Economy

Speaking to BBC radio, Stephen Moore said the EU had a “socialist model” and suggested the U.S. would be less interested in a free trade deal with Britain if the government put its economic relations with the EU ahead of those with the U.S.“The UK is kind of caught in the middle of these two forms of economic model and I believe that Britain would be better off moving towards more of the American model of economic freedom. And if that were the case, I think it would spur the Trump administration’s willingness to do the free trade agreement with the UK,” said Moore.Bank of England Governor Andrew Bailey on Thursday urged Britain’s new Labour government to rebuild ties with the EU.While the government has ruled out rejoining the EU’s single market or customs union, Prime Minister Keir Starmer has said he wants to improve trade ties and diplomatic relations with the bloc.Finance minister Rachel Reeves, speaking just before Bailey at the same event, said Britain needed to “reset” its relationship with the EU, and that she also looked forward to working closely with Trump to strengthen trade ties.While Bailey did not refer directly to the U.S. election in his speech, policymakers around the world are still digesting Trump’s victory and the prospect of double-digit tariffs on goods imported by the United States. More

Although he acknowledged that Trump’s plans to slash taxes and impose harsh tariffs on US imports will be considered, Powell flagged that it could take some time before officials have enough clarity to gauge the impact of these policy changes on their calibration of interest rates.In order to gauge how officials may assess the election outcome at their final gathering of the year next month, analysts at Deutsche Bank (ETR:DBKGn) led by Matthew Luzzetti scoured through the minutes of the meeting of the rate-setting Federal Open Market Committee in December 2016 — one month after Trump was first elected to the White House.They said that meeting had a “number of parallels to this year, with President Trump set to take the White House and promising dramatic shifts in the economic policy landscape.”The December 2016 meeting had a clear focus on fiscal policies, the analysts said, with the Fed largely anticipating a more expansionary stance at the time. Although there was significant uncertainty around the “timing and form” of fiscal and trade policies, they noted that “about half” of Fed officials began factoring in these changes to their baseline rate outlooks. Almost all, meanwhile, said the risks tilted towards stronger growth and “many” saw this as “potentially necessitating somewhat tighter monetary policy than currently anticipated.”Some economists have speculated that Trump’s proposals, especially the blanket import levies, could drive up inflation and lead the Fed to leave rates at a higher level than initially anticipated. This uptick in volatility may exacerbate the possibility of a clash between the Fed and the new Trump administration, the Wall Street Journal said.Last week, Powell flatly rejected notions that Trump could dismiss him from his post, telling reporters that he would not resign if asked to by the upcoming administration. Powell would also likely lodge a legal challenge to any attempt to oust him before his term comes to a close, the WSJ reported.For his part, Trump has not recently indicated any plans to try to force out Powell, saying in June that he would allow Powell to serve out the remainder of his term “especially if I thought he was doing the right thing.” Trump’s advisers are split on how far he should take the matter, the WSJ said.Meanwhile, any alterations in the makeup of the Fed may threaten to disrupt an ongoing bid by policymakers to defeat inflation without sparking a meltdown in the wider economy or labor demand. The Fed has described economic activity as on a “solid pace.” More

Voters’ concerns about inflation were pivotal in recent U.S. elections, with many attributing personal hardship to rising prices. However, according to Donovan, this perception may not deter the U.S. from imposing tariffs, as the immediate economic and political factors suggest continued momentum toward protectionist policies.Tariffs inherently add costs to imported goods, with the impact eventually reaching American consumers. When a tariff, for instance, imposes a 20% tax on an imported item, its final price in stores might only reflect an 8% increase. This less dramatic impact on shelf prices is because tariffs apply solely to the point of import. As products move along the supply chain, some of the cost increase is mitigated by adjustments in profit margins and other distribution costs, making these increases less conspicuous to consumers.Moreover, the effect of tariffs is particularly muted on infrequently purchased items, such as consumer durables. Inflation perceptions are disproportionately influenced by the prices of frequently purchased goods like food and gasoline, which are often domestically produced and less affected by tariffs. This disconnect may mean that while tariffs contribute to inflation in the aggregate, they do so in ways less likely to stoke broad political backlash. Consequently, while tariffs do raise prices, they may do so without strongly impacting the politically sensitive aspects of inflation perception.There is no indication that tariffs will be reined in purely by inflation concerns in this context. According to UBS, policy decisions under leaders with protectionist agendas are likely to be influenced by political motives.Despite how tariffs will increase inflationary pressure, the structural nuances of how tariffs affect consumer prices are likely to prevent inflationary fears from deterring trade measures, for now. More

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The Agreement on Climate Change, Trade and Sustainability (ACCTS) was signed at a ceremony during the Asia-Pacific Economic Cooperation (APEC) in Peru on Saturday after being struck in July, Trade and Agriculture Minister Todd McClay said in a statement.”This agreement removes tariffs on key exports including 45 wood and wool products — two sectors that are vital to achieving our goal of doubling New Zealand’s exports by value in 10 years,” McClay said.”It will also reduce costs for consumers, removing tariffs on hundreds of other products, including insulation materials, recycled paper, and energy-saving products such as LED lamps and rechargeable batteries.”The deal prioritised New Zealand’s “sustainable exports”, he said, amid a roll back by the country’s centre-right government of environmental reforms in a bid to boost a flailing economy. Exports make up nearly a quarter of New Zealand’s economy. More

“The positive outlook reflects the significant fiscal overperformance, particularly driven by corporation tax receipts, which are rebuilding the Irish government’s fiscal buffers,” S&P said.Ireland’s tax collection increased by 14.9% in the first 10 months of the year, compared with the same period in 2023, as the first portion of a 14 billion euro ($14.74 billion) back-tax windfall boosted already healthy revenues.According to Fitch, the country has a prudent domestic fiscal framework designed to mitigate risks from the large and highly-concentrated windfall corporate tax revenue. An explosion in corporate tax revenues, mainly paid by a few large U.S. multinationals, has handed Ireland one of Europe’s few budget surpluses, and a one-off collection of back taxes from Apple Inc (NASDAQ:AAPL) is set to push that surplus to 7.5% of national income this year.S&P estimates the Irish government will run a fiscal surplus equivalent to 7.4% of national income, 2.8% excluding the Apple’s windfall, still the highest in the eurozone.Fitch expects Ireland’s budget surplus for 2024 to be 4.3% of gross domestic product — 1.5% excluding revenue from Apple.”In our view, the government’s plans to stash a large portion of future surpluses into newly setup savings funds will improve Ireland’s fiscal and economic resilience,” S&P added.S&P affirmed the “AA/A-1+” long- and short-term ratings for the country.Both Fitch and S&P upgraded Ireland’s ratings in May due to its fiscal framework, Moody’s (NYSE:MCO) followed in August with an outlook revision to “positive” and affirmed its ratings. ($1 = 0.9498 euros) More

The measure is set to go into effect in December and aims to give consumers access to cheaper products, according to presidential spokesperson Manuel Adorni.The plan will boost the limit on foreign purchases exempt from tax, to $3,000 from $1,000 per package delivered, according to Economy Minister Luis Caputo.It also includes a tariff exemption of up to $400 on imported goods for personal use with buyers only subject to the country’s value-added tax, he added in a post on X. More