Economic Expansion in US Threatened by Trump's Tariff Policies, according to OECD
🗞️ Hey there! Let's dive into the latest from White House Watch. Here's a sneak peek of what's in today's edition:
- US growth forecast slashed by OECD
- Trade spats with China heat up
- Trump toes the line with the Federalist Society
The OECD announced this morning that it's lowering its growth expectations for the U.S., warning that escalating trade disputes could stifle economic growth worldwide. The global economy is bracing for its weakest period since the COVID-19 pandemic, but the U.S. will feel the brunt of it, according to the OECD. They anticipate U.S. growth to slow to just 1.6% this year, down from 2.8% in 2024[4].
Inflation continues to linger, preventing the Federal Reserve from lowering interest rates until at least 2026. The Paris-based organization also trimmed its growth projections for China, France, India, Japan, South Africa, and the UK[4].
Álvaro Pereira, the OECD's chief economist, stated, "This has massive repercussions for everyone." Countries must swiftly strike trade deals to lower tariff barriers and avoid a significant hit to growth[4]. This latest assessment is a further downgrade from the OECD's already bearish March interim forecasts, which came before Trump's "liberation day" tariffs announcement[4].
Yesterday, the dollar slid towards a three-year low, and U.S. government bonds faced pressure as weak manufacturing data and concerns over the country's mammoth debt pile alarmed investors. Futures trading points to a lower open on Wall Street this morning[5].
An ISM survey of purchasing managers revealed weaker-than-expected results for the manufacturing sector at 48.5 for May, indicating a contraction for the fourth consecutive month. Analysts attribute this contraction to the ongoing unpredictability of Trump's trade war[5].
Joe Brusuelas, chief economist at tax and consulting firm RSM US, explained that the confusion caused by the trade policies is making it difficult for supply managers to source goods efficiently, potentially leading to supply chain bottlenecks and shortages[5].
The Latest Headlines
- Ties between the U.S. and Syria are warming, leading to a decrease in troops in Syria.
- China warned the U.S. of violating a trade truce and threatened strong countermeasures.
- Treasury Secretary Janet Yellen insisted that the U.S. "will never default" on its debt.
- Trump's plans to re-list the government's shares in Fannie Mae and Freddie Mac could generate substantial profits for two of the president's wealthy allies.
- Private equity dealmaking has reversed since Trump's "liberation day" tariffs announcements.
What We're Hearing
Trump's judicial appointees are articulating a challenge in balancing their allegiance to the White House with their commitment to the Constitution. Facing a contentious division between Maga loyalists demanding unwavering loyalty and traditional conservatives upholding constitutional principles, the future of the conservative legal movement is uncertain[6].
Tensions between Trump and the Federalist Society have escalated since two Republican appointees to the Court of International Trade, along with a Democrat, blocked his signature tariffs[6]. Trump alleged that Leonard Leo, co-chair of the Federalist Society, is "a bad person" and indicated dissatisfaction with the judicial advice he received. Remarks like these are emblematic of a longstanding rift between Trump and the conservative legal movement[6].
"To Trump, loyalty über alles," said Barbara Perry, professor of presidential studies at the University of Virginia's Miller Center[6]. This divide between Trump and the Federalist Society may be unbridgeable from Trump's perspective.
Viewpoints
- Gideon Rachman argues that Trump urgently needs to follow through on his fiery rhetoric[7].
- Larry Fink discusses the importance of better aligning capital markets with national priorities[8].
- Marietje Schaake explains why governments, including the U.S., could benefit from OpenAI's AI proposal[9].
- Ivan Krastev claims that hypocrisy, rather than corruption, is what will finally drive the U.S. to distance itself from Trump[10].
- Mohamed El-Erian outlines the challenges facing the Federal Reserve[11].
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- The latest economic analysis indicates that the US growth is expected to slow to 1.6% this year, according to the OECD, due to escalating trade disputes that could stifle global economic growth.
- Inflation continues to be a concern, preventing the Federal Reserve from lowering interest rates until at least 2026, as the global economy braces for its weakest period since the COVID-19 pandemic.
- Financial markets are exhibiting signs of instability, with the dollar sliding towards a three-year low, U.S. government bonds facing pressure, and futures trading indicating a lower open on Wall Street due to weak manufacturing data and concerns over the country's debt pile.
- The manufacturing sector is experiencing contraction, according to an ISM survey of purchasing managers, attributed to the ongoing unpredictability of trade wars and supply chain bottlenecks caused by confusion in Trump's trade policies.
- As the political landscape unfolds, tensions between Trump and the Federalist Society have escalated, with the future of the conservative legal movement being uncertain due to contentious division and allegations of disloyalty.
