After decades of growing trade and current account imbalances in the United States, the new administration has set out to change this equation with nothing less than a rebalancing of the global economy. Today, a new mercantilism, rooted in tariffs and trade protection, is emerging. We define ... READ MORE >
U.S. trade policy
Market minute: Clash of the titans to cause further currency manipulation
Trade War 2.0 between China and the United States will stimulate further currency manipulation out of China to partially offset the 10% tariffs on Chinese goods imposed by the new administration. Now, with China imposing $14 billion on trade taxes on goods, it is likely that a series of tit-for-tat ... READ MORE >
How an escalating trade war will affect global growth, inflation and employment
The United States has announced steep tariffs on goods made in Canada, Mexico and China starting on Tuesday. Even though Canada and Mexico have promised retaliation, we anticipate that the disputes with those two nations will be resolved in the near term, though the standoff with China will last ... READ MORE >
Morning market minute: What guacamole tells us about the cost of tariffs
It’s well known that the average auto part crosses the border between the United States and Mexico several times. Same with Canada. So with 25% tariffs on all goods coming into the U.S. from Canada and Mexico set to begin on Tuesday, new cars are about to get a lot more expensive—anywhere from $3,000 ... READ MORE >
Trump, tariffs and financial markets
The Trump administration’s announcement on Friday that it would impose steep tariffs on goods from China, Canada and Mexico presents a fundamental contradiction in policy that financial markets cannot ignore forever. Tariffs cannot be both a negotiating tactic and an offset that raises revenues to ... READ MORE >
Morning market minute: Rate path more uncertain as era of fiscal dominance begins
The Federal Open Market Committee will in all likelihood keep the federal funds rate unchanged in a range between 4.25% and 4.5% when it meets this week. Our forecast of the optimal federal funds rate implies a range between 3.75% and 4%, or a need for two 25 basis-point reductions this year—one in ... READ MORE >
Morning market minute: A look at the U.S. trade and current account balances
The key to rebalancing the global economy depends on narrowing the U.S. current account and trade deficits. For years, the global economy has operated on a simple, if unstated, agreement: As the United States has imported more goods and services than it exports, its trading partners have used some of ... READ MORE >