Economy

BEIJING (Reuters) – China’s state media shrugged off U.S. President-elect Donald Trump’s pledge to slap additional tariffs on Chinese goods in editorials late on Tuesday, accusing the former president of blaming China for the country’s failure to address the fentanyl crisis.Trump, who takes office on Jan. 20, said on Monday he would impose “an additional 10% tariff, above any additional tariffs” on imports from China. He previously said he would introduce tariffs in excess of 60% on Chinese goods. The tariff threat is rattling China’s industrial complex, which sells goods worth more than $400 billion annually to the U.S. and hundreds of billions more in components for products Americans buy from elsewhere.Economists have begun downgrading their growth targets for the $19 trillion economy for 2025 and 2026.Editorials in Chinese communist party mouthpieces China Daily and the Global Times focused squarely on the reason Trump gave for imposing the tariffs: fentanyl.”Scapegoating others can’t end U.S.’ drug crisis,” read the headline of a China Daily editorial on Tuesday, while the Global Times urged the “U.S. not to take China’s goodwill for granted regarding anti-drug cooperation after Trump’s remarks.””The excuse the president-elect has given to justify his threat of additional tariffs on imports from China is farfetched,” China Daily said. “The world sees clearly that the root cause of the fentanyl crisis in the U.S. lies with the U.S. itself,” it added.”There are no winners in tariff wars. If the U.S. continues to politicise economic and trade issues by weaponising tariffs, it will leave no party unscathed.”Trump’s team maintains China is “attacking” the U.S. with fentanyl.China is the dominant source of chemical precursors used by Mexican cartels to produce the deadly drug. Trump on Monday also pledged 25% tariffs on goods coming from Mexico and Canada until they clamp down on drugs and migrants crossing the border.Trump is threatening Beijing with far higher tariffs than the 7.5%-25% levied on Chinese goods during his first term. S&P Global on Sunday lowered its growth forecast for China for 2025 and 2026 by 0.2 and 0.7 percentage point, respectively, to 4.1% and 3.8%, citing the impact Trump’s tariffs could have.”What we assumed in our baseline is an across-the-board increase from around 14% now to 25%. Thus, what we assumed is a bit more than the 10% on all imports from China,” said Louis Kuijs, Chief Asia Economist at S&P Global Ratings.”For now the only thing we know for sure is that the risks in this area are high.” More

By Lucy CraymerWELLINGTON (Reuters) -New Zealand’s central bank cut the cash rate by 50 basis points to 4.25% on Wednesday, as annual inflation ran near the 2% midpoint of its target range and economic activity remained subdued.The decision was in line with expectations, with 27 of the 30 economists in a Reuters poll forecasting the Reserve Bank of New Zealand (RBNZ) would cut the cash rate by 50 basis points. This follows a similar move in October.”If economic conditions continue to evolve as projected, the Committee expects to be able to lower the OCR (official cash rate) further early next year,” the statement said.”The Committee agreed that a 50 basis point cut is consistent with their mandate of maintaining low and stable inflation, while seeking to avoid unnecessary instability in output, employment, interest rates and the exchange rate,” the minutes of the meeting said.The RBNZ is now forecasting the cash rate to be at 3.8% in the second quarter of 2025 and at 3.6% in the fourth quarter of 2025, suggesting more cuts than had been expected in August.The statement said domestic price and wage setting behaviour is becoming consistent with inflation remaining near the target midpoint and that the price of imports has fallen, also contributing to lower headline inflation. It added economic growth is expected to recover during 2025, as lower interest rates encourage investment and other spending. Employment growth is expected to remain weak until mid-2025 and, for some, financial stress will take time to ease. More

TOKYO (Reuters) – The U.S. dollar steadied against major peers on Wednesday as investors continued to take stock of President-elect Donald Trump’s tariff pledges, while keeping an eye on a key inflation figure out of the U.S. later in the day. The New Zealand dollar rose after the Reserve Bank of New Zealand cut benchmark rates by 50 basis points to 4.25% while noting that inflation had declined to near the mid-point of its targeted range.Trump’s vows on Monday of big tariffs on Canada, Mexico and China, the United States’ three largest trading partners, have left investors jittery, even if some of the reaction was tempered later in the U.S. day. “Markets are likely to remain edgy as a second Trump administration brings back uncertainty about policy making in the U.S.,” said Carol Kong, currency strategist at Commonwealth Bank of Australia (OTC:CMWAY).”This uncertainty can lead markets to ‘sell first and ask questions later’ which is a positive for the USD.”The dollar was last little changed versus its Canadian counterpart at C$1.4052, below Tuesday’s 4-1/2-year high of C$1.4178.The dollar remained off Tuesday peak against the Mexican peso, after touching its highest since July 2022 in the previous session. The U.S. currency also rose to its highest level since July 30 against China’s yuan, on Tuesday. A ceasefire between Israel and Iran-backed group Hezbollah will take effect on Wednesday after both sides accepted an agreement brokered by the United States and France, U.S. President Joe Biden said on Tuesday. The Israeli shekel hit a three-month high on Tuesday. The yen, meanwhile, held onto gains made from safe-haven bids amid the turmoil. The dollar was last down 0.19%at a two-week low of 152.81 yen.The dollar has experienced some turbulence in the past few sessions, falling on the back of Trump’s late Friday naming of hedge fund manager Scott Bessent to become U.S. Treasury secretary, before surging after Trump’s tariff vows.The dollar index, which measures the greenback against six rivals, was last down 0.07% at 106.83.The main scheduled news release left this week is the October Personal Consumption Expenditures (PCE) price index due later on Wednesday.Fed minutes of the central bank’s November meeting released on Tuesday showed many policymakers in agreement that it was appropriate to reduce policy restraint gradually.The euro was little unchanged at $1.0493, while sterling last fetched $1.25735, up 0.05%.The Australian dollar was mostly flat at $0.64755 after domestic consumer price inflation stayed at a three-year low in October.In cryptocurrencies, bitcoin was trading at $91,795, keeping well below the record high of $99,830 it touched last week. Bitcoin has struggled to rise above the symbolic $100,000 barrier as profit-taking set in. It has climbed more than 40% since the U.S. election on expectations Trump will loosen the regulatory environment for cryptocurrencies. More

Data from the Australian Bureau of Statistics on Wednesday showed its monthly consumer price index rose at an annual pace of 2.1% in October, unchanged from September and below market forecasts of 2.3%. From the month earlier, it fell 0.3%. The trimmed mean – a closely watched measure of core inflation – rose to an annual 3.5% from 3.2% in September, taking it further above the Reserve Bank of Australia’s 2% to 3% target band and making it a hurdle to cuts in interest rates.The report for October – the first month of the quarter – does not contain price updates on a range of services that are more of concern to the central bank, thus it is likely to have limited bearing on monetary policy. The bank has said monthly reports tend to be volatile.Markets have not fully priced in a cut in rates until May next year, with a move in December at just a 14% probability.The Australian dollar was little changed at $0.6474 after the data, while three-year bond futures held earlier gains, up two ticks at 96.02.The central bank has kept interest rates steady for a year now, judging that the cash rate of 4.35% – up from a record-low 0.1% during the pandemic – is restrictive enough to bring inflation to its target band while preserving employment gains.The RBA has said it would need to observe more than one good quarterly inflation outcome – a reason why markets are only pricing in a 27% chance of a cut in February after the release of the fourth-quarter CPI report.Again, electricity subsidies from the federal and state governments lowered prices by 12% in the month, while rents also fell 0.3% from September thanks to government relief.When volatile items and holiday travel were excluded, the annual CPI fell to 2.7% from September’s 3.0%. More

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