For months, the effects of US President Donald Trump’s aggressive commercial policy, in large part, seemed theoretical. But with the expansion of the rates scheduled for August 1 and a decisive week ahead of the president’s economic agenda, the first concrete signs begin to appear.
No podcast The Big TakeBloomberg’s senior economy reporter, Shawn Donnanmet with David mouthBloomberg News anchor and correspondent to analyze the consequences of tariffs that, although visible, go unnoticed. They analyze which sectors and countries are being most impacted by the measures.
See below the conversation transcription:
David mouth: President Trump’s trade war is entering his fourth month, and we approach a decisive moment. Friday (August 1) that the president implemented in “reciprocal” fares-with the promise of new commercial agreements and investments in US production after that.
This week we will also have a series of data that will show how the American economy is: information about GDP, consumer confidence and July job report. It is also a busy week for the. In the midst of all this, there will be a federal reserve meeting (Fed, the US Central Bank, and journalists will have a chance to ask the Fed President, Jerome Powellas he sees the effects of trade war on the US economy.
Donnan: Trump’s fares caused this uncertainty in the American and global economy. This has generated two main effects: braked investments from companies that do not know where to allocate capital and, secondly, reduced hiring. And we have already begun to see this retraction in the investments.
Mouth: Companies around the world are cutting costs, adjusting supply chains and rethinking their investment and expansion plans.
Donnan: We saw imports for the US first to increase and then fall. Chinese exports to the US shrunk. There was a 25% drop in Japan exports – especially cars – to the US due to tariffs. Japan and Canada are on the brink of recession.
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Mouth: In total, Bloomberg Economics estimates that Global GDP could be impacted by $ 2 trillion until 2028when Trump would leave office. But who is feeling this thud more?
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Practical cases around the world
Donnan: Our colleagues in France talked to the largest organic wine cooperative in the country, located in the Languedoc region. They are literally with 2.7 million bottles of stored wine – which have not been sold. One of the main reasons: a quarter of all European wine is exported to the US, and these exports have practically stopped.
In Japan, auto parts companies began to fire because of the fall in exports. In Canada, the impact is similar. In Vietnam, suppliers were guided by US companies not to send products – afraid of tariffs – and then received green light to send everything quickly before the tariffs were stored.
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The data that show the impact
Mouth: Where do economic data reveal the effects of tariffs?
Donnan: The main indicator is business investment – the so -called non -residential fixed investment. This shows how companies bet on the future of the American economy, building factories and warehouses.
This is the great promise of the Trump administration: that tariffs will force production to return to the US. But for this to happen, it takes investment.
According to the GDPNOW index of the Atlanta Fed, in the second quarter, the growth of investments was only 0,1% – A very low level, close to recessive territory. If this is confirmed in this week’s GDP numbers, it will be a warning sign for the American economy.
Rhetoric and reality
Mouth: Is there a contrast between Trump’s rhetoric and the data?
Donnan: Yes. There is always exaggeration. Trump sells grandiose promises, but the actual results are modest. He believes rates solve everything to industrial unemployment. Your advisers think free trade has gone too far and want to rebuild barriers.
But economists warn: this has a cost. Tariffs generate Higher pricesboth in imported and national products. National steel, for example, goes up together. This affects from washing machines to cars. Production cost increases, growth slows down and companies invest less.
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The promise of investments – and the doubt
Mouth: Are there signs that the promised investment is coming?
Donnan: Trump talks about $ 15 trillion in investments – half the American GDP – which is unlikely. There are promises, such as an investment fund of $ 500 billion with Japan, but without concrete details. It takes years for these plans to come true.
Trump’s idea is, “If you want to sell to Americans, produce here.” But if producing in the US becomes more expensive, the incentive to investment decreases.
The world reacts
Mouth: And the rest of the world?
Donnan: Other countries are turning each other. The European Union has signed an agreement and the Latin American bloc is close. The United Kingdom joined the Transpacific Agreement (TPP), which has grown since the US left. The world continues to spin – and Looking for alternatives to the USA. It worries.
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What if the US remains isolated?
Mouth: What is the risk if the US maintains this policy?
Donnan: The world economy will adapt, but growth will be slower. General Motors, for example, paid $ 1.1 billion in rates in the second trimester. And the company expects to pay up to $ 5 billion in the year. This reduces profits, investment and hiring.
Other sectors at risk
Mouth: In addition to the automotive sector, are there other impacted?
Donnan: Yes. They come more rates out there, including about remedies. The pharmaceutical sector is on alert. Another critical sector is the semiconductors – Vital to everything. Trump wants to investigate the impact of imports on national security, including Strategic Minerals.
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It’s not just a sector – it’s all. My shirt was made in China. Next time it will be more expensive – or will come from elsewhere. But it will not be done in North Carolina. It is a chronic price increase.
Historically, the US grew up opening markets. Already Argentina followed the path of protectionism and had lower performance. The question is: Will the US remain dynamic or become a reduced version of themselves?
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The complacency of markets
Mouth: The bags are on the rise. But are investors worried?
Donnan: It is difficult to know, as large technology companies distort the indexes. But see the case of GMwhich lost value after informing that their profits fell 35% because of the rates. The signs are there.
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Another interesting point is the currency markets. The dollar had, in the first half, its Worst performance since 1973when Nixon abandoned the gold standard. This shows that parts of the financial market are more concerned with tariffs than it seems.
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