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Yahoo
a day ago
- Business
- Yahoo
Trump's latest tariff salvo fuels economic uncertainty, experts say
A flurry of tariff threats by President Trump leaves U.S. consumers and businesses in limbo ahead of an Aug. 1 deadline to deploy the import duties against more than 50 countries around the world, according to economists and trade experts. "Nobody knows whether these are threats or whether they will become policy, so it seems like everyone has become desensitized to them," EY Parthenon chief economist Gregory Daco told CBS MoneyWatch, adding that uncertainty over U.S. tariffs leaves companies in "a very dense fog." Mr. Trump on Saturday announced he is imposing 30% tariffs against Mexico and the 27-member European Union. That followed moves to threaten tariffs ranging from 20% to 50% on roughly two dozen countries, including key U.S. trading partners such as Brazil, Canada, Japan and South Korea. The White House last week also said it plans to impose a 50% levy on copper imports by Aug. 1, raising concerns about higher costs for electronics, cars and numerous other products that use the metal. Heat on Russia and Brazil In a separate development that illustrates the White House's willingness to use tariffs to accomplish its aims beyond trade, Mr. Trump is threatening sharply higher tariffs as he tries to tamp down conflict in Ukraine. The president said on Monday that the U.S. will impose 100% tariffs on countries that engage in trade with Russia if there is no peace deal to end the war in Ukraine within 50 days. In another case of hitching trade policy to other foreign policy priorities, Mr. Trump said last week that the U.S. would slap a 50% tariff on goods from Brazil next month, citing the criminal prosecution of former Brazilian President Jair Bolsonaro, which Mr. Trump called an "international disgrace." The Trump administration has defended its aggressive use of tariffs as a way to ensure fair trade for U.S. businesses; boost key domestic sectors; generate federal revenue; and advance other policy priorities, such as curbing fentanyl trafficking and authorized immigration from Canada and Mexico. According to Reuters, customs duties in June surpassed $100 billion for the first time in a single fiscal year, a sign the stepped-up tariff regime is contributing more revenue. "High uncertainty" So far, the White House has notched only a handful of trade deals, experts note, while agreements with major trading partners like the EU have been harder to come buy. Earlier this month, Mr. Trump announced a pact between the U.S. and Vietnam, while in June a more limited deal was reached with the United Kingdom that the White House said provides gives "American companies unprecedented access to British markets while bolstering U.S. national security." Also last month, the U.S. and China announced that they had agreed on a framework for a trade deal that makes it easier for U.S. businesses to acquire Chinese magnets and rare earth minerals. But with little time to thrash out trade agreements ahead of the White House's self-imposed Aug. 1 deadline, some trade experts say the U.S. has made little progress since suspending country-based tariffs in April. "We don't have any comprehensive deals with our largest trading partners," said Alex Jacquez, chief of policy and advocacy at Groundwork Collaborative, a left-leaning public policy think tank. "Where this leaves us is where we've been — in a period of high uncertainty for businesses and consumers." Ryan Young, a senior economist at the Competitive Enterprise Institute, a nonpartisan think tank, said mixed messages from the Trump administration on trade is making it difficult to nail down agreements. "How do you negotiate with someone when you don't know what they want?" he said. "One day, [President Trump] says they are about trade deficits, the next day it's about raising revenue, the next it's about stimulating American industry — then it's a bargaining tool. His multiple goals conflict with one another." Demanding equal footing White House spokesperson Kush Desai said Mr. Trump's tariff agenda is driven in part by his desire for U.S. trade partners to lower both "tariff and non-monetary trade barriers that are undermining American industries." Such moves by other nations would allow American industries to "be on a more equal footing to compete and grow," Desai told CBS MoneyWatch. Despite Mr. Trump's trade policies, tariffs have yet to significantly affect consumer prices in the U.S. Oxford's Daco said that the average U.S. tariff rate in June was around 15%, while the effective tariff rate -- or actual cost of tariffs on imports — was 10%. That's part of the reason, combined with a front-loading of imports by companies, why prices have been slow to rise. "In terms of the full bite of tariffs, it's not yet visible in the duties collected," he said. Following are the tariff rates the U.S. said last week it would impose on roughly two dozen countries as well as members of the EU: Brazil: 50%Laos: 40%Myanmar: 40%Cambodia: 36%Thailand: 36%Bangladesh: 35%Canada: 35%Serbia: 35%Indonesia: 32%Algeria: 30%European Union 30%Iraq: 30%Libya: 30%Mexico 30%South Africa: 30%Sri Lanka: 30%Japan: 25%Kazakhstan: 25%Malaysia: 25%South Korea: 25%Tunisia: 25%Philippines: 20% More details on the impact of tariffs in the U.S. will come Tuesday when the Department of Labor release its June Consumer Price Index, a closely watched inflation gauge. Sen. Lindsey Graham says "a turning point, regarding Russia's invasion of Ukraine, is coming" Trump pushes senators to make $9.4 trillion in spending cuts Student's unique talent that's for the birds Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data


CBS News
a day ago
- Business
- CBS News
Trump's latest tariff salvo fuels economic uncertainty, experts say
A flurry of tariff threats by President Trump leaves U.S. consumers and businesses in limbo ahead of an Aug. 1 deadline to deploy the import duties against more than 50 countries around the world, according to economists and trade experts. "Nobody knows whether these are threats or whether they will become policy, so it seems like everyone has become desensitized to them," EY Parthenon chief economist Gregory Daco told CBS MoneyWatch, adding that uncertainty over U.S. tariffs leaves companies in "a very dense fog." Mr. Trump on Saturday announced he is imposing 30% tariffs against Mexico and the 27-member European Union. That followed moves to threaten tariffs ranging from 20% to 50% on roughly two dozen countries, including key U.S. trading partners such as Brazil, Canada, Japan and South Korea. The White House last week also said it plans to impose a 50% levy on copper imports by Aug. 1, raising concerns about higher costs for electronics, cars and numerous other products that use the metal. Heat on Russia and Brazil In a separate development that illustrates the White House's willingness to use tariffs to accomplish its aims beyond trade, Mr. Trump is threatening sharply higher tariffs as he tries to tamp down conflict in Ukraine. The president said on Monday that the U.S. will impose 100% tariffs on countries that engage in trade with Russia if there is no peace deal to end the war in Ukraine within 50 days. In another case of hitching trade policy to other foreign policy priorities, Mr. Trump said last week that the U.S. would slap a 50% tariff on goods from Brazil next month, citing the criminal prosecution of former Brazilian President Jair Bolsonaro, which Mr. Trump called an "international disgrace." The Trump administration has defended its aggressive use of tariffs as a way to ensure fair trade for U.S. businesses; boost key domestic sectors; generate federal revenue; and advance other policy priorities, such as curbing fentanyl trafficking and authorized immigration from Canada and Mexico. According to Reuters, customs duties in June surpassed $100 billion for the first time in a single fiscal year, a sign the stepped-up tariff regime is contributing more revenue. "High uncertainty" So far, the White House has notched only a handful of trade deals, experts note, while agreements with major trading partners like the EU have been harder to come buy. Earlier this month, Mr. Trump announced a pact between the U.S. and Vietnam, while in June a more limited deal was reached with the United Kingdom that the White House said provides gives "American companies unprecedented access to British markets while bolstering U.S. national security." Also last month, the U.S. and China announced that they had agreed on a framework for a trade deal that makes it easier for U.S. businesses to acquire Chinese magnets and rare earth minerals. But with little time to thrash out trade agreements ahead of the White House's self-imposed Aug. 1 deadline, some trade experts say the U.S. has made little progress since suspending country-based tariffs in April. "We don't have any comprehensive deals with our largest trading partners," said Alex Jacquez, chief of policy and advocacy at Groundwork Collaborative, a left-leaning public policy think tank. "Where this leaves us is where we've been — in a period of high uncertainty for businesses and consumers." Ryan Young, a senior economist at the Competitive Enterprise Institute, a nonpartisan think tank, said mixed messages from the Trump administration on trade is making it difficult to nail down agreements. "How do you negotiate with someone when you don't know what they want?" he said. "One day, [President Trump] says they are about trade deficits, the next day it's about raising revenue, the next it's about stimulating American industry — then it's a bargaining tool. His multiple goals conflict with one another." Demanding equal footing White House spokesperson Kush Desai said Mr. Trump's tariff agenda is driven in part by his desire for U.S. trade partners to lower both "tariff and non-monetary trade barriers that are undermining American industries." Such moves by other nations would allow American industries to "be on a more equal footing to compete and grow," Desai told CBS MoneyWatch. Despite Mr. Trump's trade policies, tariffs have yet to significantly affect consumer prices in the U.S. Oxford's Daco said that the average U.S. tariff rate in June was around 15%, while the effective tariff rate -- or actual cost of tariffs on imports — was 10%. That's part of the reason, combined with a front-loading of imports by companies, why prices have been slow to rise. "In terms of the full bite of tariffs, it's not yet visible in the duties collected," he said. Following are the tariff rates the U.S. said last week it would impose on roughly two dozen countries as well as members of the EU: Brazil: 50% Laos: 40% Myanmar: 40% Cambodia: 36% Thailand: 36% Bangladesh: 35% Canada: 35% Serbia: 35% Indonesia: 32% Algeria: 30% European Union 30% Iraq: 30% Libya: 30% Mexico 30% South Africa: 30% Sri Lanka: 30% Japan: 25% Kazakhstan: 25% Malaysia: 25% South Korea: 25% Tunisia: 25% Philippines: 20% More details on the impact of tariffs in the U.S. will come Tuesday when the Department of Labor release its June Consumer Price Index, a closely watched inflation gauge.
Yahoo
a day ago
- Business
- Yahoo
Explainer-Why Trump's push for a 1% Fed policy rate could spell trouble for US economy
By Howard Schneider WASHINGTON (Reuters) -U.S. President Donald Trump says the Federal Reserve should set its benchmark interest rate at 1% to lower government borrowing costs, allowing the administration to finance the high and rising deficits expected from his spending and tax-cut bill. Trump should be careful what he wishes for. A Fed policy rate that low is not typically a sign that the U.S. is the "hottest" country in the world for investment, as Trump has said. It is usually a crisis response to an economy in serious trouble. The U.S. economy isn't in that kind of trouble now. But with near-full employment, ongoing economic growth and inflation above the U.S. central bank's 2% target, the super-low interest rates Trump seeks could easily backfire if investors in the $36 trillion Treasury market saw such a move as meaning the Fed had caved to political pressure and cut rates for the wrong reasons. Congress tasked the Fed with maintaining stable prices and full employment, not making deficit spending cheap, and slashing rates in the current environment could well reignite inflation. "I am not necessarily convinced that ... if the Fed tomorrow decided we are cutting to 1%, that this would have the traditional impact on long-term interest rates. The bond market fear would be that inflation would reignite and essentially we would have a loss of Fed independence and a de-anchoring of inflation expectations," said Gregory Daco, chief economist at EY-Parthenon. Though there is "scope to ease" from the current 4.25%-4.50% range, it is nothing like the magnitude of cuts Trump envisions, he said. Daco, noting the unemployment rate is 4.1%, the economy is growing around 2% and inflation is about 2.5%, said: "From a data perspective there is not anything to suggest the need for an immediate and substantial lowering." IS 1% NORMAL? A 1% Fed policy rate has not been uncommon in the last quarter of a century, but is no sign of good times, coinciding with joblessness of 6% or higher. Former President George W. Bush governed at a time when the rate was 1%. It occurred shortly after the U.S. invaded Iraq in 2003 and at the end of a string of Fed rate cuts following the dot-com crash and the September 11, 2001, attacks on the U.S. Former President Barack Obama inherited a near-zero Fed policy rate when he took office in January 2009. He also inherited a global financial crisis. Trump himself got the same near-zero interest rate treatment from the Fed in the last months of his first term in the White House - when the COVID-19 pandemic shut down the economy. WHAT THE FED CONTROLS, AND DOESN'T While hugely influential, the Fed has limited tools to influence the economy in normal times. U.S. central bankers meet typically eight times a year to set what is called the federal funds rate. Only banks borrow overnight at that rate, but it is a benchmark for other credit, influencing everything from corporate debt to home mortgages, consumer credit cards, and Treasury yields. Perhaps as importantly, it shapes expectations about where rates are headed. While closely correlated with the Fed's policy rate, those other rates are not set directly by the central bank. There's always a spread, including for what's been top of mind for Trump: the interest rate on U.S. Treasuries. SUPPLY, DEMAND AND RISK Global trading across an array of markets ultimately determines those other rates. A foreign pension fund's demand for Treasuries or mortgage-backed securities, for instance, influences what Americans pay for a mortgage or the U.S. government pays to finance its operations. Supply and demand are critical. U.S. government debt supply is determined by spending and tax levels set by the president and Congress. The federal government typically spends more each year than what it receives in tax collections and other revenue, and Treasury covers that annual deficit with borrowed money, issuing securities due in as few as 30 days to as long as 30 years. All things equal, larger deficits and more accumulated debt mean higher interest rates. Deficits and debt are expected to rise following the passage in Congress earlier this month of Trump's "One Big Beautiful Bill Act." On the demand side, the U.S. enjoys a privileged position that holds down government borrowing costs since it is still considered a relatively risk-free investment with plenty of supply, deep and well-functioning markets and a history of strong institutions and legal norms. Current returns above 4% are particularly attractive for large pension funds or retirees who want income while being assured their investment is safe. But, like any borrower, the U.S. government must pay a premium for the risk an investor takes on. Locking up money in a 10-year Treasury note means other opportunities are foregone. Rates of interest, inflation and economic growth may all change in that span, and investors want compensation for those risks. With the Fed policy rate as a starting point, all of those factors are piled on in the form of a "term premium." Intangibles, like trust in a country's institutions, also matter. When Trump's threats to fire Fed Chair Jerome Powell intensified in April, yields rose and the president backed off - a sign that global markets have an important vote in central bank independence. IS FED POLICY OUT OF LINE? Trump recently sent Powell a handwritten note with a list of central bank rates and penciled in where he thought the Fed's policy rate should be, near the bottom. U.S. central bank policymakers say it would be risky to cut rates until it is clear that Trump's new tariffs - many already imposed and more still to come - aren't going to stoke inflation. Central bankers often refer to policy formulas or rules that relate their inflation target to incoming and forecasted economic data to point to an appropriate interest rate. None suggest a Fed policy rate as low as Trump wants. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data


Reuters
2 days ago
- Business
- Reuters
Why Trump's push for a 1% Fed policy rate could spell trouble for US economy
WASHINGTON, July 14 (Reuters) - U.S. President Donald Trump says the Federal Reserve should set its benchmark interest rate at 1% to lower government borrowing costs, allowing the administration to finance the high and rising deficits expected from his spending and tax-cut bill. Trump should be careful what he wishes for. A Fed policy rate that low is not typically a sign that the U.S. is the "hottest" country in the world for investment, as Trump has said. It is usually a crisis response to an economy in serious trouble. The U.S. economy isn't in that kind of trouble now. But with near-full employment, ongoing economic growth and inflation above the U.S. central bank's 2% target, the super-low interest rates Trump seeks could easily backfire if investors in the $36 trillion Treasury market saw such a move as meaning the Fed had caved to political pressure and cut rates for the wrong reasons. Congress tasked the Fed with maintaining stable prices and full employment, not making deficit spending cheap, and slashing rates in the current environment could well reignite inflation. "I am not necessarily convinced that ... if the Fed tomorrow decided we are cutting to 1%, that this would have the traditional impact on long-term interest rates. The bond market fear would be that inflation would reignite and essentially we would have a loss of Fed independence and a de-anchoring of inflation expectations," said Gregory Daco, chief economist at EY-Parthenon. Though there is "scope to ease" from the current 4.25%-4.50% range, it is nothing like the magnitude of cuts Trump envisions, he said. Daco, noting the unemployment rate is 4.1%, the economy is growing around 2% and inflation is about 2.5%, said: "From a data perspective there is not anything to suggest the need for an immediate and substantial lowering." A 1% Fed policy rate has not been uncommon in the last quarter of a century, but is no sign of good times, coinciding with joblessness of 6% or higher. Former President George W. Bush governed at a time when the rate was 1%. It occurred shortly after the U.S. invaded Iraq in 2003 and at the end of a string of Fed rate cuts following the dot-com crash and the September 11, 2001, attacks on the U.S. Former President Barack Obama inherited a near-zero Fed policy rate when he took office in January 2009. He also inherited a global financial crisis. Trump himself got the same near-zero interest rate treatment from the Fed in the last months of his first term in the White House - when the COVID-19 pandemic shut down the economy. While hugely influential, the Fed has limited tools to influence the economy in normal times. U.S. central bankers meet typically eight times a year to set what is called the federal funds rate. Only banks borrow overnight at that rate, but it is a benchmark for other credit, influencing everything from corporate debt to home mortgages, consumer credit cards, and Treasury yields. Perhaps as importantly, it shapes expectations about where rates are headed. While closely correlated with the Fed's policy rate, those other rates are not set directly by the central bank. There's always a spread, including for what's been top of mind for Trump: the interest rate on U.S. Treasuries. Global trading across an array of markets ultimately determines those other rates. A foreign pension fund's demand for Treasuries or mortgage-backed securities, for instance, influences what Americans pay for a mortgage or the U.S. government pays to finance its operations. Supply and demand are critical. U.S. government debt supply is determined by spending and tax levels set by the president and Congress. The federal government typically spends more each year than what it receives in tax collections and other revenue, and Treasury covers that annual deficit with borrowed money, issuing securities due in as few as 30 days to as long as 30 years. All things equal, larger deficits and more accumulated debt mean higher interest rates. Deficits and debt are expected to rise following the passage in Congress earlier this month of Trump's "One Big Beautiful Bill Act." On the demand side, the U.S. enjoys a privileged position that holds down government borrowing costs since it is still considered a relatively risk-free investment with plenty of supply, deep and well-functioning markets and a history of strong institutions and legal norms. Current returns above 4% are particularly attractive for large pension funds or retirees who want income while being assured their investment is safe. But, like any borrower, the U.S. government must pay a premium for the risk an investor takes on. Locking up money in a 10-year Treasury note means other opportunities are foregone. Rates of interest, inflation and economic growth may all change in that span, and investors want compensation for those risks. With the Fed policy rate as a starting point, all of those factors are piled on in the form of a "term premium." Intangibles, like trust in a country's institutions, also matter. When Trump's threats to fire Fed Chair Jerome Powell intensified in April, yields rose and the president backed off - a sign that global markets have an important vote in central bank independence. Trump recently sent Powell a handwritten note with a list of central bank rates and penciled in where he thought the Fed's policy rate should be, near the bottom. U.S. central bank policymakers say it would be risky to cut rates until it is clear that Trump's new tariffs - many already imposed and more still to come - aren't going to stoke inflation. Central bankers often refer to policy formulas or rules that relate their inflation target to incoming and forecasted economic data to point to an appropriate interest rate. None suggest a Fed policy rate as low as Trump wants.


Zawya
2 days ago
- Business
- Zawya
Why Trump's push for a 1% Fed policy rate could spell trouble for US economy
U.S. President Donald Trump says the Federal Reserve should set its benchmark interest rate at 1% to lower government borrowing costs, allowing the administration to finance the high and rising deficits expected from his spending and tax-cut bill. Trump should be careful what he wishes for. A Fed policy rate that low is not typically a sign that the U.S. is the "hottest" country in the world for investment, as Trump has said. It is usually a crisis response to an economy in serious trouble. The U.S. economy isn't in that kind of trouble now. But with near-full employment, ongoing economic growth and inflation above the U.S. central bank's 2% target, the super-low interest rates Trump seeks could easily backfire if investors in the $36 trillion Treasury market saw such a move as meaning the Fed had caved to political pressure and cut rates for the wrong reasons. Congress tasked the Fed with maintaining stable prices and full employment, not making deficit spending cheap, and slashing rates in the current environment could well reignite inflation. "I am not necessarily convinced that ... if the Fed tomorrow decided we are cutting to 1%, that this would have the traditional impact on long-term interest rates. The bond market fear would be that inflation would reignite and essentially we would have a loss of Fed independence and a de-anchoring of inflation expectations," said Gregory Daco, chief economist at EY-Parthenon. Though there is "scope to ease" from the current 4.25%-4.50% range, it is nothing like the magnitude of cuts Trump envisions, he said. Daco, noting the unemployment rate is 4.1%, the economy is growing around 2% and inflation is about 2.5%, said: "From a data perspective there is not anything to suggest the need for an immediate and substantial lowering." IS 1% NORMAL? A 1% Fed policy rate has not been uncommon in the last quarter of a century, but is no sign of good times, coinciding with joblessness of 6% or higher. Former President George W. Bush governed at a time when the rate was 1%. It occurred shortly after the U.S. invaded Iraq in 2003 and at the end of a string of Fed rate cuts following the dot-com crash and the September 11, 2001, attacks on the U.S. Former President Barack Obama inherited a near-zero Fed policy rate when he took office in January 2009. He also inherited a global financial crisis. Trump himself got the same near-zero interest rate treatment from the Fed in the last months of his first term in the White House - when the COVID-19 pandemic shut down the economy. WHAT THE FED CONTROLS, AND DOESN'T While hugely influential, the Fed has limited tools to influence the economy in normal times. U.S. central bankers meet typically eight times a year to set what is called the federal funds rate. Only banks borrow overnight at that rate, but it is a benchmark for other credit, influencing everything from corporate debt to home mortgages, consumer credit cards, and Treasury yields. Perhaps as importantly, it shapes expectations about where rates are headed. While closely correlated with the Fed's policy rate, those other rates are not set directly by the central bank. There's always a spread, including for what's been top of mind for Trump: the interest rate on U.S. Treasuries. SUPPLY, DEMAND AND RISK Global trading across an array of markets ultimately determines those other rates. A foreign pension fund's demand for Treasuries or mortgage-backed securities, for instance, influences what Americans pay for a mortgage or the U.S. government pays to finance its operations. Supply and demand are critical. U.S. government debt supply is determined by spending and tax levels set by the president and Congress. The federal government typically spends more each year than what it receives in tax collections and other revenue, and Treasury covers that annual deficit with borrowed money, issuing securities due in as few as 30 days to as long as 30 years. All things equal, larger deficits and more accumulated debt mean higher interest rates. Deficits and debt are expected to rise following the passage in Congress earlier this month of Trump's "One Big Beautiful Bill Act." On the demand side, the U.S. enjoys a privileged position that holds down government borrowing costs since it is still considered a relatively risk-free investment with plenty of supply, deep and well-functioning markets and a history of strong institutions and legal norms. Current returns above 4% are particularly attractive for large pension funds or retirees who want income while being assured their investment is safe. But, like any borrower, the U.S. government must pay a premium for the risk an investor takes on. Locking up money in a 10-year Treasury note means other opportunities are foregone. Rates of interest, inflation and economic growth may all change in that span, and investors want compensation for those risks. With the Fed policy rate as a starting point, all of those factors are piled on in the form of a "term premium." Intangibles, like trust in a country's institutions, also matter. When Trump's threats to fire Fed Chair Jerome Powell intensified in April, yields rose and the president backed off - a sign that global markets have an important vote in central bank independence. IS FED POLICY OUT OF LINE? Trump recently sent Powell a handwritten note with a list of central bank rates and penciled in where he thought the Fed's policy rate should be, near the bottom. U.S. central bank policymakers say it would be risky to cut rates until it is clear that Trump's new tariffs - many already imposed and more still to come - aren't going to stoke inflation. Central bankers often refer to policy formulas or rules that relate their inflation target to incoming and forecasted economic data to point to an appropriate interest rate. None suggest a Fed policy rate as low as Trump wants. (Editing by Dan Burns and Paul Simao)