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Axios
5 days ago
- Business
- Axios
Trump saves Christmas from price hikes with extended tariff pause
Christmas shoppers got a gift of sorts from the White House this week when the president pushed the tariff pause to August 1. Why it matters: The shift should give retailers more time to stockpile most goods ahead of the holiday season, potentially pushing some tariff-related price increases to next year. Catch up quick: The tariff pause was set by the White House last spring — after Trump's Liberation Day hikes were announced — and was supposed to be lifted Wednesday. This week the White House extended the deadline, sending trading partners letters with an August 1 target. After initially saying it wasn't a hard deadline, Trump on Tuesday said he means it and there will be no extensions. Zoom out: If higher rates do go into effect August 1, it's likely that consumers won't feel a difference until the new year, writes Paul Donovan, chief economist at UBS Wealth Management, in a note Monday. How it works: Goods en route to the U.S. as late as August 1 should be exempt from additional tariffs, Donovan explains. Since it can take as many as six weeks to move ships across the Pacific, that means some items could arrive as late as mid-September and still be tariffed at the lower rate. At the same time, retailers stockpile ahead of the Christmas season — and have been bringing forward inventory to avoid higher tariffs. The upshot is, most of the stuff on shelves for Christmas will have arrived before the new deadline. Reality check: Some items can't be stockpiled, and consumers would feel those price increases sooner. There are also baseline 10% levies already in place, so some prices will have already moved somewhat. The other side: "The Administration has consistently maintained that the cost of tariffs will be borne by foreign exporters who rely on access to the American economy, the world's biggest and best consumer market," spokesman Kush Desai said in an email to Axios. He also pointed out that President Trump on Tuesday said he'd never moved the deadline. Flashback: In August 2019, Trump delayed tariffs on Chinese imports, telling reporters "We're doing this for the Christmas season... Just in case some of the tariffs would have an impact on U.S. customers." It was the one time Trump acknowledged tariff increases could pass through to the consumer, Chad Brown, senior fellow at the Peterson Institute for International Economics, told Axios earlier this year. Ultimately, the U.S. got a trade deal with China and didn't impose increased tariffs on the consumer-facing products that were under threat, like iPhones, video game consoles, etc. The intrigue: Prices can rise absent tariffs. Companies stockpiling goods in warehouses will incur extra warehousing costs, writes Donovan. And all this talk about tariffs creates an opportunity for firms to raise prices anyway — which is what people are expecting. "Normal consumers are less likely to follow what is happening, and be more willing to accept price increases as being due to trade taxes, even if those taxes have been withdrawn," he notes. What to watch: "By January these effects will have gone," Donovan writes in an email to Axios. By then "the pre-tax increase inventory will have been sold and consumer prices will rise to reflect the additional trade taxes."
Business Insider
7 days ago
- Business
- Business Insider
Trump is targeting a group of countries over 'Anti-American' policies. Here's what the BRICS feud is all about.
President Donald Trump threatened the BRICS bloc with higher tariffs this week, taking aim at policies he described as anti-American. Trump targeted the bloc—which includes Brazil, Russia, India, China, South Africa, and other partner states—in a post on Truth Social on Monday, threatening to impose an additional 10% tariff on countries that align themselves with the "Anti-American policies of the BRICS." "There will be no exceptions to this policy," he added. Here's everything you need to know about the latest update in the trade war. Who is in the BRICS bloc? The bloc is made up of 11 countries, with Brazil, Russia, India, China, and South Africa being the five original members of the group. In 2024, the bloc officially extended its membership to Egypt, Ethiopia, Indonesia, Iran, Saudi Arabia, and the United Arab Emirates. The group also declared a handful of partner countries, which include Belarus, Bolivia, Cuba, Kazakhstan, Malaysia, Nigeria, Thailand, Uganda, and Uzbekistan. Because of the group's sprawling alliances, it's not clear which nations in particular Trump was targeting, Paul Donovan, the global chief economist at UBS Wealth Management, said. "It is not clear what this 'alignment' is; BRICS is not a coherent economic force, more a photo-opportunity playing at being a grown-up gathering," he said, commenting on Trump's tariff threat in a note on Monday. Why did Trump target the group? The core group of 11 nations recently held their annual summit and signed a new declaration in Rio de Janeiro over the weekend. The declaration, which shares the group's strategy for trade, finance, and other areas of reform, included several digs at Trump's tariff policy and the recent bombing of Iran, though the group avoided mentioning Trump and the US explicitly. "We voice serious concerns about the rise of unilateral tariff and non-tariff measures which distort trade," the group said in its declaration, adding that it believed trade-restrictive acts, including tariffs, could hurt global trade, upend supply chains, and inject more uncertainty in the global economy. On the attacks against Iran, the group said: "We condemn the military strikes against the Islamic Republic of Iran since 12 June 2025, which constitute a violation of international law and the Charter of the United Naitons, and express grave concern over the subsequent esclation of the security situation in the Middle East." The bloc called on the United Nationals Security Council to look into the matter. BRICS countries have angered Trump before Trump has had issues with the group in the past. In December, the bloc drew his ire with an effort to de-dollarize their economies, a practice that involves shifting away from US dollar and using other currencies to replace the greenback. The plan even included the potential for a new common currency used by the group for trade. Such an act could impact the US dollar as the dominant trade and reserve currency, though economists broadly agree the greenback won't be displaced as the world's top currency anytime soon. "The idea that the BRICS Countries are trying to move away from the Dollar while we stand by and watch is OVER," Trump wrote in a post on Truth Social in late 2024, threatening to impose a 100% tariff on nations that didn't promise to not shift away from the dollar or create a new BRICS currency. Trump also targeted several BRICS members and partner countries in his initial reciprocal tariff package on Liberation Day. Those affected include China, which recently signed a framework trade agreement with the US, as well as India, South Africa, Thailand, Kazakhstan, and Malaysia. In a separate Truth Social post on Monday, Trump assured his followers more "TARIFF Letters, and/or Deals" were on the way with "various Countries from around the World," which he said would be released at noon. Otherwise, the US will begin enforcing its original Liberation Day tariffs on August 1.
Business Times
09-05-2025
- Business
- Business Times
Germany's DAX Index hits record high after tariffs round trip
[FRANKFURT] Germany's DAX Index became the first major European gauge to surpass its March record high, recouping all declines sparked by US President Donald Trump's trade war. The stock index rose as much as 0.8 per cent to a level of 23,528.88, exceeding the intraday peak set on March 18. The pan-European Stoxx 600 Index gained 0.4 per cent by 9.10 am in London as US-China trade talks due this weekend buoyed sentiment. The DAX had previously slumped as much as 16 per cent as Trump's sweeping tariffs unleashed global market volatility. But the index has bounced as Washington took a softer tone on trade. Optimism around a German economic boom following the new government's fiscal reforms has also driven demand for local stocks. 'It needs to be said that the latest economic data, particularly in Germany, have been very favourable,' said Claudia Panseri, chief investment officer for France at UBS Wealth Management. 'This good news is coming in as the European Central Bank is giving signals it could lower rates a bit more than what investors expected.' The German index has become so popular that it's now relatively expensive, trading at the highest premium against its European peers since 2009. European stocks more widely have been in favour in 2025 as an improving economic outlook attracted investors looking for alternatives to US assets amid Trump's tariffs. The Stoxx 600 has so far outperformed the S&P 500 by a record 19 percentage points in dollar terms. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up While the European benchmark's price-to-earnings ratio of 14 is now slightly higher than its 20-year average, it's still far cheaper than the S&P 500's ratio of nearly 21, according to data compiled by Bloomberg. About US$4.2 billion flowed into European stock funds in the week through May 7, according to a note from Bank of America citing EPFR Global data. BofA strategist Michael Hartnett has said he prefers international equities over the US this year. Among individual movers, Commerzbank rose 2.4 per cent after first-quarter profit unexpectedly rose as the German lender set aside less money than expected for souring loans amid the trade war. 'The banking sector has clearly been spearheading the European rally these past weeks along with industrials and real estate, these are solid drivers, notably for Germany,' Panseri at UBS Wealth Management said. BLOOMBERG
The Guardian
19-04-2025
- Business
- The Guardian
Could Trump's tariffs give a green light for corporate profiteering?
Over the past few years consumers have grown used to seeing prices rise at an exorbitant rate. The cost of everything – from used cars to utility bills and the humble loaf of bread – has rocketed in the worst inflation shock across advanced economies since the 1980s. While inflation has cooled in the past year, talk of fast-rising prices is back on the agenda from Donald Trump's escalating trade war. Most economists agree the US imposing tariffs on imports from its largest trading partners will lead to higher prices for American consumers. The picture is not as clear for other countries. Trump's trade policy could also change in an instant. However, experts say the very idea that consumers are expecting a fresh inflation burst could become self-fulfilling by giving companies cover to put up their prices. 'A narrative [is needed] to tell consumers why prices are going up. Tariffs provide exactly that story,' says Paul Donovan, the global chief economist at UBS Wealth Management. 'The fact we had the post-pandemic inflation waves has also changed things. Because we have had inflation in the past few years, for consumers – nobody likes it – but they are more accepting that this is what happens.' In the US, the Democrat senator Elizabeth Warren has warned Trump's tariffs could lead to profiteering, giving corporations a 'new set of excuses to price-gouge American consumers' and arguing that companies will probably put up prices even for goods that do not face additional border taxes. Elsewhere, the phenomenon has been labelled as 'greedflation', where businesses inflate their prices to increase profits rather than pass on legitimate cost increases to consumers. This week Sony announced it was putting up the price of its PlayStation 5 by as much as 25% in some markets. While the Japanese company did not explicitly blame the US president's policies, instead citing a 'challenging economic environment', analysts said the decision was more than likely an attempt to get ahead of Trump's tariffs. However, its decision included raising prices in the UK, Europe, Australia and New Zealand – highlighting how multinational companies could raise prices even in non-tariffed markets amid the escalating cost of using complex international supply chains during a global trade war. 'Sony's decision to raise PlayStation prices outside the US offers a glimpse of how Trump's tariffs could prove inflationary abroad in certain categories,' says Claus Vistesen, the chief eurozone economist at Pantheon Macroeconomics. Sony declined to comment. Experts say the inflationary risks are most extreme for US consumers – where headline inflation dipped to 2.4% in March, according to figures published earlier this month. Some economists warn inflation could hit 4% this year. On Wednesday Jerome Powell, the chair of the US Federal Reserve, warned tariffs were 'highly likely to at least generate a temporary rise in inflation,' in a challenge for the central bank. Even after Trump's partial retreat on his toughest 'liberation day' tariff threats – including rolling back to a 10% baseline charge on all trading partners, and a focused 145% rate on Chinese imports, barring some exemptions for electronics – US consumers are still facing a sharp rise in living costs. According to analysis by the Yale Budget Lab published this week, taking account of Washington's latest position, US consumers face an overall average effective tariff rate of 28%, the highest since 1901. It warns consumer prices could rise by 3% in the short-run as a consequence – the equivalent of an average per household loss of about $4,900 (£3,700) – with stark rises for clothing, shoes and electrical goods in particular. 'Part of the cost here is no one can figure out what the final policy will be,' says Martha Gimbel, the co-founder of the Budget Lab, who was previously on Joe Biden's White House council of economic advisers. 'The fact that consumer expectations of inflation are starting to go up suggest this is going to spill over and take off from an inflation standpoint. 'One of the tragedies of the tariffs is they're coming at a time when this inflationary period seemed to be moving behind us, and American households were starting to feel better. And now it seems like we're going to get the show on the road again for no reason whatsoever.' One piece of research that has gained near mythical status among economists in recent months is a 2020 study of tariffs Trump applied on washing machines during his first term. It found domestic machines and clothes dryers, which were not subjected to tariffs, also rose in price. Calling it a 'great example', Jerome Powell told a Fed press conference last month that it showed how tariffs can raise prices across the board. 'Manufacturers just, you know, they just followed the crowd and raised it.' Trump applied the tariffs, ranging from 10-50%, in 2018 after a complaint by the US manufacturer Whirlpool that foreign rivals were flooding the market with cheap machines, threatening American jobs. While the policy helped create about 1,800 new jobs, it came at an astronomical cost: consumer prices rose by almost $1.5bn, or about $817,000 per role. Felix Tintelnot, one of the report's authors and who is now an economics professor at Duke University, says there are several lessons that are relevant today. 'I'm not a fan of the term 'price gouging'. I think one needs to consider price changes on goods beyond those directly affected by tariffs – but one might also label this as smoothing out price changes. 'If there hadn't been the opportunity to raise dryer prices, washer prices might have risen more. Furthermore, facing less competition from foreign firms, domestic producers might raise their prices as well.' The danger of firms using the cover of tariffs is acknowledged among Trump's inner circle – to the point that, should inflation rise, it is clear the president will begin bashing corporates for price gouging. Andrew Ferguson, the US Federal Trade Commission chair, warned this month that the competition watchdog was watching to see that American companies compete vigorously on price. 'These necessary tariffs should not be interpreted as a green light for price fixing or any other unlawful behaviour,' he said. However, Paul Donovan says US companies have an opportunity. 'With imports of foreign goods being taxed, a US manufacturer can choose either to increase profit margin or increase market share. 'If, for example, your competitors are being charged [a tariff of] 20%, let's raise our prices 15%. Then you increase margin, and you also increase market share a bit.' Such a tactic could be tough after the multiple rounds of price increases since 2021, limiting company pricing power amid the risk that further price hikes could damage sales. However, Donovan says consumers expect more pain to come. 'My suspicion is, in an environment where there is a broad expectation of higher inflation in the US, where consumers are generally expecting it, companies will feel more able to go for the price increase option.' Despite this, expectations are deeply split along political lines. In the increasingly shattered US political landscape, Trump supporters bet tariffs are the magic bullet the economy needs, even as Democrats and mainstream economists decry them as madness. In the latest authoritative consumer sentiment survey from the University of Michigan, which is closely monitored by the Fed, Democrat voters reckoned inflation was on track to hit 7.9% within a year, while Republicans think it will collapse to 0.9%. 'It's all about the cable news channel you are watching. Some are saying this is the end of days, the others say: 'Tariffs are fine; they don't affect Americans, the foreigners pay them',' says Donovan. However, independent voters also think inflation will rise sharply, to 6.2%. The median expectation across all political persuasions was for a rise to 6.7%, the highest level since 1981. 'I am trying to answer this politely,' says Gimbel, when asked about the split. 'People are not necessarily paying attention to facts on the ground. 'I personally don't think inflation will skyrocket as high as the Democrats expect, and I don't think it's going to fall. But you are seeing inflation expectations spike among independents, and that speaks to the way this is starting to take off.'
Bloomberg
10-04-2025
- Business
- Bloomberg
Still Expect Rate Cuts from ECB, Fed: Panseri
UBS Wealth Management CIO France Claudia Panseri discusses market reaction to the 90-day pause in tariffs, the US dollar, and that she still expects rate cuts from the ECB and Fed this year. She speaks to Bloomberg's Anna Edwards, Kriti Gupta on 'The Opening Trade.' (Source: Bloomberg)
