Evelyn Reynolds

Oil prices continued to fall on Friday, extending Thursday’s sharp drop. Brent crude, the international benchmark, traded at its lowest level in more than three years, below $65 a barrel, a fall of almost 8 percent.Fears that President Trump’s tariffs could slash global economic growth — and demand for oil as a result — were weighing on the market, analysts said.China’s announcement on Friday of 34 percent retaliatory tariffs against the United States has further stoked worries that demand for oil and other commodities could be throttled by the trade turmoil.Thursday’s surprise decision by a Saudi Arabia-led group of countries in the OPEC Plus cartel to accelerate planned production increases has added to the downward pressure. Essentially, the market is worried about a bearish mixture of tariffs weakening demand, compounded by growing pressure from oil-producing countries like Iraq and Kazakhstan to add to supplies.In a note to clients, analysts at Morgan Stanley said that in a recession — which is a looming possibility — demand growth for oil “typically falls at least to zero.” More

China struck back at President Trump on Friday, imposing 34 percent tariffs on all U.S. products, matching the levies that he announced this week on Chinese goods. Stock markets plunged further as worries deepened about a global trade war.The Stoxx Europe 600 index fell more than 4 percent, erasing its gains for the year and extending the slide in global markets that began Thursday after Mr. Trump announced steep worldwide tariffs. In Japan, the Nikkei 225 fell 2.8 percent, matching its drop the day before.The S&P 500, which posted its worst daily loss since 2020 on Thursday, falling 4.8 percent, was set to fall about 3.5 percent on Friday, according to futures trading. The dour market news came hours before the latest official snapshot of the U.S. labor market was set to be released, which analysts and policymakers were watching for the impact of the Trump administration’s economic policies. More

In the weeks leading up to his expansive global tariffs, President Trump and his top aides tried to prime the public for economic pain. They warned that while there would be fallout from their aggressive trade strategy, it would prove short-lived and benefit the economy in the long run.Investors, businesses and others made clear on Thursday that the U.S. economy was not ready to accept that approach. Global markets tumbled, economists warned of a possible recession and consumers braced for price increases on cars, food, clothing and more.The early tumult underscored the high stakes of Mr. Trump’s agenda, which the president has framed as a painful medical procedure to rescue an economy he likened to a “sick patient.” In the eyes of Mr. Trump, the United States is going to “boom” once his tariffs have had time to reset the nation’s trade relationships, raise revenue and boost domestic production.But those tariffs are expected to send prices skyrocketing in the interim, an unwelcome development for Americans already struggling with years of elevated prices. Several economists have increased the odds of a recession in their forecasts as they projected a slowdown in consumer spending, business investment and economic growth.A new analysis from the Yale Budget Lab found that Mr. Trump’s overall tariffs could cause price levels to rise 2.3 percent in the short term. That would translate into an average loss of $3,800 in purchasing power per household based on 2024 dollars.“Prices are going to go up, period,” said Martha Gimbel, executive director of the Yale Budget Lab, adding that companies were going to feel the immediate pinch. “These are really big tariffs. These are not things we can expect companies to just absorb.”We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

Allianz’s Chief Economic Advisor Mohamed El-Erian on Friday that U.S. President Donald Trump’s swathe of so-called reciprocal tariffs could have a significant effect on the global economy.
He told CNBC the risk of a U.S. recession “has become uncomfortably high.”
El-Erian also warned markets were underestimating the impact of the tariffs on inflation, saying the U.S. would be lucky to see a single rate cut from the Federal Reserve this year.

Mohamed Aly El-Erian, chief economic advisor for Allianz SE. 
Bloomberg | Getty Images

President Donald Trump’s extensive raft of import tariffs are putting the U.S. economy at risk of recession, Allianz’s Chief Economic Advisor Mohamed El-Erian warned on Friday.
He added that Trump’s swathe of so-called reciprocal tariffs could have a significant effect on the global economy.

“You’ve had a major repricing of growth prospects, with a recession in the U.S. going up to 50% probability, you’ve seen an increase in inflation expectations, up to 3.5%,” he told CNBC’s Silvia Amaro on the sidelines of the Ambrosetti Forum in Cernobbio, Italy.
“I don’t think [a U.S. recession] is inevitable because the structure of the economy is so strong, but the risk has become uncomfortably high.”
Trump’s tariffs are being rolled out just as signs of weakness are starting to show in the American economy. Last month, fund managers, strategists and analysts told CNBC that they saw a slowdown on the horizon, with the risk of a recession rising to a six-month high.
El-Erian said he believed the U.S. economy would expand by between 1% and 1.5% this year, noting that this represented a “significant change in the growth outlook” when compared with the IMF’s projection of 2.7% U.S. growth made earlier this year.
“If we get close to 1%, we get close to what’s known as ‘stall speed,'” he said. “The economy isn’t going fast enough to allow for the sort of resource reallocations that you need. So once you get closer to one, which I hope we don’t, the recession risk will go up significantly.”

Aside from warning about the state of the U.S. economy as tariffs come into play, El-Erian also said that markets were underestimating the inflation impact of Trump’s aggressive trade policies.  
He further warned that markets were underestimating the inflation impact of the tariffs regime.
“The first reaction has been concerns about growth. We haven’t had two other reactions yet: what will happen to growth in other countries, and that makes a question mark on whether the dollar weakness will continue, and then what does the [Federal Reserve] do?” he questioned.

Last week, the latest U.S. data showed that core inflation rose more than expected, with the core personal consumption expenditures index — the Fed’s key inflation gauge — notching its biggest monthly gain in over a year.
“I think if we’re lucky we’ll get one rate cut, not four, and it wouldn’t surprise me if we get none,” El-Erian added.
“If it’s a normal Fed — and I say this qualification with a lot of emphasis, because this has not been a normal Fed — we would unlikely to get even one rate cut.”
Markets are currently pricing in four rate cuts from the Fed over the course of the year, according to the CME Group’s FedWatch tracker. At its most recent meeting in March, the central bank held its key rate steady in a range between 4.25% to 4.5%, with officials cutting their U.S. growth forecast but saying they still saw two rate cuts through 2025.

‘If the U.S. slows down, the rest of the world will slow down more’

In the immediate aftermath of Trump’s reciprocal tariffs announcement, European currencies logged significant gains against the U.S. dollar, with the euro and the British pound touching on six-month highs against the greenback.
El-Erian nevertheless said he did not expect to see long-term dollar weakness.
“The market has reacted to lower U.S. growth, lower interest rates, lower capital flows to the US, and that’s why we’ve seen the dollar index depreciate. I think that’s round one,” he said. “People are going to realize that if the U.S. slows down, the rest of the world will slow down more than the U.S. So I don’t believe we’re going to continue to see dollar weakness.”
Ultimately, El-Erian said, economists were divided on what huge import duties would mean for the American and global economies.
“While there’s, I think, complete consensus on the pain [caused by tariffs] in the short term, there’s disagreement on the gain in the long term,” he told CNBC. “Can you make a case that this is pain now for gain later? Yes. Can you make it with conviction? No.”
— CNBC’s Jeff Cox and Steve Liesman contributed to this report. More

The New Civil Liberties Alliance — a nonprofit group that describes itself as battling “violations by the administrative state” — sued the federal government on Thursday over the means by which it imposed steep new levies on Chinese imports earlier this year.The new filing, which the group said was the first such lawsuit to challenge the Trump administration over its tariffs, set the stage for what may become a closely watched legal battle. It comes on the heels of President Trump’s separate announcement on Wednesday of broader, more extensive tariffs targeting many U.S. trading partners around the world.At issue are the tariffs that Mr. Trump announced on China in February and expanded in March. To impose them, Mr. Trump cited a 1970s law that generally grants the president sweeping powers during an economic emergency, known as the International Emergency Economic Powers Act, or IEEPA.Mr. Trump charged that an influx of illegal drugs from China constituted a threat to the United States. But the alliance argued in the lawsuit, on behalf of Simplified, a Pensacola, Fla.-based company, that the administration had misapplied the law. Instead, the group said the law “does not allow a president to impose tariffs,” but rather is supposed to be reserved for putting in place trade embargoes and sanctions against “dangerous foreign actors.”Port Manatee in Palmetto, Fla., on TuesdayScott McIntyre for The New York TimesMr. Trump cited that same law as one of the legal justifications for the expansive global tariffs he announced with an executive order on Wednesday. That order raised the tariff rate on China to at least 54 percent, adding new levies on top of those that the president imposed earlier this year.Mr. Trump’s new order specifically described the U.S. trade deficit with other nations as “an unusual and extraordinary threat to the national security and economy of the United States.”For now, the alliance asked the U.S. District Court in the Northern District of Florida to block implementation and enforcement of the president’s earlier tariffs on China. “You can look through the statute all day long; you’re not going to see the president may put tariffs on the American people once he declares an emergency,” said John J. Vecchione, senior litigation counsel for the alliance.A spokesman for the White House did not immediately respond to a request for comment. More

Prime Minister Mark Carney said that Canada had introduced a 25 percent tariff on cars and trucks made in the United States in retaliation for the tariffs that went into effect Thursday morning on Canadian vehicles.Five hours before the tariffs imposed by President Trump took effect, the automaker Stellantis told the union representing workers at its minivan and muscle car factory in Windsor, Ontario, that the plant would close Monday for two weeks so it could assess the effects of the tariffs, idling about 3,600 employees.Mr. Carney estimated that Canada would collect about $5.7 billion from the retaliatory tariffs he said it was imposing — on top of the $42 billion or so he said Canada would generate from the tariffs it imposed on March 4. That money, Mr. Carney said, would go toward helping workers and businesses affected by the U.S. tariffs.“We take these measures reluctantly,” Mr. Carney said at a news conference after a meeting with Canada’s premiers. “And we take them in ways that’s intended and will cause maximum impact in the United States and minimum impact here in Canada.”He added, “We can do better than the United States. Exactly where that comes out depends on how much damage they do to their economy.”Canada’s tariffs, Mr. Carney said, would exclude auto parts, and the country would still allow companies that make cars in Canada — Stellantis, Ford, General Motors, Honda and Toyota — to import vehicles built in the United States without paying tariffs.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

Now that President Donald Trump has set out his landmark tariff plans, the Federal Reserve finds itself in a potential policy box.
The central bank is tasked with full employment and low prices. If tariffs challenge both, choosing whether to ease to support growth or tighten to fight inflation won’t be easy.
The general consensus is that unless the duties are negotiated lower, they will take growth down to near zero or perhaps even into recession, while putting core inflation in 2025 north of 3%.

U.S. Federal Reserve Chair Jerome Powell and U.S. President Donald Trump.
Craig Hudson | Evelyn Hockstein | Reuters

Now that President Donald Trump has set out his landmark tariff plans, the Federal Reserve finds itself in a potential policy box, having to choose between fighting inflation, boosting growth — or simply avoiding the fray and letting events take their course without intervention.
Should the president hold fast to his tougher-than-expected trade policy, there’s a material risk of at least near-term costs, namely the potential for higher prices and a slowdown in growth that could turn into a recession.

For the Fed, that presents a potential no-win situation.
The central bank is tasked with using its policy levers to ensure full employment and low prices, the so-called dual mandate of which policymakers speak. If tariffs present challenges to both, choosing whether to ease to support growth or to tighten to fight inflation won’t be easy, as each courts its own peril.
“The problem for the Fed is that they’re going to have to be very reactive,” said Jonathan Pingle, chief U.S. economist at UBS. “They’re going to be watching prices rise, which might make them hesitant to respond to any growth weakness that materializes. I think it’s certainly going to make it very hard for them to be preemptive.”
Under normal conditions, the Fed likes to get ahead of things.
If it sees leading gauges of unemployment perk up, the Fed will cut interest rates to ease financial conditions and give companies more incentive to hire. If it sniffs out a coming rise in inflation, it can raise rates to dampen demand and bring down prices.

So what happens when both things occur at the same time?

Risks to waiting

The Fed hasn’t had to answer that question since the early 1980s, when then-Chair Paul Volcker, faced with such stagflation, chose to uphold the inflation side of the mandate and hike rates dramatically, tilting the economy into a recession.
In the current case, the choice will be tough, particularly coming on the heels of how the Jerome Powell-led central bank was flat-footed when prices started rising in 2021 and he and his colleagues dismissed the move as “transitory.” The word has been resurrected to describe the Fed’s general view on tariff-induced price increases.
“They do risk getting caught offsides with the potential magnitude of this kind of price increase, not unlike what happened in 2022, where they might feel the need to respond,” Pingle said. “In order for them to respond to weakening growth, they’re really going to have to wait until the growth does weaken and makes the case for them to move.”
The Trump administration sees the tariffs as pro-growth and anti-inflation, though officials have acknowledged the potential for some bumpiness ahead.
“It’s time to change the rules and make the rules be stacked fairly with the United States of America,” Commerce Secretary Howard Lutnick told CNBC in an interview Thursday. “We need to stop supporting the rest of the world and start supporting American workers.”
However, that could take some time, as even Lutnick acknowledged that the administration is seeking a “re-ordering” of the global economic landscape.
Like many other Wall Street economists, Pingle spent the time since Trump announced the new tariffs Wednesday adapting forecasts for the potential impact.

Bracing for inflation and flat growth

The general consensus is that unless the duties are negotiated lower, they will take prospects for economic growth down to near zero or perhaps even into recession, while putting core inflation in 2025 north of 3% and, according to some forecasts, as high as 5%. With the Fed targeting inflation at 2%, that’s a wide miss for its own policy objective.
“With price stability still not fully achieved, and tariffs threatening to push prices higher, policymakers may not be able to provide as much monetary support as the growth picture requires, and could even bind them from cutting rates at all,” wrote Seema Shah, chief global strategist at Principal Asset Management.
Traders, however, ramped up their bets that the Fed will act to boost growth rather than fight inflation.
As is often the reaction during a market wipeout like Thursday’s, the market raised the implied odds that the Fed will cut aggressively this year, going so far as to put the equivalent of four quarter-percentage-point reductions in play, according to the CME Group’s FedWatch tracker of futures pricing.
Shah, however, noted that “the path to easing has become narrower and more uncertain.”
Fed officials certainly haven’t provided any fodder for the notion of rate cuts anytime soon.
In a speech Thursday, Vice Chair Philip Jefferson stuck to the Fed’s recent script, insisting “there is no need to be in a hurry to make further policy rate adjustments. The current policy stance is well positioned to deal with the risks and uncertainties that we face in pursuing both sides of our dual mandate.”
Taking the cautious tone a step further, Governor Adriana Kugler said Wednesday afternoon — at the same time Trump was delivering his tariff presentation in the Rose Garden — that she expects the Fed to stay put until things clear up.
“I will support maintaining the current policy rate for as long as these upside risks to inflation continue, while economic activity and employment remain stable,” Kugler said, adding she “strongly supported” the decision in March to keep the Fed’s benchmark rate unchanged.
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Economists and legal experts question how the strongest economy in the world can be facing a national emergency over the trade deficit.President Trump upended the international trading system on Wednesday with a blunt package of global tariffs, making the case that the United States faces a dire economic emergency as a result of trade imbalances with countries across the globe.It’s a sentiment that Mr. Trump has expressed for decades, one that helped propel him to the presidency amid anger over lost manufacturing jobs and widening trade deficits. While the United States has the largest and strongest economy in the world, Mr. Trump — and many of his supporters — have long held the view that America has been ripped off by other countries and that tariffs are the answer to rectify decades of what they call unfair treatment that has shuttered factories, decimated communities and hurt workers.“Every prediction our opponents made about trade for the last 30 years has been proven totally wrong,” Mr. Trump said on Wednesday, pointing to trade deals such as NAFTA and the Trans-Pacific Partnership as well as the tariffs he imposed during his first term. “We can’t do what we’ve been doing for the last 50 years.”Since his days as a real estate developer in the 1980s, Mr. Trump has been railing against the trade and business practices of other countries that he found to be unfair. Back then, when Japan was a booming economic rival, Mr. Trump used to assail its tactics.“If you ever go to Japan right now, and try and sell something, forget about it, Oprah. Just forget about it,” Mr. Trump said, in a 1988 interview with Oprah Winfrey, adding, “They come over here, they sell their cars, their VCRs, they knock the hell out of our companies.”This week he made good on his promise to try to force more companies to make their products in the United States. He punished trading partners with stiff tariffs, despite anxiety from economists, investors and businesses that his approach could send prices soaring and tip the economy into recession.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More