blanche over policy,' said analysts at Capital Economics. 'The Fed Chair is only one of 12 FOMC voting members.' Car prices were supposed to spike because of tariffs but didn't. They still could Five questions about Trump's 35% tariff threat to Canada Still, they noted, at a time when the FOMC is evenly split on when the Fed should start cutting interest rates; the additional influence could be helpful. • Email: jgowling@ Sign in to access your portfolio
The Guardian
16-07-2025
- Business
- The Guardian
UK inflation rises unexpectedly to 3.6% as Labour faces economic scrutiny
UK inflation unexpectedly rose in June, according to official figures, adding to the pressure on the chancellor, Rachel Reeves. The Office for National Statistics (ONS) said the consumer prices index rose by 3.6% last month, up from a reading of 3.4% in May. City economists had forecast an unchanged reading. The rise comes as Labour faces intense scrutiny over its economic management after two months of negative growth and with speculation mounting over tax rises. Reeves sought on Tuesday to shrug off Britain's anaemic growth performance at her Mansion House speech, telling City bankers she would slash red tape to help reboot the economy. The UK's annual inflation rate has risen this year after dramatic increases in water bills, energy costs and council tax – complicating the Bank of England's approach to cutting interest rates. However, concerns are growing over the strength of the UK economy amid a slowdown in the jobs market and as Donald Trump's erratic trade war weighs on the global outlook. Threadneedle Street has cut its base interest rate four times in the past year, most recently in May, to 4.25%. This has eased some of the pressure on mortgage holders after borrowing costs were ramped up in response to inflation reaching a peak of 11.1% in late 2022. City investors expect at least two further quarter-point cuts this year, with financial markets anticipating the next reduction at the Bank's August policy meeting. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion More details soon …
Zawya
09-07-2025
- Business
- Zawya
Oman among world's top ten in IAREM ranking, signals strong investment climate
MUSCAT: Oman has once again secured a position among the world's best-performing economies, according to the latest Independent Australia Ranking on Economic Management (IAREM), reinforcing its reputation as a stable and attractive investment destination. In the 2025 edition of the IAREM index, Oman ranked 8th globally, with a score of 18.78, maintaining its position in the top ten economies worldwide. The Sultanate of Oman had previously ranked 6th in the 2024 edition with a score of 18.12, reflecting consistent improvement across key macroeconomic indicators. The IAREM rating evaluates countries based on eight critical metrics: income per person, GDP growth, median wealth, employment levels, inflation, tax burden, budget balance, and public debt. Oman's ranking reflects its strong fiscal governance, robust employment environment, and prudent macroeconomic management, attributes that continue to bolster investor confidence. Oman's sustained high ranking is underpinned by strategic reforms aimed at economic diversification, efficient public spending, and investment in infrastructure, logistics, and technology. The government's commitment to Oman Vision 2040 has catalysed significant progress in reducing reliance on oil revenues and enhancing the role of the private sector. Further reinforcing investor confidence is Oman's investment-grade credit rating of BBB– with a stable outlook, as affirmed by Standard & Poor's. The rating reflects improvements in fiscal sustainability, debt reduction, and greater transparency in public financial management. International observers have taken note of Oman's trajectory. According to IAREM's analysis, Oman has outperformed several larger economies in overall economic management, positioning it ahead of countries like France, Italy, and the United Kingdom. This achievement is particularly significant in a global landscape marked by rising debt levels, inflationary pressures, and sluggish growth in many regions. In 2024, Oman achieved an impressive 6th place globally in the Independent Australia Ranking on Economic Management (IAREM), earning a score of 18.12. This marked a significant leap from previous years and placed the Sultanate ahead of major economies such as Australia, South Korea, and Singapore. The ranking reflects Oman's strong performance across key indicators including income per capita, employment, inflation control, budget balance, and sustainable public debt. Analysts attributed this success to Oman's fiscal discipline, economic diversification efforts under Oman Vision 2040, and stable macroeconomic environment, factors that continue to enhance its appeal as a competitive and secure destination for global investment. Oman's top-tier ranking not only enhances its global economic standing but also signals a welcoming climate for foreign direct investment (FDI). With economic zones such as Duqm, Salalah, and Suhar offering competitive incentives, Oman is increasingly viewed as a strategic hub linking Asia, Africa, and the Middle East. As the global economy continues to navigate uncertainty, Oman's fiscal discipline, policy reforms, and strong economic governance are proving to be key differentiators. The IAREM ranking confirms that Oman is not only on the right path but is also steadily emerging as one of the most capable and well-managed economies in the region and beyond. 2022 © All right reserved for Oman Establishment for Press, Publication and Advertising (OEPPA) Provided by SyndiGate Media Inc. (
BBC News
15-05-2025
- Business
- BBC News
World Business Report IMF terminates a $175 million loan for Malawi
The International Monetary Fund has terminated a $175 million loan programme with Malawi, citing poor economic management. The IMF said Malawi, one of the poorest countries in the world, had failed to fully restructure its unsustainable debt, but the country's government argues that it has decided to suspend this until after the elections in September this year. Rahul Tandon heard from Malawi Finance Minister Simplex Chithyola Banda and the IMF Mission Chief. And we will look at President Trump saying that India offered to drop all tariffs on US goods, something India swiftly denied. Total airline revenue for ancillary services like baggage and seat selection is set to reach 145 billion according to the International Air Transport Association.
