Economy

The potential tariffs are modeled as part of a broader analysis on global trade tensions, highlighting how their economic repercussions depend heavily on Europe’s response and broader global tariff actions.According to UBS, the direct GDP impact of a standalone 10% US tariff on the Eurozone would range from a decline of 0.28 percentage points (pp) with full retaliation to 0.43 pp if the Eurozone refrains from retaliating. The primary drag on GDP arises from declining exports, which outweigh the impact on imports.“The nominal value of a 10% tariff on the Eurozone is worth about EUR30bn, or 0.2% GDP,” economists said in a note.The overall economic impact on GDP, if tariffs were applied exclusively to Europe, is estimated to range from a decline of 28 basis points with full retaliation to 43 basis points without retaliation, driven entirely by a larger drop in exports compared to imports.Inflationary pressures from such tariffs are contingent on Europe’s actions. UBS notes, that retaliatory tariffs could raise inflation by up to 13 basis points (bp) in consumer prices and 26 bp in the GDP deflator.Without retaliation, inflation effects remain subdued due to lower import price adjustments and limited currency depreciation.“We estimate the inflation impact between -2bp and +26bp for the GDP deflator and between 1 to 13bp for CPI,” economists wrote.“If Europe does not retaliate and thus its import prices do not go up, the inflation impact is largely a function of the currency depreciation and growth weakness; by contrast, retaliation lifts import prices and inflation,” they explained.When combined with broader US tariff escalation, such as a 60% tariff on Chinese imports, the scenario changes. UBS points out that the depreciation of the Chinese yuan (RMB) relative to both the US dollar and the euro could offset the inflationary impacts in Europe.“If RMB depreciates more than other currencies due to higher US tariffs, imports from China could cheapen, neutralizing the inflationary impact of Europe’s own tariffs,” the note states.On domestic demand, UBS estimates the fallout to be relatively modest, with impacts ranging between -0.01 to -0.13 pp depending on retaliation. More

TOKYO (Reuters) -Labour unions at major Japanese auto manufacturers have set a specific target for pay hikes for wage negotiations for the first time in seven years, as they aim to spread wage growth momentum to smaller firms, a key goal of the government and central bank.The labour group, the Confederation of Japan Automobile Workers’ Unions, will seek monthly pay hikes of 12,000 yen ($79.15) or more in spring wage negotiations, it said on Wednesday.The target represents an increase of about 5% in base pay at member firms with workforces of less than 300 employees.Japanese policymakers hope that broader and sustained wage increases will boost consumption and shore up fragile economic growth.The labour group decided to revive a numeric target to give guidance to smaller unions, such as those at parts makers, who can use it as leverage in their negotiations, its executives told a news conference.The group has 12 unions, including those of Toyota Motor (NYSE:TM) and Honda (NYSE:HMC) Motor as well as of parts makers, under its umbrella, with 784,000 workers in total.”With the actual target, we want to help smaller union members demand sufficient wage growth with confidence,” Akihiro Kaneko, the group’s chair, said.The government and labour unions are focusing on achieving wage hikes at smaller firms, as bumper pay hikes have been skewed to larger firms so far.Japan’s largest labour union group Rengo, which has the auto unions group under its umbrella, is seeking wage hikes of at least 5% in 2025, similar to this year’s hefty increase.The target includes hikes of more than 3% in base pay – a key barometer of wage strength as it provides the basis for bonuses, severance and pensions.Japanese companies agreed to an average 5.1% wage hike earlier this year, the biggest increase in three decades, following a 3.5% rise last year, according to Rengo, which has about 7 million members.($1 = 151.6100 yen) More

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Woodcliff Lake, New Jersey-based Party City is behind on rent at some locations, the report said, citing people familiar with the matter.Party City didn’t immediately respond to a Reuters request for comment.The company first filed for Chapter 11 bankruptcy protection in the U.S. in January last year, with $150 million in debtor-in-possession financing to support its operations and reported $1 billion to $10 billion of estimated assets and liabilities. In September, the retailer reached a plan to exit bankruptcy, which saw a cancellation of about $1 billion in company debt and turned all its equity value over to the retailer’s lenders.Troubled retailers often seek bankruptcy protection following the holiday season to take advantage of the cash cushion provided by recent sales. More

According to the ADB, developing Asia and the Pacific is projected to grow by 4.9% in 2024, slightly below its September forecast of 5.0%. Growth for 2025 is now estimated at 4.8%, a modest downgrade from the earlier projection of 4.9%, due to weaker domestic demand in South Asia.Inflation forecasts have also been revised down to 2.7% for 2024 and 2.6% for 2025, partly reflecting anticipated moderation in oil prices.“Strong overall domestic demand and exports continue to drive economic expansion in our region,” said ADB Chief Economist Albert Park.“However, the policies expected to be implemented by the new US administration could slow growth and boost inflation to some extent in the People’s Republic of China (PRC), most likely after next year, also impacting other economies in Asia and the Pacific,” he added.China’s growth forecast remains steady at 4.8% for 2024 and 4.5% for 2025, according to ADB, while India’s growth estimates have been lowered to 6.5% this year and 7.0% next year due to weaker private investment.Southeast Asia’s outlook has been upgraded to 4.7% for 2024, driven by strong manufacturing exports and public capital spending.The bank highlights risks from U.S. trade, fiscal, and immigration policies, which could weaken global economic growth by 0.5 percentage points over four years under a high-risk scenario. Broad-based tariffs, reduced immigration, and expansionary fiscal measures could disrupt global trade and rekindle inflation in the U.S., though the impacts on Asia-Pacific are expected to remain limited.The bank cautions that additional risks, including geopolitical tensions and China’s property market fragility, could cloud the region’s outlook. More

Developing Asia, which includes 46 Asia-Pacific countries stretching from Georgia to Samoa – and excludes Japan, Australia and New Zealand – is projected to grow 4.9% this year and 4.8% next year, slightly lower than the ADB’s forecasts of 5.0% and 4.9% in September.The downgraded growth estimates reflect lacklustre economic performance in some economies during the third quarter and a weaker outlook for consumption, the bank said. Growth forecasts for China remain unchanged at 4.8% for 2024 and 4.5% for 2025, but the ADB lowered its projections for India to 6.5% for 2024 from 7.0% previously, and to 7.0% for next year from 7.2%. “Changes to U.S. trade, fiscal, and immigration policies could dent growth and boost inflation in developing Asia,” the ADB said in its Asian Development Outlook report, though it noted most effects were likely to manifest beyond the 2024-2025 forecast horizon. Trump, who takes office on Jan. 20, has threatened to impose tariffs in excess of 60% on U.S. imports of Chinese goods, crackdown on illegal migrants, and extend tax cuts.”Downside risks persist and include faster and larger U.S. policy shifts than currently envisioned, a worsening of geopolitical tensions, and an even weaker PRC (People’s Republic of China) property market,” the ADB said. The ADB lowered its inflation forecasts for 2024 and 2025 to 2.7% and 2.6%, respectively, from 2.8% and 2.9% previously, due to softening global commodity prices. GDP GROWTH 2023 2024 2024 2025 2025 2024 2025     JULY SEPT JULY SEPT DEC DEC Caucasus and 5.3 4.5 4.7 5.1 5.2 Central Asia 4.9 5.3   East Asia 4.7 4.6 4.6 4.2 4.2 4.5 4.2 China 5.2 4.8 4.8 4.5 4.5 4.8 4.5   South Asia 6.9 6.3 6.3 6.5 6.5 5.9 6.3 India 8.2 7.0 7.0 7.2 7.2 6.5 7.0   Southeast 4.1 4.6 4.5 4.7 4.7 Asia 4.7 4.7 Indonesia 5.0 5.0 5.0 5.0 5.0 5.0 5.0 Malaysia 3.7 4.5 4.5 4.6 4.6 5.0 4.6 Myanmar 0.8 n/a 0.8 n/a 1.7 n/a n/a Philippines 6.0 6.0 6.2 6.2 5.5 6.0 6.2 Singapore 1.1 2.4 2.6 2.6 2.6 3.5 2.6 Thailand 1.9 2.6 2.3 3.0 2.7 2.6 2.7 Vietnam 6.0 6.0 6.2 6.2 5.1 6.4 6.6   The Pacific 3.5 3.3 3.4 4.0 4.1 3.4 4.1   Developing 5.1 5.0 5.0 4.9 4.9 Asia 4.9 4.8   INFLATION      Caucasus and 10.2 7.6 6.9 6.8 6.2 Central Asia 6.8 6.2   East Asia 0.6 0.8 0.8 1.6 1.3 0.6 1.1 China 0.2 0.5 0.5 1.5 1.2 0.3 0.9   South Asia 8.4 7.1 7.0 5.8 6.1 6.9 5.4 India 5.4 4.6 4.7 4.5 4.5 4.7 4.3   Southeast 4.1 3.2 3.3 3.0 3.2 Asia 3.0 3.1 Indonesia 3.7 2.8 2.8 2.8 2.8 2.4 2.8 Malaysia 2.5 2.6 2.4 2.6 2.7 2.2 2.6 Myanmar 22.0 n/a 20.7 n/a 15.0 n/a Philippines 6.0 3.8 3.6 3.4 3.2 3.3 3.2 Singapore 4.8 3.0 2.6 2.2 2.2 2.5 2.2 Thailand 1.2 0.7 0.7 1.3 1.3 0.5 1.2 Vietnam 3.3 4.0 4.0 4.0 4.0 3.9 4.0 The Pacific 3.0 4.3 3.6 4.1 4.1 3.6 4.1 Developing 3.3 2.9 2.8 3.0 2.9 Asia 2.7 2.6 More

(Reuters) -A national security review of Nippon Steel’s $15 billion bid for U.S. Steel is ongoing and President Joe Biden will see what it yields before making a decision on whether to block it, the White House said on Tuesday, cautioning he still opposes the tie-up.The statement comes after shares of U.S. Steel (N:X) tumbled more than 10% on Tuesday afternoon following a Bloomberg report suggesting the deal would be killed in short order.CFIUS, a powerful committee charged with reviewing foreign investments in U.S. firms for national security risks, has until Dec. 22 to make a decision on whether to approve, block or extend the timeline for the deal’s review, Reuters has reported. “The President’s position since the beginning is that it is vital for U.S. Steel to be domestically owned and operated,” Saloni Sharma, a White House spokesperson said in a statement. “As we have said before, the President will continue to see what the CFIUS process yields. We have not received any CFIUS recommendation. The CFIUS process was and remains ongoing,” she added.Bloomberg’s initial headline read that Biden was “set to” block the deal, suggesting a final decision had been made, but the outlet later updated it to say he “plans to” kill it, echoing prior comments and leaving the door open to a last minute change.CFIUS declined to comment. Japan’s Nippon Steel said it was inappropriate that politics continued to outweigh true national security interests.”Nippon Steel still has confidence in the justice and fairness of America and its legal system, and – if necessary – will work with U. S. Steel to consider and take all available measures to reach a fair conclusion,” it added in a statement.U.S. Steel said the transaction should be approved on its merits. “The benefits are overwhelmingly clear,” it said in a statement. “Our communities, customers, investors, and employees strongly support this transaction, and we will continue to advocate for them and adherence to the rule of law.” The two companies are poised to pursue litigation over the process if Biden decides to block the merger. The acquisition has faced opposition within the U.S. since it was announced last year with both Biden and his incoming successor Donald Trump both publicly indicating their intention to block it.CFIUS told the two companies in September the deal would create national security risks because it could hurt the supply of steel needed for critical transportation, construction and agriculture projects.Despite opposition, including from the United Steelworkers union, Japan’s Nippon has pressed on in pursuit of a deal, promising to not transfer any U.S. Steel production capacity or jobs outside the U.S. if the merger succeeds.Nippon has also said it would not interfere in any of U.S. Steel’s decisions on trade matters, including decisions to pursue trade measures under U.S. law against unfair trade practices.In a bid to win over support from workers, Nippon Steel said on Tuesday it planned to give employees $5,000 each if the deal with U.S. Steel closed. It also pledged 3,000 euro ($3,160) closing bonuses to employees in Europe, which would result in a nearly $100 million total payment to employees.($1 = 0.9496 euros) More

NEW YORK (Reuters) – Investors are expected to increase their allocations to stocks and bonds from cash after even “modest” Federal Reserve interest rate cuts, BlackRock (NYSE:BLK)’s chief financial officer said on Tuesday.Expectations earlier this year that the U.S. central bank would cut interest rates aggressively after hiking them to fight inflation have moderated in recent months as the U.S. economy continues to show momentum despite high borrowing costs.”I think even modest rate cuts are going to fuel a very healthy amount of investor re-risking,” said BlackRock CFO Martin Small, speaking at the Goldman Sachs U.S. Financial Services conference on Tuesday.Lower interest rates are expected to eventually pull yields in money markets down from well above 4%, which is where cash-like instruments like T-bills currently stand. So far, however, there has been little evidence that investors are abandoning cash. Assets in U.S. money markets stood at $6.77 trillion as of last week, data from the Investment Company Institute showed, up from $6.3 trillion in early September.”There’s still enough political and economic uncertainty in the world that cash is an attractive safe haven for clients,” Small said. “Market expectations for rate cuts … are shallower and fewer,” he said, adding that these and other factors had made money market fund balances stickier.The U.S. central bank started cutting interest rates in September by 50 basis points. That was followed by another 25 basis point cut last month, with investors now betting on an additional quarter of a percentage point cut later this month. After that, further easing is largely expected to depend on economic data as well as the path of inflation.Investors now expect interest rates of about 3.7% by the end of next year, which would be about 90 basis points higher than what was priced in September.Still, Small said investors that favor cash were underperforming traditional investment portfolios that blended equities and bonds. “That fear of missing out … is contributing meaningfully to re-risking,” he said.BlackRock’s fixed-income products such as bond exchange-traded funds had seen strong inflows this year, he added.”It’s not the floodgates … but we’ve definitely seen more normalized allocations legging into fixed income,” he said. More