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Irish Times
2 days ago
- Business
- Irish Times
What US economic madness means for the rest of the world
Tariffs are a major own goal for the US – and also bad for the rest of the world. Tearing up previous agreements on trade casts doubt on whether any new agreement with the US administration will stick. The EU will still try to reach a settlement with Donald Trump by the end of the month, but there is no certainty that reason will prevail. If there is no agreement, we will face a very disruptive and damaging period of trade wars. Even if there is a deal, it will represent a significantly worse outcome for the EU and the US economies than the status quo. Naturally, all our attention is focused on the trade issue, as it will have an immediate impact on both sides of the Atlantic. However, the US budget, passed by the US Congress earlier this month, referred to as the 'One Big Beautiful Act', has even more serious long-term implications for the US economy. First, the US budget provides for a huge tax give-away for the better-off. Second, it plans to cut healthcare for many millions of Americans in 2027, just after the next congressional elections. Third, the combined effect of the changes in tax and expenditure mean the US government deficit will remain at about 6 per cent of GDP for the next decade, even under optimistic growth assumptions. READ MORE The independent Congressional Budget Office forecast that the US debt, currently at 120 per cent of GDP, will as a result rise to rise to about 140 per cent over the coming decade. In the OECD area, only Italy, Greece and Japan are currently experiencing this level of indebtedness. David McWilliams on how 'big incentives' to build could save Dublin city Listen | 36:51 The White House, akin to the short-lived regime of Liz Truss in the UK, proclaims a different reality, asserting that economic growth will solve the budgetary problems, keeping the debt in check. All serious economists in the US indicate that this is a fairy tale. We have learned the hard way that if debt reaches current US levels, stopping a slide into insolvency is very painful. There is no prospect of the US getting out of the debt mess by defaulting – they can just print dollars. Trying to square the circle of continuing to borrow big, while paying rising interest bills, can only be achieved in one of two ways – through inflation, or by what is termed financial repression. While the latter is less likely, it would involve the US government forcing the rest of the US economy to lend to it. However, if the US government hoovered up all national savings, this would severely impact on investment and growth, as has happened in Japan. [ Will Donald Trump fire Jerome Powell? 'I don't rule out anything. But it's unlikely. Unless …' Opens in new window ] The US budgetary problems matter for the rest of the world because most countries, including China, hold much of their financial reserves in the form of US government debt. In the early 1970s under Richard Nixon , when US borrowing was out of control, inflation was allowed to dramatically increase, peaking at 11 per cent in 1974. This very rapidly eroded the value of the US debt, which also represented much of the financial reserves held by the rest of the world. In response to reproaches from US creditors, the then US treasury secretary John Connally responded with Trump-like arrogance: 'Our money, your problem'. This pattern was repeated under Ronald Reagan , and it is highly likely that under Trump a burst of inflation will again be needed to erode the US government debt, much of which represents foreigners' reserves. Already, worry about this has led to a fall of 10 per cent in the value of the dollar compared to the euro since Trump took office. For our exports to the US, the 10 per cent increase in their cost in dollars comes as a double whammy on top of the 10 per cent tariff rate already imposed. [ 'It's Maga, baby': Trump's 50% tariff threat on Brazil marks unprecedented interference in foreign courts Opens in new window ] Other countries won't be as ready to lend to the US when the value of their bond holdings are being eroded. To date, the interest rate paid by the US government for long-term borrowing has not risen significantly, but it is likely to do so over coming years, given the growing risk that the inflation solution will be adopted. With rapidly rising debt, there's increasing temptation for the US to allow inflation by persuading the US central bank, the 'Fed' , to reduce short-term interest rates, rather than choking off inflation through higher interest rates. To date, Trump's threats to force the Fed to reduce interest rates have fallen on deaf ears. Trump may continue to try to strong-arm current Fed chairman Jerome Powell , but will doubtless replace him at the end of his term next year with a less independent, more pliant, nominee.
Malay Mail
6 days ago
- Business
- Malay Mail
Gold bullion and the erosion of US trust: Europe's historical and quiet revolt — Phar Kim Beng
JULY 11 — Amid trade wars, shifting alliances, and a resurgence of unilateralism, a quiet financial rebellion is unfolding in Europe. It is not led by protestors in the streets or fiery parliamentary speeches. Instead, it is taking shape deep in the vaults of global finance — through gold. In recent months, both Italy and Germany have revived efforts to repatriate significant portions of their gold reserves from the United States. Although this movement has received little attention in mainstream Western media, its implications are profound. These actions reflect growing mistrust — not only of the US financial system — but of Washington's willingness to weaponise it, especially under the administration of President Donald J Trump. A history of gold and mistrust This is not the first time Europe has questioned US custodianship of its monetary sovereignty. In 2013, under President Barack Obama, Germany's Bundesbank repatriated more than 300 tonnes of gold — worth approximately US$18.6 billion (RM79 billion) at today's prices — from New York and Paris. That move, although couched in technical justifications, was a symbolic assertion of financial independence. Yet today's repatriation push is markedly different. It is unfolding under vastly altered geopolitical circumstances, where Trump's second term is marked by aggressive rhetoric, erratic policy swings, and punitive economic measures — including tariffs that have disproportionately targeted the European Union. Furthermore, Trump's repeated attacks on Federal Reserve Chair Jerome Powell have cast doubt on the independence of America's central bank, raising red flags for European policymakers. As noted by the TAE (The Automatic Earth), this behaviour undermines confidence in US financial stewardship and prompts urgent reassessments of where Europe's wealth should be stored. The significance of sovereign gold Gold, in this context, is no longer just a commodity or hedge. It has become a tangible symbol of sovereignty. That Germany and Italy are actively pursuing the return of their gold reserves — currently valued at a combined US$245 billion, according to the Financial Times — signals a shift in the geopolitical trust that once undergirded the postwar transatlantic alliance. Indeed, gold was once central to the Bretton Woods system. Until 1971, the US dollar was convertible to gold by the Federal Reserve, anchoring international monetary stability. During the Cold War, many European nations stored their bullion in the US as a precaution against a potential Soviet invasion. But historical memory has its own gravitational pull. Indeed, gold was once central to the Bretton Woods system. Until 1971, the US dollar was convertible to gold by the Federal Reserve, anchoring international monetary stability. — Picture by Choo Choy May In the mid-1960s, President Charles de Gaulle of France ordered the transfer of nearly all French overseas gold reserves back to Paris, having lost confidence in the Bretton Woods system. This early repatriation foreshadowed today's deeper anxieties — only now, the mistrust is rooted less in East–West confrontation than in Western disunity itself. Germany's repatriation drive Germany provides a clear illustration of how grassroots pressure and institutional decisions have combined to alter gold policy. Beginning in 2010, a popular movement known as 'Bring Our Gold Home' gained traction across German civil society. As a result, the Bundesbank announced in 2013 that it would store 50 per cent of its gold reserves within Germany, relocating 674 tonnes — worth roughly US$41.8 billion today — from New York and Paris to Frankfurt. That operation, which cost about US$9.5 million, marked a turning point in how Europe viewed US financial custodianship. Currently, 37 per cent of the Bundesbank's gold reserves remain in New York — a number now under renewed scrutiny amid the shifting winds of global diplomacy. Italy's growing scepticism Italy, too, has begun intensifying calls to retrieve its gold from American vaults. While its holdings are smaller than Germany's in absolute terms, the political messaging is just as sharp. In Rome, populist and nationalist voices have increasingly questioned why Italian wealth should remain under the indirect control of a foreign central bank — especially one seen as operating under an increasingly politicised US executive. These concerns are compounded by Trump's aggressive tariff policy, which has treated European allies as if they were adversaries. NATO, once the bedrock of Euro–American defence cooperation, has been repeatedly devalued rhetorically by the US President. The European Union is being treated less as a strategic partner and more as a transactional entity, to be bent to Washington's will. A slow unravelling of trust What is emerging is not a dramatic rupture, but a gradual erosion of confidence. Should France or the Netherlands decide to follow Germany and Italy in removing their gold from US storage, it could mark the beginning of the end of American custodianship over Europe's monetary assets. Such a shift would carry symbolic and systemic consequences. It would signal that Europe no longer trusts the United States to safeguard the financial pillars of the postwar liberal order. More critically, it would suggest that Europe is preparing for a future where US power is neither as benign nor as stable as it once seemed. Gold repatriation, therefore, is not merely about logistics or portfolio diversification. It is about hedging against a future in which financial systems are no longer neutral, but weaponised — used to coerce compliance, punish dissent, and enforce geopolitical hierarchy. Conclusion: A quiet but strategic revolt The renewed gold repatriation efforts by Germany and Italy reflect a quiet but growing revolt against the unpredictability of Trump-era diplomacy and the perceived decline in US institutional reliability. Should this trend continue, the very architecture of transatlantic financial trust — built painstakingly since 1945 — could slowly crumble. The message from Europe is clear: in a world where alliances are questioned and financial tools are increasingly wielded as weapons, sovereignty must be made tangible again — and there is no more enduring symbol of that than gold. * Phar Kim Beng is a professor of Asean Studies and director of the Institute of Internationalization and Asean Studies at the International Islamic University of Malaysia ** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.
Yahoo
6 days ago
- Business
- Yahoo
Oil Edges Higher With Stockpiles and Trade-War Twists in Focus
(Bloomberg) -- Oil edged higher after a three-day drop as traders tracked US stockpiles and the latest twists in the Washington-led trade wars. The Dutch Intersection Is Coming to Save Your Life Advocates Fear US Agents Are Using 'Wellness Checks' on Children as a Prelude to Arrests LA Homelessness Drops for Second Year Manhattan, Chicago Murder Rates Drop in 2025, Officials Say Brent rose toward $69 a barrel after shedding more than 2% over the previous three sessions, while West Texas Intermediate was near $67. US government data released on Wednesday was mixed, with an increase in distillate inventories but a decline in nationwide crude holdings. President Donald Trump said he would send letters to more than 150 countries notifying them of tariff rates, and that the levies imposed could be 10% or 15%. Investors were also tracking his stance toward Federal Reserve Chair Jerome Powell after the US leader denied a plan to remove him. Oil has ticked higher this month — building on an upward trend since May — despite concerns that Trump's tariff onslaught will hurt demand. While the market remains preoccupied with the prospect of a glut later this year as peak summer demand wanes and OPEC+ returns halted supplies, nearer-term indicators, including in the diesel market, have been supportive. 'Near term, the market is grappling with relatively low inventories of crude and diesel in Europe and the US, with diesel shortages lending immediate strength to prices,' said Zhou Mi, an analyst at a research institute affiliated with Chaos Ternary Futures Co. Still, crude may return to a bearish trend once OPEC+ supply growth translates into a build-up in oil inventories, Zhou said. In the US, distillate stockpiles remain at the lowest seasonal level since 1996 even after last week's increase. At the same time, the spread in futures between low-sulfur gasoil and Brent for September— a gauge of the profitability of making diesel — has risen about 7% this month. In the Middle East, several oil fields in the semi-autonomous Kurdistan region in northern Iraq were attacked by drones on Wednesday, adding to a spate of hits on energy installations in the area. Still, the region hasn't been shipping any crude to global markets since an export pipeline was shut over two years ago. --With assistance from Yongchang Chin. How Starbucks' CEO Plans to Tame the Rush-Hour Free-for-All Forget DOGE. Musk Is Suddenly All In on AI How Hims Became the King of Knockoff Weight-Loss Drugs Thailand's Changing Cannabis Rules Leave Farmers in a Tough Spot The Quest for a Hangover-Free Buzz ©2025 Bloomberg L.P.
Yahoo
6 days ago
- Business
- Yahoo
Oil Edges Higher With Stockpiles and Trade-War Twists in Focus
(Bloomberg) -- Oil edged higher after a three-day drop as traders tracked US stockpiles and the latest twists in the Washington-led trade wars. The Dutch Intersection Is Coming to Save Your Life Advocates Fear US Agents Are Using 'Wellness Checks' on Children as a Prelude to Arrests LA Homelessness Drops for Second Year Manhattan, Chicago Murder Rates Drop in 2025, Officials Say Brent rose toward $69 a barrel after shedding more than 2% over the previous three sessions, while West Texas Intermediate was near $67. US government data released on Wednesday was mixed, with an increase in distillate inventories but a decline in nationwide crude holdings. President Donald Trump said he would send letters to more than 150 countries notifying them of tariff rates, and that the levies imposed could be 10% or 15%. Investors were also tracking his stance toward Federal Reserve Chair Jerome Powell after the US leader denied a plan to remove him. Oil has ticked higher this month — building on an upward trend since May — despite concerns that Trump's tariff onslaught will hurt demand. While the market remains preoccupied with the prospect of a glut later this year as peak summer demand wanes and OPEC+ returns halted supplies, nearer-term indicators, including in the diesel market, have been supportive. 'Near term, the market is grappling with relatively low inventories of crude and diesel in Europe and the US, with diesel shortages lending immediate strength to prices,' said Zhou Mi, an analyst at a research institute affiliated with Chaos Ternary Futures Co. Still, crude may return to a bearish trend once OPEC+ supply growth translates into a build-up in oil inventories, Zhou said. In the US, distillate stockpiles remain at the lowest seasonal level since 1996 even after last week's increase. At the same time, the spread in futures between low-sulfur gasoil and Brent for September— a gauge of the profitability of making diesel — has risen about 7% this month. In the Middle East, several oil fields in the semi-autonomous Kurdistan region in northern Iraq were attacked by drones on Wednesday, adding to a spate of hits on energy installations in the area. Still, the region hasn't been shipping any crude to global markets since an export pipeline was shut over two years ago. --With assistance from Yongchang Chin. How Starbucks' CEO Plans to Tame the Rush-Hour Free-for-All Forget DOGE. Musk Is Suddenly All In on AI How Hims Became the King of Knockoff Weight-Loss Drugs Thailand's Changing Cannabis Rules Leave Farmers in a Tough Spot The Quest for a Hangover-Free Buzz ©2025 Bloomberg L.P. Sign in to access your portfolio
Reuters
15-07-2025
- Business
- Reuters
Breakingviews - Trump can turn Huawei into an Nvidia nightmare
HONG KONG, July 15 (Reuters Breakingviews) - Who can take on Nvidia (NVDA.O), opens new tab? The $4 trillion giant has a seemingly untouchable global lead in artificial intelligence chips and software. But Donald Trump could yet hand Chinese rival Huawei an edge – and easily kill Nvidia's remaining business in the People's Republic – by widening export controls. The company appeared to score a victory on Tuesday, revealing that it plans to resume sales of its H20 chip in the People's Republic days after its CEO met the U.S. president. Jensen Huang is in Beijing and, per the Financial Times, plans to meet with Chinese Premier Li Qiang. That such a high-level meeting is happening in the thick of Trump's trade wars underscores the deep ties between the world's most valuable company and the world's biggest semiconductor market. Unsurprisingly, Huang's China trip – his second this year – has attracted scrutiny, opens new tab from U.S. lawmakers. A lot is at stake for Nvidia. It will soon launch a China-specific AI graphics processing unit, according to Reuters, but one that will be cheaper, and probably less powerful, than its predecessor to comply with Washington's latest restrictions. Even so, a pared-down Nvidia GPU should still be in high demand. That's because it will probably take a few years before local offerings from Huawei, MetaX and others catch up. And even then, Nvidia has another formidable edge: its freely available programming platform, CUDA, which developers worldwide use to develop and collaborate on AI models, frameworks and apps optimised to run on Nvidia hardware. That makes it hard and costly for existing customers including China's Alibaba ( opens new tab and Tencent ( opens new tab to switch chip suppliers, a move that requires rewriting code and retraining staff, though Huawei is planning a new chip design that will make it easier, opens new tab to transfer from CUDA, per The Information. This helps to explain why Chinese authorities are so wary of Nvidia's growing dominance: last year, the market regulator announced it is investigating the U.S. group over suspected antitrust violations. Although President Xi Jinping's government wants domestic companies to buy local as part of a self-sufficiency drive, China's groundbreaking models from DeepSeek and others are mostly trained on Nvidia chips. That suggests the U.S. company can thrive in the People's Republic for quite some time to come. Indeed, Nvidia's China revenue is forecast to reach $48 billion in the current fiscal year – or 24% of the total – and $55 billion the year after, up from $17 billion last year, according to analyst estimates on Visible Alpha. Yet Trump's policies could further cut short the company's runway for growth. The Commerce Department, for instance, is planning new rules to restrict shipments of AI chips to Malaysia and Thailand to crack down on suspected smuggling, Bloomberg reported, opens new tab earlier this month, citing sources. And beyond chips, export controls could in theory widen to include AI software too, or specific CUDA-based applications. Such policies would turn Huawei from an underdog into a much bigger threat for Nvidia. (Updates in first and second paragraph and in Context News to reflect the company's plans to resume China sales of its H20 artificial intelligence chip.) Follow Robyn Mak on X, opens new tab.
