Latest news with #JohnRapley
Globe and Mail
6 days ago
- Business
- Globe and Mail
The stock market is booming. Our economies are busting. What's going on?
John Rapley is a contributing columnist for The Globe and Mail. He is an author and academic whose books include Why Empires Fall and Twilight of the Money Gods. Stock markets are probing fresh heights. Among the G7 economies, only Italy's isn't in record territory and even Japan, which looked to have entered terminal decline after its 1990 crash, is now back within touching distance of those long-ago highs. House prices as well are near their all-time highs in most places, slightly off their recent peaks but still far above where they ever were before. And that's nothing compared with crypto and gold – bitcoin is up more than a quarter this year, gold nearly a third. In short, we're getting richer by the day. Which is kind of strange, because our economies are barely moving. Of the major economies, only the United States has shown any significant expansion recently and even that is now slowing rapidly. Reflecting this new deceleration, the corporate-earnings season now under way in the United States is turning out to be a dud, with profit growth coming in well below the rate of share-price increases. In short, the strength of market rallies doesn't reflect what's happening in economies, which are weak and getting weaker. So what's going on? Some of it is rebalancing. Talk of all-time highs in the U.S. stock market cloud the reality – the U.S. is the laggard, it's stock market up a mere 5 per cent since President Donald Trump took office and 8 per cent for the year, a far cry from Germany's 22 per cent or Hong Kong's 28 per cent. Currency effects make the discrepancy even more dramatic, leaving the U.S. market down in euro and peso terms, and pretty much flat in Canadian dollars. Lofty U.S. stock valuations bank on tech-heavy market's earnings strength For years the U.S. stock market sucked the air out of the world's markets. At its peak, it accounted for more than half of the world's publicly traded capital, the Magnificent Seven tech stocks alone having a combined value bigger than any other stock market on the planet. But now, money has begun returning home. That explains the weakening of the dollar. Given how much smaller than the U.S. these markets are, flows of this scale have an outsized impact on prices. As a result, the laggards of the past decade, such as Spain, Hong Kong, South Africa and Britain, have become winners, with a small share of repatriated investment making for big rallies. This rebalancing was always bound to happen at some point, but Mr. Trump's policies are accelerating it. Though presenting the trade 'deals' he's now rolling out as wins, because other countries have to 'pay' higher tariffs than the U.S., it's an odd victory when your consumers must pay more for their goods than foreigners. After Mr. Trump announced his trade deal with Japan this week, Toyota's share price shot up 15 per cent, but Ford's barely budged. That's because the price of a Toyota car will increase by 15 per cent, but Ford's will probably rise more, since the company must pay tariffs on all its inputs. The same is happening in bond markets, where the spread between U.S. government bonds and those of other countries, especially emerging markets, is narrowing. As the U.S. looks less investable, other countries lure capital back away from it. To this reallocation of investment one can add the massive amount of stimulus now entering the global pipeline – the tax cuts in Mr. Trump's Big Beautiful Bill, Germany's big stimulus program, NATO's rearmament, Japan's fiscal loosening: There's a lot of bond issuance coming, which will pump money into the world economy. The monetary tightening that had followed the 2021-22 inflation spike has now given way to an increase in global money supply that's running at an annual rate of more than 7 per cent. Opinion: The triple contradiction of Trumponomics could crash the world economy But what's good for markets isn't necessarily good for the economy. In the U.S., first-time homebuyers are spending a higher share of their income on mortgage payments today than they were before the 2008 crash, leaving less to spend or invest on other things, while squeezing future demand. The same is happening in Canada, and as we know one consequence of the rising cost of living is that voters are demanding a reduction in immigration. If voters don't always favour the harsh measures being taken against immigrants in the U.S., nonetheless virtually all Western countries are starting to clamp down on inflows. That is cutting off one of the few remaining sources of growth in Western economies, namely the rise in labour supply. Sooner or later, in short, markets will realign with the economy. Unless the latter picks up, the former are sure to fall. At the moment, a slowdown looks the more likely scenario. Whatever stimulus effects come from government's fiscal largesse, the impact of tariffs and slow growth in the labour market owing to immigration cutbacks will drag down growth. Investors are still pricing shares as if the good days will keep rolling. But this fall may bring a chill to markets.
Toronto Sun
21-07-2025
- Business
- Toronto Sun
CHARLEBOIS: Why food prices haven't spiked due to tariffs — yet
A shopper looks at a grocery bill in this file photo. Photo by Getty Images For months now, consumers across North America have been wondering: Where's the inflation? With tariffs making headlines constantly — particularly under the Trump administration — many expected food prices to spike. Yet, grocery bills haven't exploded. Not yet. This advertisement has not loaded yet, but your article continues below. THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLY Subscribe now to read the latest news in your city and across Canada. Unlimited online access to articles from across Canada with one account. Get exclusive access to the Toronto Sun ePaper, an electronic replica of the print edition that you can share, download and comment on. Enjoy insights and behind-the-scenes analysis from our award-winning journalists. Support local journalists and the next generation of journalists. Daily puzzles including the New York Times Crossword. SUBSCRIBE TO UNLOCK MORE ARTICLES Subscribe now to read the latest news in your city and across Canada. Unlimited online access to articles from across Canada with one account. Get exclusive access to the Toronto Sun ePaper, an electronic replica of the print edition that you can share, download and comment on. Enjoy insights and behind-the-scenes analysis from our award-winning journalists. Support local journalists and the next generation of journalists. Daily puzzles including the New York Times Crossword. REGISTER / SIGN IN TO UNLOCK MORE ARTICLES Create an account or sign in to continue with your reading experience. Access articles from across Canada with one account. Share your thoughts and join the conversation in the comments. Enjoy additional articles per month. Get email updates from your favourite authors. THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK. Create an account or sign in to continue with your reading experience. Access articles from across Canada with one account Share your thoughts and join the conversation in the comments Enjoy additional articles per month Get email updates from your favourite authors Don't have an account? Create Account As John Rapley, a leading economist, and others recently explained, that calm may be misleading. In Canada, food inflation in June came in at a moderate 2.8%, still well above the overall inflation rate of 1.9%, according to Statistics Canada. That gap underscores how food is still outpacing general inflation — but the divergence is narrowing, at least for now. Food inflation has eased from 3.8% earlier this year, but the rate of decline is slowing. In the United States, the trend is even more pronounced. The U.S. Consumer Price Index rose 2.7% year-over-year in June, while food prices climbed by approximately 3%. Grocery store prices matched that rate, and restaurant meals rose even more sharply. Prices for beef, coffee and citrus saw month-over-month increases exceeding 2%, showing clear signs of price pressure. Your noon-hour look at what's happening in Toronto and beyond. By signing up you consent to receive the above newsletter from Postmedia Network Inc. Please try again This advertisement has not loaded yet, but your article continues below. There's a dangerous assumption circulating in public discourse: If tariffs haven't already translated into higher prices, they probably won't. But food inflation doesn't follow a linear or predictable timetable. In fact, the current lull may signal something more troubling — a delayed blow to household budgets that could hit when consumers are least prepared. Donald Trump famously told Walmart a few months ago to 'eat up tariffs,' arguing that a giant like Walmart can absorb costs — until it can't. Rising input and inventory costs will eventually make their way up the food chain. When tariffs are announced, importers often rush to stockpile goods before the new duties apply. In the food sector, that means filling warehouses with tariff-free inventory — cheaper ingredients, packaging, even finished products. Retailers also hesitate to raise prices immediately, opting instead to absorb short-term costs to stay competitive, banking on smoother negotiations or more favourable media coverage. This advertisement has not loaded yet, but your article continues below. But those buffers don't last forever. Eventually, the warehouse shelves are emptied, and what replaces them is significantly more expensive. When that transition happens, price increases aren't gradual — they're abrupt. A $4.99 product suddenly becomes $5.69. It's subtle, but it's real. These step changes chip away at consumer trust and spark frustration, often directed at grocers, suppliers or policymakers. These numbers may not seem alarming in isolation — but they highlight a persistent gap between general inflation and the cost of feeding a family. And many retailers are still relying on pre-tariff inventories. That cushion is vanishing. RECOMMENDED VIDEO Then there's the 'uncertainty tax.' With Donald Trump's unpredictable Truth Social posts and erratic trade rhetoric, many food companies are preemptively pricing in the risk of higher tariffs to protect margins. Ironically, this ends up costing consumers more. In many ways, it's less damaging to know tariffs will be high than to be left in the dark. This advertisement has not loaded yet, but your article continues below. This type of inflation — delayed, compressed, and poorly understood — is especially difficult for central banks to manage. It's not driven by overheated demand but by distorted supply chains. Interest rate hikes won't reverse trade disruptions. But if consumer expectations shift — if people begin to panic-buy or demand higher wages — the inflationary cycle becomes self-perpetuating. In Canada, the stakes may be even higher. Our food system depends heavily on imported inputs — fertilizers, animal feed, specialty ingredients, packaging—and we are directly exposed to the consequences of U.S. trade policy. If Washington tightens tariffs on China or Mexico, the cost shock will ripple through Canadian supply chains, often without warning. This advertisement has not loaded yet, but your article continues below. So far, Canada's food inflation has moderated — and that's welcome news. But policymakers should be cautious about claiming victory. The lagging effects of tariffs — and the misplaced sense of security they create — risk lulling consumers and officials into complacency. In economics, timing is everything. And in food, timing can mean the difference between affordability and anxiety. — Dr. Sylvain Charlebois is the Director of the Agri-Food Analytics Lab at Dalhousie University and co-host of The Food Professor Podcast. He is currently a visiting scholar at McGill University in Montreal. Toronto & GTA Canada Toronto & GTA Football Editorial Cartoons
Globe and Mail
19-07-2025
- Business
- Globe and Mail
Trump's tariffs haven't raised prices yet. That might be a bad sign
John Rapley is a contributing columnist for The Globe and Mail. He is an author and academic whose books include Why Empires Fall and Twilight of the Money Gods. This week's inflation reports in both the United States and Canada were surprisingly benign, given we're in a trade war. In both countries, inflation ticked upwards, but just a bit: enough to keep central banks from cutting interest rates but not to ring the sort of alarm bells that the 'Liberation Day' tariff announcement set off. On the face of it, therefore, Donald Trump has been vindicated. White House press secretary Karoline Leavitt crowed, 'The data proves that President Trump is stabilizing inflation and the Panicans continue to be wrong about tariffs raising prices.' To underscore this point, much was made of a release showing Japanese car prices falling, apparent evidence that Mr. Trump's prediction that foreigners would pay the tariffs was being borne out. But in fact, the data may be more troubling than the White House is letting on. The Japanese figures appear to have been a one-off, reflecting the large cushion Japanese automakers had accumulated: years of a weak yen having made their cars cheap in America, swelling their profits and thus allowing them to slash prices to hold market share. U.S. Federal Reserve's inflation fears start to be realized with June CPI increase But the broader data we're getting on import prices doesn't reveal any softening. On the contrary, a mild inflation continues. So on the whole, foreign exporters aren't eating the tariffs by lowering their prices. That means someone stateside is paying them, and they're paying a lot – US$64-billion in the second quarter alone, nearly US$50-billion more than the same time last year. There are two candidates: businesses and consumers. The big surge in tariff revenues came in May, which confirms what was already suspected – that importers had got ahead of tariffs by stockpiling goods early in the year. Those stocks apparently began to run out only in May, which would account for the take-off of revenue collections then. Given the time between a good's arrival in port and its appearance on store shelves, we would not expect major price increases until perhaps the late summer, which explains some of the softness in prices. In addition, we're getting anecdotal evidence that American companies are, for now, absorbing the hit from tariffs. Given the on-again-off-again character of Mr. Trump's trade war, it's still not clear if tariffs will be in place later this year. He may chicken out and suspend them again, as investors expect, or he may win the great trade deals he's trying to squeeze out of other countries, dropping his tariffs in response. Until more clarity emerges about the long-term status of tariffs, companies are choosing not to alienate their customers with price rises, and are hoping for better days. That can't go on forever, though. Absorbing the tariffs is pressuring their bottom lines, which means they have less money left over for investments, pay rises or Christmas bonuses. This has been showing up in both the soft and hard data, with companies cutting back their hiring plans, job and wage growth slowing and future investment plans softening. Opinion: The market is in denial. Trump wants higher tariffs, and he's getting them Opinion: Trump's trade war madness won't last The picture that emerges, therefore, is of an economy that is slowing as businesses absorb the tariffs. The slowing economy has reduced demand, which in turn has caused service-sector prices to rise more slowly. That disinflation has then counterbalanced the price rises we are seeing elsewhere in the economy, where the impact of tariffs is starting to materialize. For instance, food prices are trending back up in the U.S., which is to be expected since unlike durable goods, food can't be stockpiled, so the effect of tariffs shows up more quickly. In other words, good news on inflation is bad news for the economy. That may be an omen of what lies ahead. If the economy continues slowing, falling demand may keep prices from rising too sharply, but it could also point to a coming recession. Hardly a vindication of the White House. If instead the tax-cuts windfall from Mr. Trump's Big Beautiful Bill stokes sufficient demand to keep the economy out of recession, but the tariffs remain in place, companies will eventually pass along the price rises. That could begin happening in the autumn. The return of inflation, not least to food prices, would also augur ill for the White House, given that Mr. Trump ran for office promising to bring them down. The worst scenario of all is that we get a bit of both, raising the prospect of the dreaded stagflation returning. Mr. Trump's get-out-of-jail card will be if America's trading partners cave and agree to trade deals which both boost U.S. export sales and allow tariffs to fall. So the next few weeks will be crucial, since the President has set Aug. 1 as a deadline for many of the tariffs to take effect. He has until then to end his trade wars, with either victory or surrender. If neither happens, autumn could turn ugly.
