Economy

U.S. President Donald Trump’s tariff policies are complicating the path ahead for European Central Bank interest rates, Pierre Wunsch, member of the ECB’s Governing Council, told CNBC.
His comments come after Trump announced 25% tariffs on all cars “not made in the United States,” and threatened to place “far larger” tariffs on the European Union and Canada if they were to work together to resist duties from the U.S.

U.S. President Donald Trump’s tariff policies are making the path ahead for European Central Bank interest rates “more complicated,” according to Pierre Wunsch, member of the ECB’s Governing Council.
“We were going in the right direction. And I was actually quite relaxed,” he told CNBC’s Karen Tso on Thursday on the sidelines of the IIF Europe Summit in Brussels.

“If we forget tariffs …. we were going in the right direction. Then the question was more a question of fine tuning of the pace of cuts and where we land,” Wunsch said. “I was like, you know, inflation might be the boring part of [20]25, and [20]25 is not a boring year. But if you add tariffs to the equation, it’s becoming more complicated,” he said.
Wunsch, who is also the Governor of the National Bank of Belgium, said tariffs would be “bad for growth” and “probably” inflationary, but noted that the exact impact remains uncertain and will depend any potential retaliation and on how exchange rates react to duties.
His comments come a day after Trump announced 25% tariffs on all cars “not made in the United States,” effective as of April 2. In a post on Truth Social, Trump on Thursday also threatened to place “far larger” tariffs on the European Union and Canada if they were to work together to resist duties from the U.S.
These are just the latest developments in Trump’s trade policy turmoil, which has seen a slew of tariffs announced — and at times postponed, amended or abolished, as negotiations and counter measures have also come into play.
April 2 is set to be a key date for a wide range of duties to come into effect, although recent comments from Trump and his administration have signaled that adjustments could be made and the duties could be more lenient than originally indicated.

Interest rate decisions ahead

The ECB will make its next interest rate decision on April 17 soon after the tariffs are scheduled to come into effect. Markets were last pricing in a roughly 79% chance of a 25-basis-point interest rate cut from the ECB next month, according to LSEG data.
By then, Wunsch said the central bank could have a rough idea of the impact of tariffs, which could influence the ECB’s decision making. However, he said he “wouldn’t put too much focus on April,” as trade policy would have a medium-term impact.
The central banker on Thursday left the door open for all possible actions from the ECB regarding interest rates — further cuts, a hike, or a pause.
“I think the likelihood is still limited that we would have to hike, but there might be a case for a pause,” he said.
“If tariffs have an inflationary impact and a negative impact on growth, it’s going to be a difficult equation, and we might have to consider a pause. I’m not pleading for one, but I think it should be part of the discussion,” he said.

Fiscal vs. tariff policy

Policymaker Wunsch on Thursday also flagged that recent shifts around fiscal policy in Europe could dampen the impact of tariffs.
Germany earlier this month adjusted its constitution in what has been described as a fiscal U-turn, making changes to its long standing debt policies to enable higher defense spending and creating a 500 billion euro ($539 billion) infrastructure special fund.
The European Commission meanwhile has also made moves towards a major defense expenditures package, pledging to mobilize as much as 800 billion euros to boost security spending.
While it was still unclear what exactly would come of the EU-wide plans, “what’s going to take place in Germany is … significant,” according to Wunsch.
The country’s measures “could, to some extent, and even maybe to a large extent, over the medium term, compensate for the tariffs in the U.S.,” he said.
If the impacts of tariffs and fiscal expansion balance out, the remaining impact from tariffs could then be around driving inflation higher, Wunsch noted, saying this was a reason to look not just at April but to take a longer term view over the next one or two years.
“The risk might be on the upside on the inflation front,” he said. More

American companies are racing to negotiate price cuts from Chinese suppliers, shift production and increase prices for US consumers as executives grapple with President Donald Trump’s additional 20 per cent tariffs on Chinese goods and prepare themselves for more.Trump campaigned on a promise of 60 per cent duties on Chinese goods, and the White House may impose additional levies on imports from China on April 2, when it unveils “reciprocal tariffs” on countries around the world.It is unclear how high tariffs could go, but US and Chinese companies are looking for workarounds and rethinking their supply chains to lessen reliance on China.“Obtaining cost concessions from our vendors” was top of the list, Jeff Howie, chief financial officer at home furnishings retailer Williams-Sonoma, told investors this month.Howie said the company would continue to shift sourcing out of China, having already reduced Chinese-made goods from 50 per cent of inventory in 2018 to 23 per cent. He said it would also expand production in the US and was “passing on targeted price increases to our customers”.The Pottery Barn owner is one of several US retailers taking action. Costco and Walmart have already demanded price cuts from suppliers, with the latter hauled in by Chinese authorities to explain their thinking.Demands for price cuts, along with moves to shift production elsewhere, underscore how large companies have built greater resilience and flexibility into their supply chains following Trump’s first trade war and the Covid-19 pandemic.US and Chinese companies said the latest tariffs had accelerated a production diversification drive that began during Trump’s first term.“The 2017 round of tariffs certainly created action, and we’re in a different position than we were back then,” Richard McPhail, chief financial officer of home improvement giant Home Depot, told the Financial Times.Home Depot chief Ted Decker added that many of its suppliers had shifted some manufacturing out of China over the past seven years. About a third went to south-east Asia, a third to Mexico and a third to the US, he said.Elegant Home-Tech, a Chinese manufacturer that ships vinyl flooring to the US, including to Home Depot warehouses, began building a factory in Mexico in 2023 after Trump’s first bout of tariffs.The $60mn factory will start shipping flooring to the US this summer, said a manager at the company, asking not to be named. The group hopes it will not be caught in the crossfire of US-Mexico trade tensions.“Everything is uncertain,” said the manager. “This is difficult for manufacturers, for importers and for retailers.”Elegant Home-Tech is in negotiations with its customers over how to share the added tariff burden, which now stands at 50 per cent. This includes 25 per cent from Trump’s first term and the normal 5 per cent rate.“Our profit is very tiny,” said the manager. “It’s impossible for us to afford all the tariff costs. We will likely split the costs. We think the [in-store] price will increase, too.”Chinese pet-food maker Petpal Pet Nutrition Technology told investors its factories in Vietnam and Cambodia “could now fully take over orders from American customers” and were “not affected by tariffs”.Similarly, Chinese battery-powered tools manufacturer Globe said its “Vietnam factory has basically achieved full coverage of exports to the United States”.The problem for companies shifting their production elsewhere is they are not sure who will be hit by tariffs next. Trump has said the only sure-fire way to avoid tariffs is to move production to the US. “Nobody knows what tariffs are going to be put on, where, when or what,” said Jay Schottenstein, chief executive of clothing brand American Eagle. “We don’t know what’s going to be on Vietnam, we don’t know China, we don’t know India. We don’t know Bangladesh.”“We’re not going to be jumping all over the place until we know exactly what the story is,” he told analysts.Still, American Eagle executives said they had already spent months preparing and planned to reduce China sourcing from the current “high teens” percentage to “single digits” by the second half of the year.For retailers, particularly those heavily reliant on Chinese manufacturing, the effects will be more damaging.Discount retailer Five Below, which sources about 60 per cent of its products from China, expects a percentage-point hit to its gross margin for the year despite its best efforts to mitigate the impact.Kristy Chipman, Five Below’s finance chief, told analysts the group was looking to renegotiate prices with suppliers, shift production and raise some in-store prices.“The breadth and magnitude of the recently announced tariffs are significant,” she said. Additional reporting by Nian Liu and Wenjie Ding in Beijing and Thomas Hale in Shanghai More

Former Treasury Secretary Janet Yellen will be joining an advisory board for bond giant Pimco, CNBC has learned.
The advisory board members’ mission, according to the Pimco website, is to “contribute their insights to the firm on global economic, political and strategic developments and their relevance for financial markets.”

Treasury Secretary Janet Yellen speaking with CNBC’s Sara Eisen (not shown) at the U.S Treasury Department on Jan. 8, 2024.

Former Treasury Secretary Janet Yellen will be joining an advisory board for bond giant Pimco, CNBC has learned.
Joining other prominent officials in the world of economics and finance, Yellen, who also served as Federal Reserve chair, will serve on the board that meets several times a year, according to the report from CNBC’s Leslie Picker.

The advisory board members’ mission, according to the Pimco website, is to “contribute their insights to the firm on global economic, political and strategic developments and their relevance for financial markets.”
Current members include Gordon Brown, the former U.K. prime minister; ex-White House chief of staff Joshua Bolten; Michèle Flournoy, former defense policy advisor under two U.S. presidents; and Raghuram Rajan, an economist and former governor for the Reserve Bank of India.
In addition, former Federal Reserve Chair Ben Bernanke also served as a senior advisor at Pimco, and Richard Clarida, who had served as the central bank’s vice chair, is a managing director in the firm’s New York office.
Yellen served as head of Treasury during all four years of the Biden administration, and before that was Fed chair from 2014-18. She was the first woman to hold the respective posts. Prior to taking the Treasury post, she served a stint as a distinguished fellow at the Brookings Institution think tank.
Pimco, based in Newport Beach, California, manages about $2 trillion for clients and once ran the largest bond fund in the world. Yellen has a past with the firm, reporting once that she collected a $180,000 speaking fee at the firm in 2019.

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People take pictures of the U.S. Treasury Department building in Washington, D.C., on Feb. 6, 2025.
Mandel Ngan | AFP | Getty Images

The Treasury Department is planning to furlough a “substantial” level of its workforce in conjunction with Elon Musk’s efforts to shrink the size of the federal government, according to a court document.
As part of a complaint in a related case, Trevor Norris, the department’s deputy assistant secretary in human resources, indicated that the layoffs will be coming as part of the Department of Government Efficiency’s ongoing moves to cut the federal employee rolls.

In a sworn statement, Norris said Treasury is wrapping up plans to comply with President Donald Trump’s executive order backing DOGE’s activity. Treasury currently has more than 100,000 employees.
“These plans will be tailored for each bureau, and in many cases will require separations of substantial numbers of employees through reductions in force (RIFs),” Norris said in an affidavit.
The case involves a complaint by the state of Maryland to get a stay on the layoffs. In recent days, three judges have issued restraining orders putting temporary halts on DOGE’s efforts to hit several departments.
“The Treasury Department is considering a number of measures to increase efficiency, including a rollback of wasteful Biden-era hiring surges, and consolidation of critical support functions to improve both efficiency and quality of service,” a Treasury spokesperson said. “No final decisions have yet been made, and any current reporting to the contrary is false.”
Bloomberg News first reported the planned layoffs.

Get Your Ticket to Pro LIVEJoin us at the New York Stock Exchange!Uncertain markets? Gain an edge with CNBC Pro LIVE, an exclusive, inaugural event at the historic New York Stock Exchange.
In today’s dynamic financial landscape, access to expert insights is paramount. As a CNBC Pro subscriber, we invite you to join us for our first exclusive, in-person CNBC Pro LIVE event at the iconic NYSE on Thursday, June 12.
Join interactive Pro clinics led by our Pros Carter Worth, Dan Niles, and Dan Ives, with a special edition of Pro Talks with Tom Lee. You’ll also get the opportunity to network with CNBC experts, talent and other Pro subscribers during an exciting cocktail hour on the legendary trading floor. Tickets are limited! More

Home improvement retailer Kingfisher became the latest British company to report a negative impact from U.K. Finance Minister Rachel Reeves’ October budget — as she prepares her latest update on the state of the British economy.
Top on the businesses’ list of complaints is higher employment costs after the government pledged in October to increase national insurance contributions from employers and raised the country’s “national living wage” by 6.7% from April 1.
The Confederation of British Industry said Reeves “must inject business with a serious confidence boost” on Wednesday.

Rachel Reeves, UK chancellor of the exchequer, outside 11 Downing Street ahead of presenting her budget to parliament in London, UK, on Wednesday, Oct. 30, 2024. 
Bloomberg | Bloomberg | Getty Images

Home improvement retailer Kingfisher became the latest British company to report a negative impact from U.K. Finance Minister Rachel Reeves’ October budget — as she prepares her latest update on the state of the British economy.
In its annual earnings release on Tuesday, Kingfisher, which owns home improvement retailer B&Q, said the government’s policies had “raised costs for retailers and impacted consumer sentiment,” with sales of big-ticket items falling.

It is the latest in a line of British businesses that have criticized Reeves’ bumper tax-rising budget since autumn. The companies will now be keeping a close eye on Reeves’ Spring Statement, when she’s set to update lawmakers on her latest spending and taxation plans at 12:30 p.m. London time Wednesday.
Top on the businesses’ list of complaints is a higher employment cost after the government pledged in October to increase national insurance contributions from employers and raised the country’s “national living wage” by 6.7% from April 1.
On Sunday, Reeves defended the tax rises ahead of the Wednesday statement, telling Sky News the government “took the action that was necessary to ensure our public services and public finances were on a firm footing.”
However, a number of consumer-facing businesses have flagged concerns with the Labour government’s economic policies in their earnings reports this quarter. They include supermarket giant Tesco, which said its higher national insurance contributions could add up to £250 million ($324 million) to annual costs, while the chairman of pub chain JD Wetherspoon, Tim Martin, said the changes will cost every one of his pubs £1,500 per week. 
Regis Schultz, CEO of sportswear retailer JD Sports, said the policies mean it was tempting for businesses to reduce staff numbers and hours, “which will be bad news for the economy.” 

It comes as the U.K. battles economic sluggishness, rising prices and widespread uncertainty as a result of U.S. President Donald Trump’s global trade tariffs.
The Office for Budget Responsibility (OBR), the country’s independent public finances watchdog, is reportedly expected to downgrade the U.K.’s growth forecasts for 2025 on Wednesday, halving its previous 2% estimate.
AB Foods, which owns budget fashion retailer Primark, blamed the Labour government’s budget as contributing to broader consumer weakness in the country. Finance Director Eoin Tonge told analysts that customers across its brands were cautious, citing “a shock and a fear, that’s driven people to pull in their horns.” That view was shared by clothing retailer Frasers Group, which said it saw weaker consumer confidence around the budget announcement. The company’s Chief Financial Officer Chris Wootton told Reuters the company “felt we’d been kicked in the face.”
The slew of negative corporate commentary is expected to pile pressure on Reeves ahead of her Spring Statement.
The British Retail Consortium has called on the government to “inject confidence into the economy,” warning that April’s rise in tax contributions and the minimum wage will generate £5 billion in additional costs for retailers, giving “many no option but to push prices up.”
The Confederation of British Industry (CBI) said Reeves “must inject business with a serious confidence boost” on Wednesday.
“As an immediate priority the government should re-commit to not raising the business tax burden further over the course of this Parliament,” Louise Hellem, chief economist of the CBI, said in a statement. “Setting an ambitious goal for R&D spending, making it easier to invest in skills and taking measures to reduce the regulatory burden on business would be encouraging moves that would show the government understood what business needs to see from them.”
Goldman Sachs Chief Equity Strategist Peter Oppenheimer meanwhile told CNBC on Monday that concerns over consumer and business confidence will see Reeves focus on cutting costs rather than raising taxes this week, but said the government’s focus on boosting growth was “a laudable objective, a difficult thing to do.”
CNBC has reached out to the U.K. Treasury for comment.
— CNBC’s Holly Ellyatt contributed to this report. More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldThe US has put dozens of Chinese entities on an export blacklist in the Trump administration’s first big effort to slow China’s ability to develop advanced artificial intelligence chips, hypersonic weapons and military-related technology.The US commerce department on Tuesday added more than 70 Chinese groups to the “entity list”, which requires any American company selling technology to them to have a licence. In most cases, the licence request is denied.Among the listed groups are six Chinese subsidiaries of Inspur, a big cloud computing group that has worked with US chipmaker Intel, including one based in Taiwan. The Biden administration put Inspur on the entity list in 2023 but came under criticism for not adding its subsidiaries. Inspur did not immediately respond to a request for comment.The US said the subsidiaries were targeted for helping develop supercomputers for military use and obtaining American-made technology to support projects for China and the People’s Liberation Army. It added that the subsidiaries had developed large AI models and advanced chips for military use.“We will not allow adversaries to exploit American technology to bolster their own militaries and threaten American lives,” said Howard Lutnick, the US commerce secretary. “We are committed to using every tool at the department’s disposal to ensure our most advanced technologies stay out of the hands of those who seek to harm Americans.”The US has not provided any public evidence to support the blacklisting of Beijing Academy of Artificial Intelligence for supporting China’s military modernisation. BAAI is a leading non-profit AI research institute set up in 2018 to bring together industry and academia. It regularly releases open source AI models and other tools and holds an annual conference to convene global experts in the field.The blacklisting of BAAI comes after Washington targeted Zhipu in January. The start-up is a frontrunner among Chinese AI groups developing large language models. BAAI did not immediately respond to a request for comment.In most cases, the restrictions will apply to non-US companies that export products containing American technology to the Chinese groups under an extraterritorial tool known as the “foreign direct product rule”.The US also targeted four groups — Henan Dingxin Information Industry, Nettrix Information Industry, Suma Technology and Suma-USI Electronics — that are involved in developing exascale superconductors for military purposes, such as nuclear weapons modelling. Washington said the groups provided “significant manufacturing capabilities” to Sugon, an advanced computer server-maker put on the entity list in 2019 for building supercomputers for military use.The Chinese embassy in Washington said the US had “time and again overstretched the concept of national security and abused state power to go after Chinese companies”.“We firmly oppose these acts taken by the US and demand that it immediately stop using military-related issues as pretexts to politicise, instrumentalise and weaponise trade and tech issues, and stop abusing export control tools such as entity lists to keep Chinese companies down,” said Liu Pengyu, the embassy spokesperson.The Biden administration imposed export controls on China targeting quantum computing and AI chips under its “small yard, high fence” policy. But critics accused it of failing to close loopholes that let some Chinese companies avoid restrictions.Meghan Harris, a semiconductor policy expert at Beacon Global Strategies, said it was telling that the first significant action on export controls “corrects what was viewed as a major gap in the Biden administration’s listing of Inspur, which left major subsidiaries unrestricted”.“While a solid first action by the Trump team that will be seen as strengthening controls and fixing errors, it’ll take a bit more time to work up the weightier policy decisions,” she added.Jeffrey Kessler, under-secretary of commerce for industry and security, said his bureau was “sending a clear, resounding message” that the administration would prevent US technology “from being misused for high performance computing, hypersonic missiles, military aircraft training and [Unmanned Aerial Vehicles] that threaten our national security”.The US also added 10 entities based in China, South Africa and the UAE to the list over links to the Test Flying Academy of South Africa, a flight school that Washington put on the entity list in 2023 after discovering it was hiring western fighter jet pilots, including from the UK, to train Chinese pilots.Additional reporting by Ryan McMorrow in Beijing More