Economy

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldThe EU is considering hitting US services exports, including Big Tech’s operations, to retaliate against Donald Trump imposing 25 per cent tariffs on the car industry and promising a further round of measures next week.Brussels has already unveiled extra duties on up to €26bn of US goods after Washington imposed steel and aluminium tariffs. But European officials and diplomats said the scale of action by the Trump administration required it to consider using more powerful trade tools. The bloc has wide powers to suspend intellectual property rights and exclude companies from public procurement contracts under its Enforcement Regulation, which was strengthened in 2021 after a trade conflict with the first Trump administration.“The Americans think that they are the ones with escalation dominance [in the trade war], but we also have the ability to do that,” said one EU diplomat, adding that the aim was ultimately to de-escalate with a comprehensive trade deal.A fightback could include restrictions on the intellectual property of Big Tech companies. Another example would be banning Elon Musk’s Starlink satellite network from winning government contracts. Italy is already reconsidering whether to acquire the system.“Services is where the US is vulnerable,” a second diplomat said. Washington ran a €109bn trade surplus with the EU in services in 2023, compared with a €157bn deficit in goods.EU officials believe that the Trump administration will only be willing to negotiate after the US has erected a tariff wall that would demonstrate it is serious about securing better terms from trading partners that allegedly took advantage of its open market.The European officials are hopeful of making fast progress on an eventual agreement but acknowledge even this would not remove all additional tariffs imposed by Trump. “The view is that we have to respond. It is the only way to get a deal,” said a third EU diplomat. “We tried to talk.” Since the EU’s exports far outweigh its imports, the bloc would struggle to match US tariffs on goods. Brussels also does not want to halt gas supplies from the US to the continent.“There are only so many goods imports from the US that the EU can target before that damages the economy too much,” said David Henig, of the European Centre for International Political Economy think-tank. “If you don’t want to target energy, there’s a limit to what can be done on goods. Whereas on services there is greater room for retaliation without so much harm to the economy.”Some experts say that to inflict even more economic pain on the US, the European Commission would need to use its anti-coercion instrument (ACI), dubbed the “trade bazooka”. This tool could restrict the activities of US banks, revoke patents or prevent companies receiving revenues from software updates or streaming. “I would advise the European Commission to use the ACI,” said Ignacio García Bercero, a former senior commission official who led negotiations on a US-EU trade deal, the Transatlantic Trade and Investment Partnership, that were concluded without a deal.Any retaliatory measures taken by the EU would be drawn up by the commission but must be approved by a weighted majority of member states. EU countries are still negotiating the goods retaliation list drawn up in response to Trump’s steel and aluminium tariffs; France has pressed for bourbon whiskey to be removed to avoid fallout for its own drinks industry. The commission has postponed the measures, which also cover jeans, motorcycles and possibly soyabeans, until April 12. They will be discussed with national leaders before a final agreement.Diplomats and officials said there was scope for more goods tariffs in response to any US “reciprocal” tariffs that will be adopted by the White House next week and are expected by Brussels to be around 20 per cent. Aircraft, chemicals and pharmaceutical products could be hit. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Asian, European and North American countries have put Donald Trump on notice of possible retaliation against his 25 per cent car tariffs, threatening to ignite a full-blown global trade war. Japan’s Prime Minister Shigeru Ishiba said “every option” was under consideration and South Korea promised an emergency response after the US president announced the tariffs would go into effect on April 2, when Washington is also expected to apply a range of reciprocal tariffs against America’s trading partners. The car tariffs are Trump’s most aggressive trade policy move to date and hit shares in carmakers from Toyota to Stellantis to Porsche. Carmaker shares dropped around the globe. General Motors closed down 7.36 per cent in New York on Thursday, while Ford fell 3.88 per cent. In Europe, shares in Stellantis, the owner of the Fiat, Peugeot and Chrysler brands, dropped 4.23 per cent, Porsche dipped 2.4 per cent and Volkswagen fell 1.5 per cent.“We need to think about the best option for Japan’s national interest,” Ishiba told the country’s parliament on Thursday. “We are considering every option in order to reach the most appropriate response.”Industry executives warned Asian and European carmakers would be among the hardest hit. Luxury brands, such as Jaguar Land Rover and Aston Martin, are also exposed, because they do not make cars in the US.With $40bn of car sales to the US in 2024, Japan is the second-largest exporter of finished vehicles to the country after Mexico, where Japanese companies are the dominant manufacturers.As countries across the world prepared for a deadline less than a week away, Ursula von der Leyen, president of the European Commission, said the bloc planned on “safeguarding its economic interests” while seeking a negotiated solution to the dispute.Some content could not load. Check your internet connection or browser settings.French finance minister Eric Lombard attacked the US for “completely shifting its economic policy in a very aggressive manner”, harming both regions’ economies.“The only solution for the EU will be to raise its own tariffs on American products,” he added, telling France Inter radio that Brussels was working on a list of targeted products.By contrast, President Claudia Sheinbaum of Mexico, the biggest car exporter to the US, said her country was seeking to retain preferential treatment in talks with the Trump administration. “We are the only country that has this level of communication with the US government,” she said, adding that Mexico would give a more complete response when the fuller range of Trump’s tariffs — including reciprocal duties — is unveiled next week.Sheinbaum’s government says that, under new rules set out by the White House, tariffs on imported Mexican cars may be discounted because of their high US content.In the UK, chancellor Rachel Reeves signalled the British government had no plans to retaliate, saying it was not in a “position where we want to do anything to escalate these trade wars”.Canada’s Prime Minister Mark Carney had earlier denounced what he described as “a direct attack” on auto sector workers. But Trump gave no sign of backing down.“If the European Union works with Canada in order to do economic harm to the USA, large scale Tariffs, far larger than currently planned, will be placed on them both,” he posted on his Truth Social network early on Thursday.“FOR YEARS WE HAVE BEEN RIPPED OFF BY VIRTUALLY EVERY COUNTRY IN THE WORLD, BOTH FRIEND AND FOE. BUT THOSE DAYS ARE OVER — AMERICA FIRST!!!”European car-part manufacturers were also hit, with France’s Valeo down 7.7 per cent. The White House’s decision to impose duties on imported car parts as well as completed vehicles would inflict further damage, analysts said. Almost half of vehicles sold in the US are imported, and cars assembled in the US contain nearly 60 per cent foreign-sourced parts, according to research from Bernstein.Trump has said the steep tariffs will convince foreign companies to make more of their cars in the US, boosting the country’s manufacturing industry.Sigrid de Vries, director-general of European car industry body Acea, urged Trump to “consider the negative impact of tariffs not only on global automakers but on US domestic manufacturing as well”. European manufacturers export up to 60 per cent of the vehicles they make in the US, according to Acea. Additional reporting by Kana Inagaki and Mari Novak in London, Christine Murray in Mexico City and Anne-Sylvaine Chassany in Berlin; data visualisation by Alan Smith More

Young people are pointing out on social media various cultural and social trends they see in everyday life as signs of a forthcoming recession.
While these observations are meant as jokes, they underscore the anxiety young people feel when it comes to the economy.

Christina Locopo | CNBC

For economists, harbingers of a recession can include a slowdown in consumer spending and rising unemployment.
For the chronically online, indicators can range from the perceived fall of fake eyelashes to more commercials for online colleges. Or, maybe, it’s a skin care company selling eggs.

And for Sydney Brams, a Miami-based influencer and realtor, it’s a decline in prices on clothing resale platform Depop.
“I was literally running to my parents and my boyfriend, and I’m like, ‘Look at this. Look, something is very wrong,'” Brams told CNBC after seeing some Depop sellers “come back to Earth,” as she described it. “I feel like Chicken Little.”
Making a joke of so-called recession indicators in everyday life has gained traction in recent weeks as the stock market pullback and weak economic data raised anxiety around the health of the economy. This trend also underscores the uniquely sharp sense of financial dissatisfaction among America’s young adults.

Read more CNBC analysis on culture and the economy

Many of today’s young adults experienced childhood during the Great Recession and came of age as the pandemic threw everything from in-person work to global supply chains out of orbit. Now, they’re concerned about what’s been deemed a white-collar job market slowdown and President Donald Trump’s on-again-off-again tariff policies — the latter of which has battered financial markets in recent weeks.
To be clear, when they share their favorite recession indicators, they’re kidding — but they don’t see the future path of the U.S. economy as a laughing matter.

“It’s gallows humor,” said James Cohen, a digital culture expert and assistant professor of media studies at Queens College in New York. “This is very much a coping mechanism.”
These omens can be found across popular social media platforms such as X, TikTok and Instagram. Some users see cultural preludes to a recession in, say, Lady Gaga releasing her latest album or the quality of the new season of HBO’s “The White Lotus.” Others chalk up social trends such as learning to play the harmonica or wearing more brown clothing as forewarnings of a financial downturn on the horizon.

Social media users Sydney Michelle (@sydneybmichelle), left; Celeste in DC (@celesteiacevedo), and Sulisa (@ssclosefriendstory) share their personal “recession indicators” on TikTok.
Courtesy: Sydney Michelle | Celeste in DC | Sulisa | via TikTok

Just last week, several social media users saw a slam-dunk opportunity to employ variations of the joke when DoorDash announced a partnership with Klarna for users to finance food delivery orders. A spokesperson for Klarna acknowledged to NBC News that people needing to pay for meals on credit is “a bad indicator for society.”
Some content creators have made the humor an entry point to share budget-friendly alternatives for everyday luxuries that may have to go if wallets are stretched.
“We are heading into a recession. You need to learn how to do your nails at home,” TikTok user Celeste in DC (@celesteiacevedo) said in a video explaining how to use press-on nail kits as opposed to splurging at a salon.

Declining confidence

These jokes don’t exist in a vacuum. Closely followed data illustrates how this trend reflects a growing malaise among young people when it comes to the economy.
At the start of 2024, 18-to-34-year-olds had the highest consumer sentiment reading of any age group tracked by the University of Michigan. The index of this group’s attitude toward the economy has since declined more than 6%, despite the other age cohorts’ ticking higher.

This switch is particularly notable given that young people have historically had stronger readings than their older counterparts, according to Joanne Hsu, director of the Surveys of Consumers at Michigan.
A typically cheerier outlook can be explained by younger people being less likely to have additional financial responsibilities, such as children, Hsu said. But she added that this age bracket is likely grappling with rising housing costs and debt right now, while also feeling uncertainty tied to economic policy under the new White House.
“I have a suspicion that young people are starting to feel like — or have been feeling like — many markers of the American dream are much more difficult to reach now,” Hsu said.
Young people are also less likely to have assets such as property or investments that can buoy financial spirits when the economy flashes warning signs, according to Camelia Kuhnen, a finance professor at the University of North Carolina.
The potential for a recession, which is broadly defined as at least two consecutive quarters of the national economy contracting, has been on the minds of both Wall Street and Main Street. A Deutsche Bank survey conducted March 17-20 found the average global market strategist saw a nearly 43% chance of a recession over the next 12 months.
An index of consumer expectations for the future released Tuesday by the Conference Board slid to its lowest level in 12 years, falling well below the threshold that signals a recession ahead. Meanwhile, Google searches during a period in March for the word “recession” hit highs not seen since 2022.
This onslaught of news comes after Treasury Secretary Scott Bessent said on March 16 that there were “no guarantees” the U.S. would avoid a recession. Bessent said a “detox” period is needed for the national economy, which he and other Trump administration officials have argued is too reliant on government spending.

‘The vibes are off’

Though the recession humor has had a yearslong history online, it’s gained momentum in recent weeks as the state of the economy has become a more common talking point, according to Cohen, the Queens College professor. While a recession indicator entry was added to the digital culture encyclopedia Know Your Meme only this month, the jokes have tracked back to at least 2019.
“Especially with Gen Z, there’s a lot of jokes with never being in a stable economic environment,” said Max Rosenzweig, a 24-year-old user experience researcher whose personal recession indicator was the number of people he’s seen wearing berets. “It’s funny, but it’s like, we’re making light of something that is scary.”
Cohen said he heard from Gen Z students that this type of humor helped them realize others are experiencing the same uncertainty. These students may not feel control over the country’s economic standing, he said, but they can at least find community and levity in a precarious moment.
Cohen sees the recent surge of this humor as a sort of “barometer” for what he calls the vibes around the economy. His conclusion: “The vibes are off.”
Brams sees a similar story playing out in South Florida and on social media. “I’m not going to lie, it just feels really grim,” the 26-year-old said.
But, “it’s not anything that me or my friend or my boyfriend or my parents can really do anything about,” she said. “There’s no choice but to just stay in your lane, try to keep your job, try to find joy where you can and just stay afloat.” More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.These are tricky times to be a big automaker — though less so if you’re Chinese. President Donald Trump’s planned 25 per cent tariffs on imported cars and key auto parts are meant to force manufacturers to relocate production to the US and create jobs. European and Asian carmakers’ shares have dropped, but so have those of US carmakers, whose costs will rise. Shares of China’s BYD, however, now the world’s biggest maker of electric vehicles, rose on Thursday. The US tariffs may put western carmakers further behind BYD and its compatriots — by pushing their prices up just when Chinese firms are coming out with ever more affordable offerings and whizzy EV technology.The tariffs come soon after what some analysts have called a “DeepSeek moment” — referring to China’s recent AI breakthrough — for the global auto industry. BYD last week announced a superfast EV charging system that it says can add about 470km of range in five minutes. By enabling drivers to charge up an electric car about as easily as filling up a petrol one this could remove a key deterrent to consumers going electric. Weeks earlier, BYD unveiled another techno-leap: a free, advanced self-driving system called God’s Eye that it plans to install across its range.Grid capacity might yet restrain BYD’s plans for 4,000 fast-charging stations across China, and political and practical barriers could thwart ambitions to build such networks in other big markets. Foreign rivals may, in time, replicate its charging achievements. Yet BYD’s prowess shows the focal point of EV innovation is now China. Beijing’s state-led industrial policy has built a formidable manufacturing base and catalysed a striking shift in purchasing patterns. Pure battery and plug-in hybrid cars are expected to outsell internal combustion engine (ICE) cars in China in 2025, years ahead of western rivals.All this is happening while the EU is proposing to relax emissions rules — a perhaps predictable response to European automakers’ failure to keep up with targets, but one that will slow EV momentum. US policy, meanwhile, has in effect been going into reverse on EVs. Trump wants to cut consumer tax incentives to go electric, and roll back clean technology subsidies in favour of his “drill, baby, drill” approach to oil.US carmakers such as General Motors were still promising to invest revenues from higher ICE car sales into reducing EV prices. If tariffs go ahead as billed — though little is certain with Trump — they would in theory have an opportunity to use some of their excess capacity to boost domestic sales to replace imports. In practice, applying import levies to auto parts as well as whole vehicles will disrupt their supply chains, raise costs and force prices up — which may put US consumers off buying.While most other big global carmakers rely on the US for a portion of their sales, the likes of BYD are already largely shut out of importing into the US, as well as Canada and the EU, by existing tariffs on Chinese EVs. But Chinese groups are being welcomed into emerging markets such as South Africa, Brazil, India and Turkey, helping China to overtake Japan in 2023 as the world’s largest car exporter. Many of those exports are ICE cars, but as demand develops, China has highly competitive EV models ready to go.BYD’s arch-rival Tesla, whose cars are largely US-made, is among the best-positioned automakers to weather the tariffs. But even Tesla faces threats from BYD’s advances. And for western carmakers as a whole, US tariffs threaten to be a further brake on their transition to the clean technology that is the future of the industry — just when they should be applying the accelerator. More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldThe US’s federal debt burden is set to surpass the peak it reached in the wake of the second world war in coming years, Congress’s fiscal watchdog has warned, underscoring growing concerns over America’s public finances. The Congressional Budget Office said on Thursday that the US’s debt-to-GDP ratio would reach 107 per cent during the 2029 fiscal year — exceeding the 1940s era peak — and continue rising to 156 per cent by 2055. The debt-to-GDP ratio is forecast be 100 per cent for the 2025 fiscal year.The projections come just days after Moody’s delivered a warning about the sustainability of the US’s fiscal position, with the rating agency saying that President Donald Trump’s trade tariffs could compromise attempts to bring its large federal deficit under control by raising interest rates. “Mounting debt would slow economic growth, push up interest payments to foreign holders of US debt, and pose significant risks to the fiscal and economic outlook; it could also cause lawmakers to feel constrained in their policy choices,” the CBO said on Thursday. Despite the scale of the rise in the debt burden, the rate of expansion is forecast to be less drastic now than anticipated a year ago due to the CBO’s assumptions of lower interest rates, less spending on Medicare and higher revenues. Some content could not load. Check your internet connection or browser settings.The Trump administration has pledged to find the fiscal headroom to deliver on its campaign pledge of substantial tax cuts for businesses and households. Trump has tasked tech billionaire Elon Musk with finding $2tn in federal spending cuts by the middle of next year as the president looks to renew tax cuts put in place in 2017, during his first administration. The president has also raised the possibility of lowering corporation tax on domestic activity from 21 per cent to 15 per cent. The CBO calculations do not take into account the impact of Trump’s tax cuts becoming permanent — a move which the fiscal watchdog said last week would add 47 percentage points to the US’s debt-to-GDP ratio by 2054. The Trump administration believes revenues from sweeping tariffs could plug the gap left by lower revenues from income and corporate taxes. However, economists at the Peterson Institute, a Washington think-tank, have disputed the claim that the levies on trade will be enough to compensate for the potential loss of trillions of dollars in income tax revenues. Some content could not load. Check your internet connection or browser settings.The US federal government has been running substantial budget deficits each year since the pandemic, with outlays exceeding revenues by 6.4 per cent of GDP last year. The CBO said that deficits would likely remain high, rising to 7.3 per cent by 2055 — slightly lower than anticipated in March 2024. The calculations assume long-term US growth will be slightly lower than anticipated a year ago. The CBO believes that lower growth is largely down to less immigration, with the US population set to start shrinking in 2033.Video: Why governments are ‘addicted’ to debt | FT Film More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Argentina said on Thursday it had agreed a $20bn loan deal with the IMF to replenish the country’s central bank reserves, in a key step forward for libertarian President Javier Milei’s economic plan.Economy minister Luis Caputo said the deal still needed approval from the fund’s board, which could take several weeks, but that he had asked IMF director Kristalina Georgieva’s permission to announce the figure after uncertainty over the agreement prompted a sell-off of Argentine pesos over the past week.“What we are aiming for with this agreement is that people can rest assured that pesos are backed by the central bank. That will give us a healthier currency,” Caputo said.Milei is betting that a fresh loan from the IMF, to whom Argentina is already the world’s largest debtor with more than $40bn owed for a previous programme, will keep his revival of the troubled South American economy on track. While he has slashed inflation and stabilised the economy, Milei has been unable to rebuild the scarce foreign exchange reserves he inherited, which he needs to prop up the peso, repay debts, weather external shocks and lift Argentina’s strict currency controls. IMF cash gives him firepower to do so.Luis Caputo said the central bank’s gross reserves would rise from $26bn to $50bn after deals with multilateral lenders More