Trump's Tariffs Shock the World
President Donald Trump's announcement of "reciprocal tariffs" has shocked the world. Nations and corporations were all expecting the US to increase tariffs but the scope and scale have caused severe tremors in the global economy. There's a base level of 10% tariffs on all trading partners. Imports from China (54%), Vietnam (46%), Bangladesh (37%), Pakistan (29%), India (26%), Japan (24%) and the European Union (20%) are all subject to higher tariffs. Even the poor African nation of Lesotho (GDP: $2.5 billion) has not been spared. It is now subject to a 50% tariff on the jeans it exports to the United States.
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| Trump's Reciprocal Tariffs. Source: CNBC |
The charts showing President Trump's claimed tariffs on US imports by other countries have no resemblance to reality. For example, the US Commerce Department claims Pakistan imposes a 58% tariff on imports from the US. Pakistan's trade weighted average tariffs on the US goods were 7.3% compared to 9.9% that the US charges on imports from Pakistan, according to the Pakistani Ministry of Commerce. Financial writer James Surowiecki has reverse engineered what the Trump team did to come up with the "tariffs charged to the U.S.A." column. Surowiecki found that these figures were worked out by dividing the US trade deficit with each country by the total US imports from that country. For example, the US buys more goods from China than it sells to them - there is a goods trade deficit of $295 billion. The total amount of goods it buys from China is $440 billion. Dividing 295 by 440 gets you to 67%.
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| Trump's Tariffs. Source: Express Tribune |
Higher tariffs on imports will raise the prices paid by the US consumers for imported goods such as electronics and textiles. And higher prices tend to depress demand. So Pakistan's main exports of textiles to the US will mean higher prices and lower demand. However, what is important is the difference in tariffs charged on imports from various countries. The fact that tariffs applied to Pakistani exports are lower than those applied to Bangladeshi, Chinese and Vietnamese textiles could help Pakistan gain market share in the US. In addition, Pakistan could attract Chinese manufacturers' investment who could then export their products from Pakistan to the US market.
The biggest fear expressed by most mainstream economists is that the Trump tariffs could trigger a global economic slowdown. Global investors have already sharply driven down major stock market indices across the globe. China, the world's second biggest economy, has already retaliated with 34% additional tariffs on imports from the US. Wharton economist Professor Jeremy Siegel has compared Trump's tariffs to the Smoot-Hawley tariffs that caused the Great Depression of the 1930s. Trump's tariffs put the effective tariff rate above the level of around 20% set by 1930’s Smoot-Hawley Tariff Act.
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Comments
With fox news commentators in charge, and a narcisstic clown loose - who don't have the time to find out what the actual tariffs are being charged by countries and who impose tariffs on uninhabited islands - Americans, and not just them, but the whole world has been an unwilling audience to a shit show.
by Fareed Zakaria
https://www.washingtonpost.com/opinions/2025/04/03/trump-tariff-fantasy-nostalgia/
“Liberation Day” is an apt name for President Donald Trump’s policy to impose massive new tariffs across the world. He sees the United States as a victimized colony, taken advantage of by other countries that have robbed it of jobs, industries and money. “Our country and its taxpayers have been ripped off for more than 50 years,” he said when announcing his plans on Wednesday. Trump’s acolytes, such as Vice President JD Vance and Commerce Secretary Howard Lutnick, parrot this view, painting a picture of a hollowed-out country with empty factories, unemployed workers and stagnant wages.
The reality is the opposite. And it is only because it is the opposite — in other words, because of America’s unrivaled economic power — that Trump can even attempt his tariff policy. It is U.S. economic heft that allows him to try to force the rest of the world to bend to his will. But Trump is using American power in such a capricious, destructive and dumb way that it will almost certainly result in a lose-lose outcome for everyone.
The real economic story of the past three decades is that the United States has surged ahead of all its major competitors. In 2008, the U.S. economy was about the same size as the euro zone’s; now, it is nearly twice the size. In 1990, average U.S. wages were about 20 percent greater than the overall average in the advanced industrial world; they are now about 40 percent higher. In 1995, a Japanese person was 50 percent richer than an American in terms of GDP per capita; today, an American is about 150 percent richer than a Japanese person. In fact, the poorest American state, Mississippi, has a higher per capita GDPthan Britain, France or Japan.
And yet Trump has been convinced that through all these decades, America is actually in steep decline. His worldview seems to have been set in the 1960s, when, in his memory, America was a great manufacturing power. (Another piece of that antique worldview is an overestimation of Moscow, which in his mind apparently remains a towering economic player on the world stage, with which he can do many important deals. Russia bizarrely has been excluded from any new tariffs.)
The reality of America as the dominant nation in the fastest-growing and most critical spheres of the global economy today — technology and services — seems to mean nothing to him. His tariffs have been calculated using a method closer to voodoo than economics. Among many mistakes, they are based solely on U.S. trade deficits with countries in goods. That the United States runs huge surpluses in services — exporting software, software services, movies, music, law and banking to the world — somehow doesn’t count. More than 75 percent of the U.S. economy is apparently intangible fluff; steel is the real deal.
But while America is the world’s dominant power, it is not so strong that it can act this irrationally. The world economy has grown to a size and scale that it will find ways around American protectionism, which is now among the world’s most egregious. Contrary to Trump’s stubborn beliefs, the United States was in fact already somewhat protectionist, with tariff and nontariff trade barriers greater than in 68 other countries. With these new tariffs, American protectionism is off the charts, with higher rates than the Smoot-Hawley ones of 1930 that exacerbated the Great Depression. In the short run, everyone will suffer. But in the medium to long run, countries will start trading around the United States.
by Fareed Zakaria
https://www.washingtonpost.com/opinions/2025/04/03/trump-tariff-fantasy-nostalgia/
But while America is the world’s dominant power, it is not so strong that it can act this irrationally. The world economy has grown to a size and scale that it will find ways around American protectionism, which is now among the world’s most egregious. Contrary to Trump’s stubborn beliefs, the United States was in fact already somewhat protectionist, with tariff and nontariff trade barriers greater than in 68 other countries. With these new tariffs, American protectionism is off the charts, with higher rates than the Smoot-Hawley ones of 1930 that exacerbated the Great Depression. In the short run, everyone will suffer. But in the medium to long run, countries will start trading around the United States.
This movement has already begun. Since Trump first took office in 2017, the United States has abandoned virtually all efforts to expand trade. But other countries have picked up the slack. The European Union has signed eight new trade deals, and China has signed nine. As Ruchir Sharma, the chair of Rockefeller International, notes, “Of the 10 fastest-growing trade corridors, five have one terminus in China; only two have a terminus in the U.S.” Countries around the world need growth, and that means trade. China will clearly be the big winner in this new world economy because it will position itself as the new center of trade. Add to this Trump’s hostility toward America’s closest allies, and you will likely see Europe, Canada and even some of America’s Asian allies find a way to work with China.
Trump’s nostalgic worldview is rooted even further back than the 1960s. He looks fondly on the late 19th century, when, as he described this week, the United States had only tariffs and no income tax, and America was stronger economically than it has ever been compared with the rest of the world. This history is nonsense. In 1900, the United States accounted for about 16 percent of the global economy by one measure; it is now about 26 percent of it. Americans’ standards of living and healthare much higher today.
But in acting out on his nostalgic fantasy, Trump might well end up dragging America back to what it was then: a poorer country, dominated by oligarchs and corruption, content to swagger around its backyard and bully its neighbors but marginal to the great currents of global economics and politics
https://www.cnn.com/2025/04/07/business/china-trump-tariffs-opportunity-analysis-intl-hnk/index.html?cid=ios_app
While many nations are scrambling to strike tariff deals with Trump, China is standing up to him, hoping to turn “crisis into opportunity.”
Within 48 hours of Trump’s market-hammering announcement of tariffs on countries across the world, the world’s second-largest economy swiftly retaliated with its own punitive measures on US goods and firms.
Then, after the US president vowed to ratchet up tariffs again on Monday, Beijing once again vowed to hold the line. “The US threat to escalate tariffs on China is a mistake on top of a mistake,” its Commerce Ministry said a statement.
The threat “once again exposes the blackmailing nature of the US,” the statement said. “China will never accept it. If the US insists on its own way, China will fight to the end.”
Beijing’s defiance is part of what has appeared to be a carefully calibrated confidence from a Chinese government that’s decided to position itself an oppositional force standing up to what it calls “unilateral bullying” from the US.
Over the weekend, Beijing telegraphed a clear message for its domestic audience and foreign countries: China is well prepared to weather a trade war – and come out stronger on the other side.
“US tariffs will have an impact (on China), but ‘the sky won’t fall,’” a commentary in the ruling Chinese Communist Party’s mouthpiece People’s Daily said Sunday.
“Since the US initiated the (first) trade war in 2017 – no matter how the US fights or presses – we have continued to develop and progress, demonstrating resilience – ‘the more pressure we get, the stronger we become,’” read the commentary, which was also on the front page of the paper’s Monday edition.
With the “strong leadership” of China’s Communist Party and the country’s “institutional advantages,” China was “sure to turn crisis into opportunity and move steadily into the future,” the commentary said.
Trump on Wednesday unveiled an additional 34% tariff on all Chinese goods imported into the US, bringing duties on all Chinese imports to the US to well over 54% when existing tariffs are taken into effect. Beijing hit back Friday with its own baseline 34% tariffs on all American imports, as well as other measures, including export controls on rare earth minerals and trade restrictions on specific US companies.
On Monday, the US president threatened to significantly ratchet up the trade war between the world’s two largest economies by slapping an additional 50% tariffs on Chinese imports midweek if Beijing doesn’t remove its retaliatory tariffs by Tuesday.
The American president also said China’s “requested meetings” with the US would be canceled.
Beijing’s rhetoric in response speaks to what could be the strategic calculation of Chinese leader Xi Jinping and his cadres in Beijing: that Trump is not just using the tariffs as a negotiating tactic – and the epic disruption to global trade has the potential to hurt the US more than China.
“Many (People’s Republic of China) counterparts have argued (the) US is making a mistake that will undermine its own global standing,” Ryan Hass, a senior fellow at the Washington-based Brookings Institution think tank, wrote on the social media platform X on Sunday, following meetings with government officials, scholars, business leaders during a visit to China.
“There’s debate about whether the world is entering a period of blocs or a transition to an era of globalization minus the US. Beijing seems to prefer the latter scenario,” he said, adding that “China’s leaders will not countenance being seen as passive in response to US.”
By Joe Cash, Philip Blenkinsop and Andy Sullivan
https://www.reuters.com/world/trumps-latest-tariffs-loom-set-deepen-global-trade-war-2025-04-09/
US duties target rivals and allies alike, risk recession
China lashes back with 84% tariffs on US goods from Thursday
JPMorgan CEO Dimon expects recession and defaults, urges quick trade talks
Alarm bells ring for investors as bonds tank
European Union approves its own tariffs
BEIJING/BRUSSELS/WASHINGTON, April 9 (Reuters) - China and the European Union announced new trade barriers on U.S. goods on Wednesday in response to steep duties imposed by U.S. President Donald Trump, escalating a global trade war that has hammered markets and raised the likelihood of recession.
China announced a tariff hike on U.S. imports to 84% from 34%, shortly after Trump's punitive 104% tariffs on Chinese imports kicked in on Wednesday, as a standoff between the world's two largest economies showed no signs of resolution.
The EU said it would impose 25% tariffs on a range of U.S. imports in a first round of countermeasures. The 27-member bloc faces U.S. tariffs of 20% on most products and higher duties on autos and steel. Countermeasures in Canada, a close U.S. ally and major trading partner, also took effect on Wednesday.
Targeted U.S. duties on dozens of other countries, from Japan to Madagascar, also took effect, the latest in a thicket of tariffsthat are unwinding a global trading order that has been in place for decades. Tariffs in the world's largest consumer market now average above 20%, according to various estimates, up from 2.5% before Trump took office.
JPMorgan Chase CEO Jamie Dimon, a prominent voice on economic matters, said Trump's tariffs would probably lead to a recession and defaults by borrowers.
Global markets took a pummeling, with the damage spreading beyond stock markets that have seen trillions of dollars in equity evaporate over the past week. Oil prices plunged to four-year lows, while investors dumped U.S. Treasury bonds and the dollar, which are typically seen as safe-haven assets. The damage rolled into corporate funding markets, raising the cost of borrowing for even lower-risk companies.
Japan and Canada said they would cooperate to stabilize the global financial system - a task usually taken on by the United States during times of crisis.
Trump has shrugged off the market rout and offered investors mixed signals about whether the tariffs will remain in the long term, describing them as "permanent" but also boasting that they are pressuring other leaders to ask for negotiations.
By Bloomberg
Donald Trump appeared to blink in the face of global, domestic and perhaps most importantly Wall Street fury at his singlehanded destabilization of stock markets, bonds and even oil prices. The 78-year-old Republican, who has been saying all week he wouldn’t back down from his tariffs, backed down. He did so, coincidentally, just hours after his much-touted “reciprocal” levies went into effect and China retaliated by raising its tariff on US goods to 84%.
But in calling for a 90-day delay of his own trade war escalation—the latest and biggest in a series of similar retreats—Trump didn’t step away when it came to China. Indeed, the US is now raising levies on Chinese goods to 125%.
As of now, US tariffs on steel, aluminum and automobiles remain at their current rates. Tariffs of 10% or 25% on Canadian and Mexico goods, with the exception of items covered by the North American trade pact, will also stay the same. European Union imports face only a 10% tax even though the bloc announced retaliation on the metals tariffs.
As Trump’s adjutants fanned out Wednesday afternoon to spin the sudden reversal, independent observers ascribed the administration’s partial capitulation to intense pressure from all quarters and the massive damage done to markets. The White House turnabout also included trial balloons of tariff exceptions for some US companies and protection for farmers.
But the damage may already be done. Though stocks predictably shot up on the news, the S&P 500 and Nasdaq still closed with more than seven months of gains unaccounted for. The “toxic uncertainty” that’s been the economic hallmark of Trump’s second term won’t go away, one economist told the New York Times, unless there’s a “major course correction.” —David E. Rovella
Editorial
https://www.theguardian.com/commentisfree/2025/apr/09/the-guardian-view-on-trumps-trade-war-no-one-will-win-but-china-is-taking-the-long-view
Beijing is braced for turbulence due to swingeing tariffs. But it sees a bigger, more promising story of US hegemonic decline
No one, least of all consumers and workers, will win the ferocious trade war that Donald Trump has unleashed. This is “a game of who can bear more pain”, in the words of one analyst. And because trade is at the heart of US ties with its biggest tariff target, China, the rest of the bilateral relationship is likely to deteriorate. That too is concerning.
Yet China, despite the economic struggles of recent years, may see a longer-term opportunity in the current crisis. Beijing’s response to the initial US tariff announcements was measured. Now it vows to “fight to the end” and has imposed an additional 50% tariff on US goods – taking the total to 84% – in retaliation for tariffs that Mr Trump now says will hit 125%.
Do not expect it to falter first. Concessions would likely be taken as a sign of weakness, encouraging the US to turn up the pressure. Xi Jinping is also a strongman who has dialled up nationalism as economic growth has slowed. Backing down would be humiliating, especially when the US vice-president, JD Vance, speaks dismissively of “Chinese peasants”.
Beijing is already allowing the yuan to weaken, though a major devaluation is thought unlikely. And it has been preparing for this moment. The end of its demographic boom, Mr Xi’s vision for his nation, the impact of the pandemic, Mr Trump’s first term and the bipartisan US turn against China (for which Beijing itself deserves much of the blame) have all begun to reshape the economy. China has diversified agricultural imports and found new markets for its goods – though exports to the US still account for just under 3% of its GDP. Last month, it announced plans to “vigorously boost” domestic consumption, though previous action on that long-held ambition has not matched the rhetoric.
Mr Trump’s abrupt announcement on Wednesday that he is suspending punitive tariffs on other countries for 90 days highlights an apparent underlying intention to make them distance themselves from China and stop them being used as a conduit for its goods. But if he goes ahead, high rates risk pushing them towards Beijing instead. Mr Trump’s erratic policy may also reflect growing anxieties about the impact of these tariffs, not least among his own supporters. China is confident that Mr Trump will come under growing pressure to rethink from billionaire backers, ageing workers watching their retirement funds dive, farmers, employees fearing for their jobs and consumers contemplating costlier iPhones and groceries. A bilateral deal is not impossible.
Beijing does not like what lies ahead. But in the longer term, it has more confidence in its trajectory. It looks back to the 2008 financial crisis, when it “saved the world” with its massive stimulus package, and looks ahead with new self-assurance after January’s AI “Sputnik moment” with its DeepSeek platform.
Above all, Beijing believes that when this storm has passed, few will regard the US as a dependable economic or security guarantor, and China will appear a more predictable, if not more likable, partner. At February’s Munich security conference – where Mr Vance’s sneering attack on European allies made the headlines – China’s foreign minister, Wang Yi, pledged that China would be “a steadfast constructive force” and “factor of certainty in this multipolar system”. Some countries may feel forced to live with Beijing’s own trade and investment restrictions, and its use of economic coercion for political purposes. Others may simply drift from America’s orbit.
This is a transformational moment in the global order. China expects to suffer. But it will not be entirely unhappy as it watches the US
@RnaudBertrand
Fundamentally, the extreme tariffs on China are the exact same mistake as the sanctions on Russia and will have the same principal effect: to prove in the eyes of the world the impotence of the United States.
https://x.com/RnaudBertrand/status/1910512816253263904
Which is pretty ironic when you think about it as in many ways one of Trump's key tasks in his mandate was to handle the US's defeat in Ukraine in a way that restores the US's image of strength; which he evidently wanted to do by throwing Europe under the bus and let them (and Ukraine) bear the costs and consequences of the defeat.
You'd think that would impress upon him the lesson of not making the same mistake again, yet here we are: he hasn't even negotiated an end to the Ukraine war yet he's already applying much the same script against China, an economic giant compared to Russia—the very embodiment of Einstein's proverbial definition of insanity.
And this time, unlike what happened with Russia, the US has far less legitimacy to do so and is completely and utterly alone in this endeavor: Europe won't be there to pass the buck to when things predictably go south.
Because that's without an inch of a doubt what will happen. I keep hearing this argument that China is much more dependent on the United States than the contrary; that when you're the surplus country you somehow have less leverage in a trade war than the deficit country.
This, I'm afraid, is the same type of magical and hubristic thinking we used to hear in 2022 when the West kept saying it would destroy the Russian economy.
For one China actually has very little dependence on exports to the US. They make up the equivalent of less than 3% of its GDP, and the immense majority of these aren't Chinese products but American products made in China: iPhones, Dell computers, Nike shoes, etc.
If you take an iPhone for instance, less than 2% of its costs go to Chinese workers making the phone, and all in all Apple makes an estimated 58.5% gross margin on its phones (https://en.wikipedia.org/wiki/Apple_supply_chain). So who's more hurt when you disrupt that supply chain: China or the United States? It's exports from China to the U.S., sure, but it's the U.S. that captures the most value here. And it's therefore first and foremost U.S. value that's being destroyed when you disrupt this trading relationship.
Don't take my word for it, just look at the latest economic forecasts. Goldman Sachs yesterday estimated that the new tariffs would cost China 0.5% of its GDP *growth* this year (https://x.com/DavidInglesTV/status/1910202004460417086), with the economy still growing at 4%. Meanwhile the same Goldman Sachs sees 45% chance of a US recession this year following the tariffs (https://wsj.com/livecoverage/stock-market-trump-tariffs-trade-war-04-09-25/card/goldman-sachs-reverts-its-base-case-to-no-recession-BtqS6LU37Tk5pwkRg5wV), with a GDP growth forecast of 0.5% for the year. Previously, before this tariff madness, they were predicting "another solid year" of economic growth for the U.S. at 2.5% GDP growth (https://goldmansachs.com/pdfs/insights/briefings/ASolidGrowthOutlookFor2025.pdf).
In other words, Goldman Sachs—which can't exactly be characterized as being biased in favor of "communist China"—believe that tariffs will cost China 0.5% of its GDP and the U.S. 2% of its GDP: the U.S. will be hit 4 times harder!
This is mostly because, as we'll undoubtedly discover in the coming weeks if this madness persists, the U.S. is much more dependent on China than the contrary.
It's not only end products like iPhones or Nike shoes that'll suffer but the entire U.S. supply chain: Trump keeps saying that imports are bad, that the U.S. needs to become autarkic and make everything at home, but according to the U.S. National Association of Manufacturers an incredible 56% of goods imported to the U.S. are actually manufacturing inputs (https://nam.org/issues/trade/), with a lot of that coming from China.
@RnaudBertrand
Fundamentally, the extreme tariffs on China are the exact same mistake as the sanctions on Russia and will have the same principal effect: to prove in the eyes of the world the impotence of the United States.
https://x.com/RnaudBertrand/status/1910512816253263904
This is mostly because, as we'll undoubtedly discover in the coming weeks if this madness persists, the U.S. is much more dependent on China than the contrary.
It's not only end products like iPhones or Nike shoes that'll suffer but the entire U.S. supply chain: Trump keeps saying that imports are bad, that the U.S. needs to become autarkic and make everything at home, but according to the U.S. National Association of Manufacturers an incredible 56% of goods imported to the U.S. are actually manufacturing inputs (https://nam.org/issues/trade/), with a lot of that coming from China.
How on earth can the U.S. develop manufacturing at home, if that is indeed the objective here, while cutting itself from manufacturing inputs? Anyone with an ounce of common sense can see that the logic is absurd.
All in all, history will likely record this moment as yet another key event in America's downfall when—blinded by the same hubris that characterized its Russian sanctions strategy—it deliberately undermined its own economic advantages.
Compounding the damage, other nations watching this self-inflicted wound as well as Trump's egoistic and crass "America first, come kiss my ass" rhetoric, will likely accelerate their own efforts to reduce economic exposure to the United States.
It's almost like a Greek tragedy about the inevitability of fate: despite all warnings and omens, the protagonist remains convinced of his exceptional destiny, only to discover too late that his desperate attempts to maintain dominance were themselves the prophesied instruments of his undoing.
By Josh Hammer, author of “Israel and Civilization: The Fate of the Jewish Nation and the Destiny of the West.”
https://www.latimes.com/opinion/story/2025-04-10/trump-tariffs-china-trade-war
Ever since President Nixon’s fateful trip to visit Chairman Mao Zedong in Beijing in 1972, American elites of all political stripes promised that welcoming China into the global economy would be good for all parties involved. American consumers, we were reliably informed, would get cheaper and more abundant goods; American exporters would get a massive and exciting new market to peddle their wares; and the Chinese people themselves would soon reap the rewards of the “political liberalization” that could only come about through “economic liberalization.” This was the dominant thinking when Nixon visited China over a half-century ago, when the George W. Bush administration welcomed China into the World Trade Organization in 2001, and when President Obama hosted and toasted Xi Jinping at the White House in 2015.
Suffice it to say it hasn’t exactly all worked out according to plan.
In Shanghai in 2022, amid the communist country’s interminable COVID-19 lockdowns, government drones with loudspeakers blasted: “Control your soul’s thirst for freedom. Do not open your windows and sing.” Chinese companies have engaged in serial intellectual property theft, brazenly stealing American companies’ trade secrets and illegally repackaging them for export at heavily subsidized prices.
TikTok, one particularly problematic Chinese export, is mental fentanyl designed to addict the Western masses and dupe them into poisonous ideologies — and Communist Party spyware, to boot. Speaking of (actual) fentanyl, China is largely responsible for that particular drug killing hundreds of thousands of vulnerable young Americans. Meanwhile, China sends “spy balloons” across the North American continent and routinely allies with the worst state actors on the planet. And if that weren’t bad enough, America’s manufacturing base and national security-critical supply chain infrastructure have been decimated — by China.
For far too long, elites have led America to disaster when it comes to trade with China. They have acted in myopic and ruinous fashion, bringing calamity to the nation they purport to love. America’s trade war with the rogue Chinese superpower must happen. The Chinese Communist Party must be crushed — and there is no one better to crush them than the White House-dwelling class traitor par excellence, Donald Trump. Godspeed, Mr. President.
Billed as so rock-solid safe they’re risk-free, US Treasury bonds have long been the first port of call for investors during times of panic. They rallied during the global financial crisis, on 9/11 and even when America’s own credit rating was cut.
But this time may be different. As President Donald Trump unleashes an all-out assault on global trade, their status as the world’s safe haven is increasingly coming into question. They are trading, in other words, a little like a risky asset themselves. Or, as former Treasury Secretary Lawrence Summers says, like the debt of an emerging-market country.
Yields, especially on longer-term debt, have surged in recent days while the dollar has plunged. Even more disconcerting for America is the pattern of recent market moves. Investors have often dumped 10- and 30-year Treasuries—pushing prices down and yields up—at the very same time they frantically sold stocks, crypto and other risky assets. The inverse is also true, with Treasuries rising in unison with them. This has many on Wall Street increasingly nervous.
This volatility—and the risk of destabilizing the US financial system—is seen as likely to continue when markets open Monday. Trump, 78, has continued to up the ante in one of the biggest poker games in history, and his main opponent—China—keeps matching his raises. Just this morning, Beijing said it will boost tariffs on all US goods from 84% to 125%.
Perhaps hoping to bluff his way to a win, Trump has said he’s waiting for Xi Jinping to call him. But the Chinese leader has shown an unwillingness to back down. China has in fact been publicly adamant, going so far as calling Trump’s tariffs a “joke.” At this point, the levies on both sides are so high that trade between the world’s two largest economies is effectively about to halt. Which means any further escalation would have to be in other areas. And China has signaled it may go there. —David E. Rovella
https://tribune.com.pk/story/2539796/pakistans-exports-to-us-climb-104-in-fy25s-first-eight-months
Pakistan’s exports to the United States rose by 10.4% during the first eight months of the current fiscal year, driven largely by robust performance in textiles and garments, accoring to a report published on the state-run PTV World website.
Overall exports to North America reached $4.2 billion in the July–February period of FY25, marking a 9.7% year-on-year increase.
The surge was led by the textile sector, which accounted for approximately 94% of total exports to the U.S., underlining the industry's continued importance to Pakistan’s trade balance.
Officials credited the growth to government trade reforms and facilitation efforts by the Special Investment Facilitation Council (SIFC), which has sought to streamline investment and export processes.
The uptick in exports is viewed as a welcome development for Pakistan’s foreign exchange position, which remains under pressure despite recent improvements in reserves.
Analysts say the increase signals a gradual recovery in the country’s export sector, and reflects growing demand for Pakistani goods in key overseas markets.
Further trade gains could depend on global economic conditions and continued structural improvements in export infrastructure, they added.
Moreover, remittances to Pakistan are expected to have reached a record $4.1 billion in March, State Bank of Pakistan (SBP) Governor Jameel Ahmad said on Monday, signalling renewed economic momentum in the wake of last year’s fiscal crisis.
Speaking at the Pakistan Stock Exchange, Ahmad said that foreign exchange reserves were projected to surpass $14 billion by June, helped by rising inflows from overseas Pakistanis and improved balance of payments.
Remittances rose to $3.12bn in February, up 40% year-on-year, and increased by 3.8% month-on-month. Total inflows for the first nine months of FY25 (July–March) stood at $28.07bn, a 33% increase from the same period last year.
According to brokerage AKD Securities, the March inflows were primarily from Saudi Arabia ($987m), the UAE ($842m), the UK ($684m), and the US ($419m).
Ahmad added that Pakistan faced foreign debt obligations of $26bn in FY25, but around $16bn of that was expected to be rolled over or refinanced, easing near-term pressure.
Despite an underperforming agricultural season, the SBP governor said GDP growth was likely to fall in the 2.5–3% range, down from a potential 4.2% had farming output met expectations.
Ahmad also noted a significant drop in inflation, calling March’s consumer price index (CPI) reading of 0.7% year-on-year “historic” — the lowest since December 1965.
The surprise decline in inflation exceeded market and finance ministry expectations, which had forecast between 1% and 1.5%. It was largely attributed to falling prices of wheat, perishable food items, and electricity charges.
Pakistan faced a deep economic crisis in 2023, prompting a $7bn bailout from the International Monetary Fund. The IMF forecasts Pakistan’s GDP growth to gradually rise to 4.5% by 2029.
Slash the trade deficit and the net inflow of foreign money dries up; this will hit share prices and raise the cost of borrowing for companies
https://www.wsj.com/finance/investing/who-will-pay-the-price-for-trumps-economic-goals-37a7df15?st=kFTAYm&reflink=article_email_share
For years, Americans have imported way more than they exported, thus the trade deficit in the current-account part of the equation. For the balance of payments to balance, there needs to be a corresponding inflow of capital. That has largely come from foreigners buying assets, most prominently stocks and government debt in the form of Treasurys.
Trump’s plan will disrupt that dynamic. Smaller trade deficits mean smaller inflows of capital.
Trump’s obsession is the goods deficit—and there are two ways it can come down.
The first is that the overall goods-and-services deficit remains unchanged, but services—about which Trump doesn’t seem to care and in which the U.S. runs a surplus—are sacrificed for manufacturing. To wit: hurt Wall Street and Silicon Valley to benefit Main Street. This, though, would need shifts in domestic tax and regulation.
The second way for the goods deficit to shrink is to reduce the overall trade deficit. That will mean less foreign money coming in (remember, the balance has to balance). Combine that with more investment in manufacturing—because imported goods are made less competitive by tariffs—and it will mean America has to provide more of the savings to finance new assembly plants, clean rooms and sweatshops.
But domestically things have to balance, too. More savings means less consumption. The flip side of America relying on foreign savings all these years is that it has been able to consume far more. The rest of the world has to work for a living, while America gets stuff in return for promising its full faith and credit.
At the risk of joining the Trumpsplainers, I’ve long thought of Trump as focused on people as workers rather than as consumers. The existing system is focused on delivering stuff to satisfy consumer wants, and let jobs fall where they will, even if that is outside the U.S., rather than delivering jobs and supplying only the stuff that ends up being produced.
Markets are trying to figure out the implications of upending this system. Here are four:
More expensive stuff, and less choice of stuff. Increasing saving means reducing consumption. The tariffs amount to the largest tax increase in decades, which counts as government “saving”—as well as pushing up the price for almost everything imported.
Higher interest rates. The capital inflows that offset the trade deficit help fund a big chunk of federal government borrowing. Slash the trade deficit and the net inflow of foreign money dries up. Bond yields will need to rise to attract domestic savers to buy Treasurys instead of stocks or corporate bonds, which will hit share prices and raise the cost of borrowing for companies.
Lower stock prices. Only a small chunk of foreign investments goes into building factories. If there were more foreign direct investment, it could finance at least some of the reconstruction of manufacturing. But we’ve assumed Trump succeeds in shrinking the trade and current-account deficits, so there will be less foreign money coming in (remember: balance). So more foreign factory building means less foreign buying of stocks and bonds, so lower stock prices.
A weaker dollar. In economic theory the dollar is the variable that moves when savings and investment don’t balance. If the U.S. saves too little to cover its investment, the dollar should weaken to make U.S. investments more attractive to foreigners.
https://www.cnbc.com/2025/04/17/china-targets-us-services-and-other-areas-after-decrying-meaningless-tariff-hikes-on-goods-.html
Targeting trade in services
China is seen by some as seeking to broaden the trade war to encompass services trade — which covers travel, legal, consulting and financial services — where the U.S. has been running a significant surplus with China for years.
Earlier this month, a social media account affiliated with Chinese state media Xinhua News Agency, suggested Beijing could impose curbs on U.S. legal consultancy firms and consider a probe into U.S. companies’ China operations for the huge “monopoly benefits” they have gained from intellectual-property rights.
China’s imports of U.S. services surged more than 10-fold to $55 billion in 2024 over the past two decades, according to Nomura estimates, driving U.S. services trade surplus with China to $32 billion last year.
Last week, China said it would reduce imports of U.S. films and warned its citizens against traveling or studying in the U.S., in a sign of Beijing’s intent to put pressure on the U.S. entertainment, tourism and education sectors.
“These measures target high-visibility sectors — aviation, media, and education — that resonate politically in the U.S.,” said Jing Qian, managing director at Center for China Analysis.
While they might be low on actual dollar impact given the smaller scale of these sectors, “reputational effects — such as fewer Chinese students or more cautious Chinese employees — could ripple through academia and the tech talent ecosystem,” he added.
Nomura estimates $24 billion could be at stake if Beijing significantly step up restrictions on travel to the U.S.
Travel dominated U.S. services to China, reflecting expenditure by millions of Chinese tourists in the U.S., according to Nomura. Within travel, education-related spending leads at 71%, it estimates, mostly coming from tuition and living expenses for the more than 270,000 Chinese students studying in the U.S.
Entertainment exports, encompassing films, music and television programs, accounted for just 6% of U.S. exports within this sector, the investment firm said, noting that Beijing’s latest move on film imports “carries more symbolic heft than economic bite.”
“We could see deeper decoupling — not only in supply chains, but in people-to-people ties, knowledge exchange, and regulatory frameworks. This may signal a shift from transactional tension to systemic divergence,” said Qian.
https://transcripts.cnn.com/show/fzgps/date/2025-04-20/segment/01
Today on the program, Trump takes on America's top colleges, freezing or pulling billions of dollars of funding from institutions like Harvard, Columbia and Cornell, unless they submit to his demands. I'll talk to the former President of Columbia, Lee Bollinger. Then, Elon Musk's DOGE has already removed some 280,000 federal employees from their jobs. The billionaire complains such workers tend to be liberal bureaucrats who work against the President's agenda. But, the author, Michael Lewis, found something very different when he reported on the government's workforce. He'll explain.
But first, here is my take. When Donald Trump was inaugurated, by most measures, the United States was the strongest major economy in the world. Growth was robust. Unemployment was at historic lows. Inflation had fallen to a manageable level, and productivity, the elixir of economics, had picked up. Trump took this booming economy and upended it with massive tariff hikes. Has anything like this ever been done before? Well, nothing quite as self-defeating, but the Smoot-Hawley tariffs were also imposed after a decade of heady growth. That story is worth recalling because there are startling set of parallels to today's situation.
We remember the 1920s as the roaring 20s, and in economic terms, it is apt. The annual growth rate for the decade was over four percent. Unemployment stayed low for most of it. Revolutionary innovations defined the period, allowing the mass production of cars, airplanes, telephones, radio and movies, television was birth then, as were band aids, which many saw as the greatest thing since sliced bread, which was also invented then. Henry Ford perfected the mass production techniques that would define modern manufacturing for decades. Just as the 1990s and 2000s were celebrated for creating a new economy, that was the feeling about the 1920s.
But, there was another story about the 20s, about the hollowing out of a core American industry, of jobs being shipped abroad, and the loss of the soul of the country. You see, agriculture had been at the heart of the American economy, comprising most of the workforce until the late 19th century. Even by 1900, 40 percent of the American workforce labored in the agricultural sector. The country was defined by its yeoman farmers. Every one of the first American presidents, Washington, Adams, Jefferson, had owned and run farms, but the rise of manufacturing had resulted in the erosion of that landscape. By the 1920s, more than half of the country had moved into cities, and only 25 percent of Americans worked in agriculture. The American way of life was in peril.
America's first great populist movement was birthed in the late 19th century in response to the decline of agriculture. It briefly captured the Democratic Party, with the fiery populist orator William Jennings Bryan becoming the nominee of the Democratic Party three times. By the 1920s, the movement had weakened and moved into parts of both the Democratic and Republican parties. It gained ground as farming got hit hard during that decade. You see, after the boom years of World War I, when America had fed a Europe at war, there was a sharp drop in demand once Europe's farms returned to production.
The Republican establishment was opposed to subsidies to benefit agriculture. Calvin Coolidge vetoed measures helping farmers when he was President in the 1920s. But, by 1930, in the wake of the 1929 stock market crash and economic slowdown, congressional Republicans from farm states were adamant. Farmers needed support. They allied with legislators who wanted to protect American industry and produced what they might have described as one big, beautiful bill that raised tariffs substantially on a variety of products, industrial and agricultural.