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      Trump is using tariffs as a blunt-force tool. It won’t work | Mike Williams

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      Last week, Donald Trump revived a trade war from his first term, implementing a 25% tariff on all imported steel. In doing so, he’s using tariffs as a blunt-force tool under the assumption that they’ll be sufficient to jump-start the American steel industry.But that’s not the case.Tariffs are important, but they’re far from enough. Thanks to decades of disinvestment and terrible trade policies, the steel industry has grappled with decline and stagnation for years. It now faces grave threats as China continues to flood the global market with artificially cheap steel, manipulating prices in its favor. Meanwhile, the global market has begun a shift towards “clean” steel produced with electricity and hydrogen, a process the United States has only just started to support.To survive, the steel industry must modernize. To support that effort, the federal government should be implementing targeted tariffs alongside investments and incentives that help the industry grow and transition.Strategic tariffs can help protect steel manufacturing from excessive overcapacity and unfair price manipulation by foreign competitors. They can also be used to account for other effects, such as the impact of high-emissions steel production on health and the environment. For example, a tariff that considers carbon emissions in the production of a given unit of steel would help protect the domestic steel industry from foreign competitors’ cheap, high-emissions steel. The European Union is already implementing this kind of tariff, called a carbon-border adjustment mechanism. Revenue from this tariff – and others – could help our steel industry transition to clean technologies and accelerate the industry’s modernization.When tariffs are used for negotiation without being combined with other government tools, they can backfire. Already, Canada and the EU are preparing reciprocal tariffs on American steel and aluminum, which will make American steel even less desirable in those markets. Steel is a critical material in countless supply chains, from cars and planes to housing and infrastructure, and across-the-board increases in steel prices carry widespread economic risks. Trump’s 2018 tariffs on steel provide a roadmap for what we can expect: while production temporarily ticked up, exports declined almost 25% between 2018 and 2020, and after retaliation from China and Mexico, economists downgraded growth estimates, and business investment slowed.Tariffs are necessary for correcting distortions in global trade but are a poor tool for catalyzing the kind of investment needed for the long-term viability of the American steel industry, which needs to transition to clean technology to remain competitive globally. While tariffs can protect existing production capacity from being undercut, they won’t necessarily yield large infrastructure and modernization investments from domestic steel companies already operating at slim margins.But just as it has started to do for our domestic semiconductor industry, the federal government can combine fortified trade policies with structural support for the steel industry’s transformation. This could include investment tax credits for revamping steel-production facilities to use clean technologies and production tax credits for making domestic clean steel, spurring private investment across the steel industry.The federal government could leverage existing policies as well. For example, expanding the Biden administration’s “Buy America” requirements for federally funded projects, such as highway and bridge construction, to include domestically produced, 100% clean steel would strengthen demand for US-produced steel. Reviving “Buy Clean” standards for steel used in federal projects could also accelerate the industry’s modernization. These structural supports could be funded by the revenue from targeted, well-designed tariffs.skip past newsletter promotionafter newsletter promotionTrump has claimed his tariffs will create a “manufacturing boom”, turn America into a manufacturing “powerhouse” and “make America rich again”. But going all in on tariffs alone is an unsteady foundation for industrial policy. Unless Trump expands his strategy to include incentives and investment for the steel industry, his approach will be like a game of Jenga: eventually, it will all come crashing down.

      Mike Williams is a senior fellow at the Center for American Progress and former deputy director of the BlueGreen Alliance More

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      Trump threatens 25% tariffs on foreign cars and semiconductor chips

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      Donald Trump stood firm against warnings that his threatened trade war risks derailing the US economy, claiming his administration could hit foreign cars with tariffs of around 25% within weeks.Semiconductor chips and drugs are set to face higher duties, Trump told reporters at a news conference on Tuesday.The White House has repeatedly raised the threat of tariffs since Trump returned to office last month, pledging to rebalance the global economic order in America’s favor.A string of announced tariffs have yet to be introduced, however, as economists and business urge the Trump administration to reconsider.Duties on imports from Canada and Mexico have been repeatedly delayed; modified levies on steel and aluminum, announced last week, will not be enforced until next month; and a wave of so-called “reciprocal” tariffs, also trailed last week, will not kick in before April.Tariffs are taxes on foreign goods. They are paid by the importer of the product – in this case, companies and consumers based inside the US – rather than the exporter, elsewhere in the world.Asked on Tuesday if he had decided the rate of a threatened tariff on cars from overseas, Trump said he would “probably” announce that on 2 April, “but it’ll be in the neighborhood of 25%”.Upon being asked the same question about threatened tariffs on semiconductors and pharmaceuticals, Trump replied: “It’ll be 25% and higher, and it’ll go very substantially higher over the course of a year.”The ramp-up, he explained, was designed to lure manufacturers to the US. “When they come into the United States, and they have their plant or factory here, there is no tariff.”Executives have cautioned that the administration’s plan for tariffs risks harming the US economy. A 25% tariff on Mexico and Canada “will blow a hole in the US industry that we have never seen”, Jim Farley, the Ford CEO, told an investor conference in New York last week. More

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      The Guardian view on Trump’s diplomacy: when the US knows the price and ignores values | Editorial

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      The Trump administration did not take red lines on Ukraine to its talks with Russia in Saudi Arabia on Tuesday: it cares about the bottom line. The secretary of state, Marco Rubio, underscored that when he said the two sides would create a team, not only to support Ukraine peace talks but also to explore the “incredible opportunities” to partner with Moscow geopolitically “and, frankly, economically” that might result.Kyiv and other European capitals are still reeling at the full extent of Donald Trump’s cynicism when it comes to world affairs, and callous disregard for the people caught up in them. But it should be no surprise that business dealings were high on the agenda. Vladimir Putin would dearly love to end his country’s economic isolation. Russia is making the case that American energy firms and others could profit handsomely by doing business with it again.For Mr Trump, his two key interests – money and power – are not only interrelated but fungible, just as US goals and his personal interests often appear indistinguishable to him. (This is a man who launched his own cryptocurrency token days before returning to the White House, and as he sought to ease regulation of the industry).When he talks of the future of Ukraine or Gaza, he speaks not of human rights and security, lives and homes, but of laying US hands on $500bn of minerals and a “big real-estate site” respectively. He believes in cutting deals, not making peace. At the heart of his foreign policy team is Steve Witkoff, not a diplomat but a billionaire real-estate developer and golf buddy. Mr Witkoff was first appointed as Middle East envoy and then dispatched to negotiate with Moscow. The head of Russia’s sovereign wealth fund, Kirill Dmitriev, was also in Riyadh – while Ukraine and European allies have been denied a seat.Mr Trump’s merging of wealth and strength were obvious even before he took office the first time. He suggested he could use Taiwan as leverage with China on issues including trade. John Bolton, who became his national security adviser, later said (though Mr Trump denied it) that the president pleaded with China’s leader, Xi Jinping, to ensure he would win the next election, “stress[ing] the importance of … increased Chinese purchases of soybeans and wheat in the electoral outcome”.Mr Trump’s Middle East policy is not only pleasing to his evangelical Christian supporters. His repugnant proposal to ethnically cleanse Palestinians from Gaza, allowing the construction of an American-owned “Riviera”, is shocking but in many ways builds upon ideas long held by businessman friends as well as Israeli settlers. His son-in-law, Jared Kushner, a former real-estate developer charged with overseeing Middle East policy in Mr Trump’s first term, suggested last year that Gaza’s “waterfront property” could be “very valuable”. (Saudi Arabia’s sovereign wealth fund, incidentally, became a major investor in Mr Kushner’s private equity firm after he left the administration.)Volodymyr Zelenskyy tried to capitalise on Mr Trump’s economic transactionalism by offering access to Ukraine’s resources, notably minerals, in exchange for security. He got Mr Trump’s attention – but the terms of the resulting US demand make it look less like diplomacy than extortion. The US president prices up everything and knows the value of nothing. Others must now endeavour to show him that his plans will not come as cheaply as he believes.

      Do you have an opinion on the issues raised in this article? If you would like to submit a response of up to 300 words by email to be considered for publication in our letters section, please click here. More

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      To the CEOs who’ve joined Trump’s fight against diversity, I say this: you’re making a big mistake | Stefan Stern

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      The mask has slipped and the gloves are off. A company which in 2022 boasted that it had exceeded its target, “spending $1.26 billion with US certified diverse suppliers”, is now ending diversity, equity and inclusion (DEI) initiatives.That company is Meta (formerly known as Facebook), whose chief executive, Mark Zuckerberg, announced DEI dismantling shortly before he had a prominent seat at Donald Trump’s recent inauguration. Perhaps from that privileged spot he was able to imbibe some of the “masculine energy” he says he wants to see at work.Meta is not alone in signalling a shift from its previous position. Amazon, McDonald’s, Accenture, Google, General Motors, Pepsi, Walmart and Boeing are among the corporate giants who are downplaying or removing altogether references to DEI and public commitments to it. The consultancy Deloitte used to declare that “diversity, equity and inclusion are core to our values”. But, the FT reports, the page those words appeared on has been wiped from its website.It is possible these decisions were taken partly on legal advice. Zuckerberg seems to have pre-empted the attorney general, Trump’s Florida favourite Pam Bondi, as she recently declared that there should be an end to what she called “illegal DEI” and “accessibility” discrimination. You can imagine that in-house counsel had anticipated legal trouble and so were moved to suggest caution on DEI issues. Zuckerberg is not merely being cautious, however. He has moved Maxine Williams, former chief diversity officer, to a role concerned with “accessibility and engagement”. Whether that restructuring will be enough to satisfy the Maga overlords remains to be seen.Some of the changes at other companies may be merely symbolic or presentational. And not everyone is backing down. The investment bank Goldman Sachs stated: “We strongly believe that organisations benefit from diverse perspectives” – although this belief has not stopped them from removing one of their former requirements for diversity in their clients. Goldman Sachs is still “committed to operating our programmes and policies in compliance with the law”, it says. Jamie Dimon, the boss of JPMorgan Chase, dared anti-DEI activists to challenge his bank’s pro-diversity stance. (But he is taking a hard line on forcing people to return to the office, despite remote working being key for modern diverse workforces.)All the same, the overriding effect of seeing that array of (newly) admiring CEOs lining up in Washington to salute the incoming chief was to recall the timeless Marxist dictum (Groucho, not Karl): “Those are my principles and if you don’t like them … well, I have others.”View image in fullscreenMaybe the pressure has finally got to some of these top bosses. A recent article from senior partners at McKinsey noted that “CEOs are on the job 24/7, responsible for addressing an ever-shifting array of problems and threats”.But perhaps part of the problem is feeding already narcissistic CEOs the sort of grandiose advice offered by the blue-chip consultants in their article. Likening the boss to an “elite athlete”, the authors argue that CEOs need to use their time purposefully (like LeBron James, the basketball star), “perfect the art of recovery” (like the footballer Cristiano Ronaldo), keep learning (like the golfer Bryson DeChambeau), embrace data and analytics (like a Formula One grand prix driver) and be adaptable and resilient (like the gymnast Simone Biles and … Muhammad Ali).The end product sounds like a remarkable person indeed: “This is how leaders can … build their resilience muscle, and become … ready to thrive in the 21st century, while staying humble, celebrating noble failures, and always helping team members.” Yep, nobody I know, either.In fact, bosses risk being cut off from the everyday concerns of their staff. An academic study into this phenomenon looking back decades, published in the American Journal of Sociology and called The Great Separation, draws on evidence from a dozen countries. The highest earners inhabit the same narrow terrain, and have limited contact with lower earners, the researchers found. This can affect how elites engage with the rest of society, and how in turn lower earners see them. This “great separation” may have had an impact on “the key social and political challenges of our time”, the study says. Brexit, Trump, populism and the rise of the new right may all be symptoms.Can the media do anything to help? The new media business Semafor has just launched a weekly newsletter called The CEO Signal, available (for free!) to bosses running companies with annual turnover of at least $500m (£400m). Its editor, Andrew Edgecliffe-Johnson, says there is a need for such a specially targeted publication: “There’s a place here in the market for something that’s much more tightly focused to the people at the very top of the org chart – who are actually trying to run exceedingly complicated organisations, at an increasingly complicated time,” he told the Press Gazette.“And there’s nobody in any organisation who faces the same list of challenges as the CEO does,” he added. “It’s a cliche to say that it’s lonely at the top, but there is something to that.” The venerable Harvard Business Review is also about to launch a new service specifically for the “C-suite” – that is, for people whose job title begins with the word “chief”.How these new publications will help to mitigate some of the problems highlighted by the “great separation” study is not immediately clear. I am, however, reminded of what Laura Empson, a professor at Bayes Business School in London, has observed: that if a leader complains it is lonely at the top then they “are not doing it right”.Rather than an ever-narrowing elite of CEOs becoming more and more detached from their workforce, we would do better to try to reconnect. Companies and workplaces should be vibrant and cohesive communities of people.The ghastly alternative could be seen at the White House last week, when Elon Musk cavorted around the Oval Office firing off wild and unsubstantiated accusations against public officials, while Trump looked on calmly. Musk confidently asserted, without offering any evidence, that some officials at the now gutted USAid had been taking “kickbacks”. This is not model CEO behaviour. And this is not the leadership we need.

      Stefan Stern is co-author of Myths of Management and the former director of the High Pay Centre. His latest book is Fair or Foul: the Lady Macbeth Guide to Ambition
      Do you have an opinion on the issues raised in this article? If you would like to submit a response of up to 300 words by email to be considered for publication in our letters section, please click here. More

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      ‘It comes from racism’: immigrant workers on Trump’s deportation push

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      Donald Trump has ramped up anti-immigration fervor into his second presidency, promising mass deportations, pushing to increase arrests and bolstering public relations efforts to amplify arrests. The moves have sent a wave of terror through the undocumented worker community that underpins large parts of the US economy.“Every day I wake up and walk out the door, I go with the hope of going to work, but with the fear of not being able to come back,” said a construction worker and single parent in Texas who obtained immigration protection under the Biden administration. She requested to remain anonymous due to fears about her immigration status.“Every day I worry if something happens, who will take my kids,” she said. “I have only one child born in the US. They are the only one who might be able to return, but me and the other kids would not be able to come back.”She claimed that since Trump took office for his second term, there had been fewer opportunities to work construction jobs given the increased fear of Immigration and Customs Enforcement (Ice) raids at workplaces.Despite being in the US for 10 years and constantly trying to obtain documentation, she explained it took her experiencing weeks of wage theft to be able to get documentation through the deferred action program, which provides temporary status and work authorization to immigrants who have been victims of labor abuses.“Unfortunately, these next few years will be years of fear, years of silence,” she said. “I believe the anti-immigrant pushes are racist. People have been taken away without criminal records. We used to have the ability to pay fines before because we didn’t have criminal records, but I’ve heard from other immigrants, anyone being taken into custody by Ice, regardless of their situation, will be deported.”Trump has signed an executive order to allocate military resources at the US border with Mexico and opened Guantánamo Bay prison in Cuba to the detention of undocumented immigrants. The Department of Homeland Security also rolled back a policy of restricting Ice arrests at sensitive locations such as hospitals, places of worship and schools and the agency is pushing to recruit IRS agents to assist in immigration enforcement. The administration is also reportedly planning to reopen family detention centers.View image in fullscreenThe changes come as Trump campaigned with misleading and false statements about immigrants, portraying them as criminals and taking away jobs, including making a baseless claim that Haitian immigrants in Ohio were eating pets.Despite this rhetoric fomenting xenophobic sentiments, an October 2024 report by the Economic Policy Institute on the benefits of immigration to the US cited the enabling of economic growth as the US-born workforce declines, and the payment of nearly $100bn annually in taxes, and noted mass deportations actually result in job losses for US-born workers due to reduced local demand output.Several industries rely heavily on immigrant workers. Nearly 2.9 million immigrants, the most in any occupation group, are employed in construction and extraction, comprising 34% of employment in these occupations in the US.The Guardian spoke with several immigrant workers in construction about their experiences and fears caused by Trump’s immigration policies and the anti-immigrant sentiments stoked by his rhetoric and policies.Another undocumented construction worker in Texas said there is a “constant fear” in going to work every day that his workplace will be raided by Ice or that he will return home to find his family, the majority of whom are undocumented, taken away.“It is a constant fear. It’s something we can’t take from our minds, every instance of the day,” they said. “My main worry is there will be one day where my family might be taken away from me and be sent back to Mexico.”Trying to acquire legal documentation has been “almost impossible”, they added. “The reason behind these policies, it comes from racism. The majority of immigrants aren’t criminals. Like myself, a lot of immigrants come to this country to be able to fulfill their dreams, to be able to work. We’re humans and we have rights. The things we go through when being held in immigration detention, unless you live them, you won’t be able to understand it.”Andres Surquia of Georgia currently has immigration protection through deferred action – a government policy that allows certain undocumented immigrants to work and avoid deportation for two-year periods.“I’m scared because Trump has said he wants to remove deferred-action protections, which took me so long to get,” he said. “As immigrants, we come into this country to work and we want to be respected and protected.”The International Union of Painters and Allied Trades, which represents 140,000 workers in the US and Canada, pushed to secure deferred-action immigration protections for workers experiencing labor abuses in construction for the past several years under the Biden administration.“It was one of the main pillars we put forth as a union, in coalition with other unions, that really view immigration as a working-class issue,” said the IUPAT general president, Jimmy Williams. “Now, under the Trump administration it’s going to go back to all these workers having no recourse, and the employers continuing to be able to use their status as a way to keep them further and further from being able to speak out.”Immigration is a labor and economic issue, Williams said. The union views it as a responsibility to fight and defend these workers because they are their union members. But he expressed disappointment with Democrats whom he feels have so far failed to support these workers.“Where’s the resistance?” Williams asked. “When will the Democratic party really get it right on framing this as a working-class issue and put the target solely on where it belongs, which is on the employers that have abused this system for decades now, keeping workers’ rights down, keeping wages down? You’ve seen limited to no response from the opposition.”A construction worker in Texas who has been pursuing asylum said she had seen fewer people show up to work out of fear in recent weeks.“There’s not many people going to work any more, because of the fear. The only reason why I go to work is it’s a necessity to bring food home and pay bills,” she said. “They want to extract the people that are working in the farms, that are working in the fields, that are working in the restaurants that they eat in, and now they’re taking them without any explanation. It’s not fair.”Milton Velásquez is a construction worker in Maryland from El Salvador who currently has temporary protected status (TPS), provisional protection given to nationals of some countries in crisis. Trump has already revoked these protections for 350,000 Venezuelans and has incited fears he will revoke or limit protections for 1 million immigrants in the US from 17 nations granted protections under the Biden administration.“It scares me because if my TPS does get revoked, I will lose a lot of job opportunities without it and it would limit my income,” he said. “There is always fear of deportation. I try not to think about it, but what scares me the most is having to go back to El Salvador. I would have to work 10 times as much to get paid $10 a day.”Under the first Trump presidential term, Velásquez faced issues with trying to bring his son and daughter to the US from El Salvador through the Central American Minors program, which Trump shut down in 2017. He is still separated from his daughter.“I tried to get her a visa,” Velasquez added. “I’ve been longing to bring them here. That’s what I work for, to provide for my family, to get my family to come here.”Send us a tipIf you have information you’d like to share securely with the Guardian about the impact of the Trump administration’s temporary protected status decision, please use a non-work device to contact us via the Signal messaging app at (929) 418-7175. More

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      UK marketplace sellers face ‘second Brexit’ hit from Trump’s US import rules

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      Many UK-based independent sellers on marketplaces such as eBay and Amazon could suffer a significant hit to US sales from planned changes to import rules under Donald Trump, with experts comparing the impact to a second Brexit.The new rules, which mean all parcels originating or made in China and being sold into the US must pay import duty – of as much as 15% on fashion items – and an additional 10% tariff, are also expected to impact bigger online clothing retailers such as Asos and Boohoo.The changes were introduced at the start of February in an attempt to protect US retailers from a surge in competition from the likes of Chinese online marketplaces Shein and Temu, but were indefinitely paused after the US customs service struggled to cope with the massive increase in parcels requiring checks last week.However, they are expected to be implemented within the coming months, potentially driving up prices for US consumers and hitting sales for online retailers.Before the change, parcels with a value of less than $800 (£635) shipped to individuals in the US were exempt from import tax and did not pass through the usual customs checks. That scheme, originally designed to help smooth online shopping, is being revoked after it emerged that the number of shipments under the “de minimis” rules had ballooned to more than 1bn, valued at $54.5bn by 2023 – most of them from China or Hong Kong via firms including Shein and Temu.“You are looking at an increase of $30 to $50 per consignment [group of parcels],” said Brad Ashton at the advisory firm RSM. “It is creating a perfect storm for online retailers putting goods into the US market. It has a lot of the hallmarks of Brexit in terms of its potential impact on small traders.“Businesses will see their margins eroded because costs will increase. We may get to a point where the changes make a UK business uncompetitive in selling to the US.”The widespread use of Chinese factories for many British brands, particularly in fashion, means businesses such as Asos and Boohoo will be drawn in, as well as many UK independent marketplace sellers.It will not just affect goods made in China and then sent from the UK, but potentially a much wider array, as any package containing even one product made in China may have to pay import tax and pass through customs checks, further increasing costs, according to experts.There is also an expectation that the de minimis rules will eventually be scrapped for all imports, no matter their origin.About $5bn worth of parcels were exported to the US from the UK under de minimis rules in 2021, according to a Congressional Research Service analysis of data from US Customs and Border Protection. About 80% of that was estimated to be related to online retail, with fashion likely to be a large proportion of it.Chris White, at the logistics company Fulfilmentcrowd, said that during the brief period when the rules were in place in early February, one-third of the parcels it shipped to the US from the UK were found to be of Chinese origin and subject to the new taxes.Fast-fashion specialists Asos and Boohoo sell about £300m of clothing a year to the US. Both are already struggling to compete with the rise of Shein and high street retailers, which have revived after the Covid pandemic. John Stevenson, a retail analyst at Peel Hunt, said Asos and Boohoo would have to “adjust prices or take a view on [the] profitability of operating in the US”.As well as the higher tax charges, customs checks required after the rule change will add as much as two days to the processing of orders, making UK retailers less competitive with US-based operators on the speed of delivery.skip past newsletter promotionafter newsletter promotionStevenson said the hit to Asos and Boohoo was “not business-critical” in the way it could be for Shein or Temu, which he believed were heavily reliant on the tax benefit, but that it would have an impact.In the short term, online sellers will probably have lower sales because of uncertainty among US shoppers over possible taxes. White said that during the period when the new rules were in place, similar parcels were loaded with different levels of duty as local customs officers made different decisions.He said a further element of the rule change might be to expose brands that were “trading on an image of being British or European” as being “made in China and not Savile Row”, potentially damaging their appeal.There would be “lots of crossed fingers and puzzled faces” over the changes in legislation, with retailers potentially opening more US warehousing or, longer term, to switch sources of supply, White added.Boohoo closed its US warehouse earlier this year, and Asos is scheduled to close its facility there in November. However, a reversal could be on the cards if the de minimis rules are confirmed. Many fast-fashion companies have already diversified their supply chains – making more in India, Bangladesh or Turkey. Trump’s tax changes could accelerate this further.Shein is reportedly incentivising Chinese suppliers to set up in Vietnam, according to a report by Bloomberg.It is not clear when the new rules might be implemented as the US tries to put the technology and workforce in place to handle the new system. Experts say it could take weeks or months.While there is a chance that Trump will change his mind, as he has done on tariffs with Canada and Mexico, no business can bet on which way the US might jump. More

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      Trump policies make US ‘scary place to invest’ and risk stagflation, says Stiglitz

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      Donald Trump’s tariff threats have made the US “a scary place to invest” and may unleash stagflation, the Nobel prize-winning economist Joseph Stiglitz has said.“It risks the worst of all possible worlds: a kind of stagflation,” Stiglitz said in an interview with the Guardian.He argued that despite optimism about the US economy at the turn of the year, the uncertainty created by Trump’s on-off tariff plans and the president’s apparent contempt for the rule of law would deter investment.“If you’re a corporate in the US or in Europe, do you think you have a global market, or do you have just a European market? Where do you locate your factories?” he said.He highlighted Elon Musk’s efforts to slash government departments without congressional authority, and Trump’s disregard for contracts – including the trade pact he struck with Canada and Mexico in his first term – among damaging signals for investors considering the US as a destination.“The government has a huge number of contracts and we’re just tearing them up. How much risk do you want? The US has become, I would say, a scary place to invest,” he said.Stiglitz argued that the uncertainty was likely to slow economic growth, while at the same time Trump’s tariffs – and retaliation by other countries – would drive up inflation.The prospect of rising inflation in the world’s largest economy has led investors to pare back bets on the US Federal Reserve cutting interest rates since Trump’s return to office, amid mounting concern over the fallout from a global trade war.Stiglitz, a Columbia University professor and former World Bank economist who served as chair of Bill Clinton’s council of economic advisers, said the Fed was “clearly worried” about the inflationary effects of Trump’s policies, which could lead it to raise interest rates.“Almost all economists agree that the tariffs will increase prices. How much it will increase prices is a little bit affected by the magnitude of the appreciation of the exchange rate, but all economists think that the extent of the appreciation of the exchange rate won’t be anywhere near enough to compensate for the tariffs.skip past newsletter promotionafter newsletter promotion“I could certainly see a scenario where we get to stagflation – we get inflation, and a weak economy,” he said. “I cannot see a really robust economy, because I just see the global economy suffering so much from the uncertainty that Trump poses.”Scott Bessent, the US Treasury secretary, has suggested the administration wants to bring down 10-year US Treasury yields, an important interest rate, which would have a knock-on effect across global markets. Lower Treasury yields would make it cheaper for Washington to borrow.But Stiglitz suggested the only way the president’s policies would positively contribute to that goal was by running the US into the ground. “The inflation from the tariffs is going in the wrong way, and the only thing that is going in the right way for Bessent is his efforts to crater the economy,” he said.“In supporting Trump’s economic policies, [Bessent] is helping to get the yield curve down by crashing the US economy – not a good policy, I would say.” More

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      Forget Trump’s tariffs, the president’s bond market threat is worse | Heather Stewart

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      When Donald Trump gave an in-flight press conference en route to the Super Bowl last week, it generated a flurry of news, from the fresh threat of steel tariffs to the declaration of “Gulf of America Day”.Much less remarked upon was a throwaway comment about the US’s financial obligations, which underlined the fact that tariffs are far from the only way in which Trump is jeopardising economic stability.“We’re even looking at Treasuries,” the president told reporters. “There could be a problem … It could be that a lot of those things don’t count. In other words, that some of that stuff that we’re finding is very fraudulent, therefore maybe we have less debt than we thought.”The suggestion was that opening up the US Treasury’s data to Elon Musk’s “department of government efficiency” team had identified a money-saving wheeze: why not walk away from some of America’s debt obligations – a “selective default”, as economists call it.Like so many of the serially erratic president’s pronouncements, this one had to be “walked back”, as the Americans call it. Kevin Hassett, his economic adviser, stressed the next day that Trump was referring to other payments that the US Treasury had been making, not its $36tn (£28.6tn) in debt obligations. Hassett suggested the Treasury “had been “sending money out without flagging what it was for”.Yet just entertain for a moment the idea that a US administration might decide it could unilaterally default on even a small portion of its debts. The result would be catastrophic. Because of the dollar’s status as the world’s reserve currency, the yield on US Treasuries – US government bonds – is perhaps the most important benchmark in global financial markets.If investors suddenly began demanding a higher yield – in effect the interest rate – as insurance against the risk they would not get their money back, the effects would ripple through the trillions of dollars of other assets worldwide priced with reference to supposedly super-safe Treasuries.Hassett made clear this is absolutely not an outcome the saner elements of Trump’s administration were aiming for. Indeed, the treasury secretary, Scott Bessent, has said the president wants to bring down the yield on 10-year US government borrowing costs.Yet as a result of Musk’s crazed takeover of the financial plumbing of the state, the US is already welching on its obligations – moral and financial – all over the world.Every day seems to bring fresh examples: health clinics in the developing world being closed because of the dismantling of USAid; researchers whose projects funded by the National Institutes of Health have been put on hold.Officials from the city administration in New York have even claimed the government in effect dipped into the city’s bank account to claw back $80m in federal grants that had already been made.This fast-track austerity is ostensibly aimed at improving the government’s balance sheet – putting the US through “the private equity wringer”, as Wired’s Brian Barrett put it last week.But the Musk/Trump takeover simultaneously risks shattering confidence in US institutions, in a way that is liable to have long-lasting and unpredictable consequences.Five former treasury secretaries warned in an extraordinary New York Times editorial last week of the risks of letting Musk loose on the nation’s financial system.“Any hint of the selective suspension of congressionally authorised payments will be a breach of trust and ultimately, a form of default. And our credibility, once lost, will prove difficult to regain,” they said.Musk has faced legal action and is targeting arms of government with which he has a particular beef, meaning the chances of anything that looks like a formal default remain low.View image in fullscreenBut the whole performance – as exemplified by a rambling Oval Office briefing involving Trump, Musk and his son X (who has the same name as the social media platform formerly known as Twitter) – screams “political risk”, as analysts would call it if it was happening elsewhere in the world.It would not be surprising if efforts to spur the development of alternative global reserve currencies and payments structures – such as those proposed by nations in the global south – are given added impetus by the shenanigans in Washington.The sheer insularity of the Trump administration’s approach was illustrated on Friday when Bessent – supposedly one of the more sensible figures in the administration – said: “The US has a strong dollar policy, but because we have a strong dollar policy it doesn’t mean that other countries get to have a weak currency policy.”In the short term, the most immediate impact of Trump’s plans on the global economy is likely to be via his long-trailed tariffs plan, which will throw sand in the wheels of the international trading system.All of this is likely to dampen growth, and if trade analysts are right that Trump’s latest idea of “reciprocity”, based on each country’s existing tariff and VAT rates, is the opening bid in a negotiation, it may be weeks or even months before any clarity emerges.Given this corrosive uncertainty, markets have so far been remarkably quiescent in the face of Trump’s wayward trade policy, and appear to be relatively unconcerned about Musk’s slash-and-burn mission, for now.They have been putting their faith in the mighty US consumer, and the economy’s powerful and innovative tech sector, to feed the narrative of US “exceptionalism”.But every week of the Trump/Musk show in Washington surely increases the threat of a structural shift in how investors view the US economy – which would ultimately be felt around the world. 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