Economy

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldWall Street stocks sank and gold hit a record high on Thursday as US President Donald Trump’s tariffs and investor doubts about a potential ceasefire between Russia and Ukraine weighed on risky assets.The blue-chip S&P 500 closed 1.4 per cent lower, leaving the index in correction territory, having slumped more than 10 per cent — erasing about $5tn from its market value — since hitting a record high on February 19. The tech-heavy Nasdaq Composite slipped 2 per cent.Investors piled into gold at the same time, pushing prices of the haven metal to a fresh high of $2,985 per troy ounce.  The moves come as investors grow increasingly concerned that Trump’s aggressive trade agenda will hit US economic growth, with the president on Thursday threatening to impose a 200 per cent retaliatory tariff on alcohol imports from the EU.Investor sentiment was further hit after Russian President Vladimir Putin expressed concerns about how a potential ceasefire with Ukraine would be implemented and monitored. Some content could not load. Check your internet connection or browser settings.“Investors are repricing risk all over the world,” said Manish Kabra, head of US equity strategy at Société Générale. “But it’s happening most aggressively in the US, where there’s a major risk-off mood setting in.”US equities had surged in the weeks after Trump’s landslide election win as investors bet that corporate tax cuts would lead to an economic boom. But those hopes have been hit by Washington’s flurry of tariff announcements, which have begun to weigh on business and consumer sentiment and dented animal spirits.Goldman Sachs earlier this week slashed its year-end S&P 500 target from 6500 to 6200 while downgrading its US GDP forecast to 1.7 per cent from 2.4 per cent — its first below-consensus projection in two-and-a-half years. US growth concerns have spurred a rotation out of highly valued tech groups including the so-called Magnificent Seven into defensive pockets of the market, according to analysts.Gold has climbed 14 per cent this year as investors turn to bullion as a hedge against inflation. Several banks have upgraded their gold price forecasts in recent weeks, including Macquarie, which said on Thursday morning that it expected gold to touch $3,500 per troy ounce this year. “President Trump’s rapid move to announce, if not always to enact, import tariffs has contributed to geopolitical uncertainty and boosted inflation expectations, helping push down front-end real rates and supporting gold,” wrote Macquarie analysts in a note. Fears of potential Trump tariffs have brought physical gold surging into New York — bullion inventories on Comex are at an all-time high of more than 40mn troy ounces — although that influx has started to slow. More

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President Trump has called the word tariff “the most beautiful word in the dictionary.” He imposed hefty tariffs during his first term and promised expansive new ones as he pursued his second. On his first day back in the White House in January, he issued an executive order directing his cabinet picks to prepare even more tariffs.In the first 50 days of his second term, those sweeping actions have upended diplomatic ties, shaken markets and confounded entire industries. But so has President Trump’s whipsawing commitment to his tariffs, which he has paused, reversed or withdrawn — at times almost as soon as they took effect.Here’s a timeline of President Trump’s widening — and constantly shifting — tariffs, which as of Thursday included a threat to impose 200 percent levies on alcohol from the European Union.Jan. 20 🇨🇦 🇲🇽Hours after he was sworn in, Mr. Trump announced that he would implement additional 25 percent tariffs on imports from Canada and Mexico starting on Feb. 1, accusing both countries of not doing enough to stop the flow of drugs and migrants into the United States. Read more ›Jan. 26 🇨🇴Surprising even some of his own staff members, Mr. Trump announced on social media that he would immediately impose 25 percent tariffs on all goods from Colombia — and would raise them to 50 percent in one week — after its government turned back planes carrying deported immigrants. Colombia’s president, Gustavo Petro, briefly threatened tariffs of his own. But he quickly backed down, and soon so did Mr. Trump. That evening, the White House released a statement saying the government of Colombia had “agreed to all of President Trump’s terms” and the “tariffs and sanctions will be held in reserve.” Read more ›Feb. 1 🇨🇦 🇲🇽 🇨🇳Mr. Trump signed an executive order imposing 25 percent tariffs on nearly all goods from Canada and Mexico, and a 10 percent tariff on China. The president said the tariffs were levied in response to his concerns about fentanyl smuggling and illegal immigration. Canada and Mexico said they would retaliate with tariffs of their own. China threatened “countermeasures.” Read more ›We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Elon Musk’s electric-car maker Tesla has warned that President Donald Trump’s trade war could make it a target for retaliatory tariffs against the US and increase the cost of making vehicles in America.In an unsigned letter addressed to US trade representative Jamieson Greer, Tesla said it “supports” fair trade but warned that US exporters were “exposed to disproportionate impacts when other countries respond to US trade actions”.“For example, past trade actions by the United States have resulted in immediate reactions by the targeted countries, including increased tariffs on EVs imported into those countries,” the Austin, Texas-based company wrote in the letter dated March 11.The letter follows two weeks of erratic trade policy announcements from the government that have rattled businesses and financial markets as investors worry about the growing risks of the world’s largest economy being plunged into a recession.The letter underscores how even Tesla, a group led by close Trump ally Musk, is concerned about the potential effects of the wide-ranging tariffs. The EU and Canada have both threatened sweeping retaliations for tariffs on steel and aluminium imports into the US, which went into effect earlier this week. One person familiar with the process of sending the letter said: “It’s a polite way to say that the bipolar tariff regime is screwing over Tesla.” The person added: “It is unsigned because nobody at the company wants to be fired for sending it.”Tesla did not immediately respond to a request for comment. The group said in its letter that tariffs could increase the costs of making vehicles in the US and make them less competitive when exported overseas. It also urged the administration to avoid making minerals that are in short supply in the US — such as lithium and cobalt — even more expensive to import.Tesla said it had been overhauling its global supply chain to find and build as many materials and components in the US as possible for its electric vehicles and lithium-ion batteries. It pointed to its battery manufacturing plant in Reno, Nevada, and its lithium processing in Corpus Christi, Texas.“Nonetheless, even with aggressive localisation of the supply chain, certain parts and components are difficult or impossible to source within the US,” the company added. It urged Greer to “further evaluate domestic supply chain limitations to ensure that US manufacturers are not unduly burdened by trade actions that could result in the imposition of cost-prohibitive tariffs on necessary components”.The letter was filed to the trade representative’s office as part of the agency’s broad request for comment from US businesses as it reviews foreign trade practices and tries to identify any tariffs, taxes, regulations or subsidies that could be harming companies. Tesla sent a similar letter in response to widespread tariffs imposed during the first Trump administration, a person familiar with the process said. The March 11 letter was uploaded to the USTR website by Miriam Eqab, an associate general counsel at Tesla.Musk has emerged as one of Trump’s top advisers after spending more than $250mn to help his re-election campaign. In return, the world’s richest man has received a broad mandate to influence policy and slash the federal government, being named head of the so-called Department of Government Efficiency (Doge).Earlier this week, Trump hosted an event at the White House promoting Tesla and promised to buy one of its vehicles in a show of support for Musk.Tesla’s stock has plunged 40 per cent since the start of the year on concerns about declining sales and amid a wider market sell-off triggered by growing nervousness about US economic and trade policies. The carmaker has also been hit by a consumer backlash in Europe as people balk at Musk’s interventions in support of rightwing political parties, while its US showrooms have become a magnet for protesters unhappy with the cuts to the federal government being spearheaded by Musk. More

The comments come after Bessent said Friday that the U.S. would undergo a transition period as the federal government tries to cut spending, including laying off public sector workers.
Bessent on Thursday reiterated his view that current levels of government spending are “unsustainable.”

Treasury Secretary Scott Bessent said Thursday that his previous comments about a “detox period” for the U.S. economy did not mean that a recession was necessary.
“Not at all. Doesn’t have to be, because it will depend on how quickly the baton gets handed off. Our goal is to have a smooth transition,” Bessent said on CNBC’s “Squawk on the Street.”

The comments come after Bessent said Friday that the U.S. would undergo a transition period as the federal government tries to cut spending, including laying off public sector workers. Bessent on Thursday reiterated his view that current levels of government spending are “unsustainable.”
“We have excess employment in the government, and those people can be moved to the private sector,” Bessent said.
The Treasury head’s comments last week came as several recent economic indicators have pointed to weakening growth. Job growth was slower than expected in February, and surveys of consumers and small business have shown a decline in confidence.
The stock market has also struggled in recent weeks, with the S&P 500 down 6% in March.

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SPX in March

The federal spending cuts are not the only policy changes that President Donald Trump’s administration is pushing. The White House has also increased tariffs on major U.S. trading partners, and a deal to extend existing tax cuts is expected to be a key part of political negotiations later this year.
“There’s two parts to this: It’s accelerating the economy, growing the revenue base — and controlling expenses. In the U.S., we do not have a revenue problem, we have a spending problem,” Bessent said Thursday. More

Treasury Secretary Scott Bessent said Thursday the administration is more focused on the long-term health of the economy and markets and not short-term gyrations.
While Bessent said the administration is attentive to market moves, he predicted that both the real economy and markets would prosper over time.

Treasury Secretary Scott Bessent said Thursday the Trump administration is more focused on the long-term health of the economy and markets and not short-term gyrations.
“We’re focused on the real economy. Can we create an environment where there are long-term gains in the market and long-term gains for the American people?” Bessent said on CNBC’s “Squawk on the Street.” “I’m not concerned about a little bit of volatility over three weeks.”

The comments come with markets in a state of turmoil largely centered on President Donald Trump’s near-daily moves on tariffs against major U.S. trading partners such as Canada, Mexico and China. Major averages have moved toward correction territory, as the Dow Jones Industrial Average has lost more than 7% over the past month.
While Bessent said the administration is attentive to market moves, he predicted that both the real economy and markets would prosper over time.
“The reason stocks are a safe and great investment is because you’re looking over the long term. If you start looking at micro horizons, stocks become very risky. So we are focused over the medium-, long-term,” he said in the interview with CNBC’s Sara Eisen. “I can tell you that if we put proper policies in place, it’s going to lay the groundwork for a both real income gains and job gains and continued asset gains.”
Stocks again were volatile in morning trade, with the averages around even as Bessent spoke.
Earlier in the morning, the Bureau of Labor Statistics reported that wholesale inflation was flat in February, well below Wall Street expectations for a 0.3% increase. That followed a report Wednesday indicating that the consumer price rate had nudged lower as well, providing some welcome news amid concerns that the Trump tariffs would aggravate inflation.
“Maybe the inflation is getting under control and the market is going to have some confidence in that,” Bessent said.

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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The writer is group chief economist at BNP Paribas A compass is useful for a long walk in unfamiliar woods. Less so if you come across a bear and have to run for your life. And so it is with the European Commission’s so-called Competitiveness Compass. This is a serviceable follow-up to last year’s Letta and Draghi reports, but it is inadequate to deal with the radically changed geopolitical context in which the EU now finds itself. Europe urgently needs a show of strength, both military and economic. Encouragingly, European leaders signalled at their March 6 security summit that they grasp this, not least by including UK Prime Minister Sir Keir Starmer in their deliberations. Meanwhile, Germany’s “whatever it takes” fiscal moment is a tangible sign that people are ready to shift. But beyond this, there are precious few ideas for boosting growth quickly and permanently — as is essential if public debt is to remain sustainable despite higher deficits and rising interest rates. So here are five things European heads of government should decide to do when they meet in Brussels on March 20.First, boost intra-EU trade. The EU is its own largest trading partner — so much so that it would only take a 2.4 per cent increase in intra-EU trade to make up for a 20 per cent fall in exports to the US. As Mario Draghi, former president of the European Central Bank, has noted, the myriad differences in domestic rules and VAT rates across member states add up to the equivalent of internal tariffs of 45 per cent on goods and 110 per cent on services. EU leaders should decide to provide, within six months, mutual recognition of other member states’ rules for the majority of traded goods and services. Further, they should ask the commission to increase the so-called one-stop shop thresholds (currently at a measly €10,000 of annual sales) for collection and reporting of VAT and excise duties on intra-EU trade. According to the European Investment Bank, 60 per cent of exporters cite regulatory inconsistencies as a barrier to expansion.The second priority is to increase trade with the UK. The commission has been busy finalising new free trade agreements with other countries. While these are welcome, the quickest way to boost trade would be to remove frictions with the UK, its closest trading partner. One way to do this would be to quintuple reciprocally the “de minimis” threshold for the collection of customs duties and VAT for EU-UK exchanges (currently a mere €150).Third, the EU ought to be regulating for growth. Taking a leaf out of UK chancellor Rachel Reeves’ book, the commission and all EU and national regulators should be asked to review their mandates, making growth and competitiveness part of their objectives.The fourth thing is incentivise the savings and investment union. In the decade since the idea of capital markets union was first mooted, the gap between words and action has hardly narrowed. Proper incentives are needed. On the savings side, a powerful move would be to create an EU investment savings account that would give households across the bloc access to all the financial products available in any member state. On investment, it is time to relax the overly conservative prudential constraints on securitisation, notably capital surcharges on both issuers and investors. They currently make it uneconomic for both. As a result, just 1.9 per cent of outstanding EU loans are transformed into securitised vehicles, compared with 7 per cent in the US. A 2024 report led by Christian Noyer, former governor of the Banque de France, made specific recommendations to change that. EU leaders should ask the commission to fast-track them.The final priority is to find new ways to fund defence spending. Germany, the UK and France have already said that they intend to increase defence spending. But the latter pair are constrained by their fiscal situations, as are the next largest two EU economies — Italy and Spain. Multiple channels will need to be mobilised, alongside banks, private savings and public-private partnerships. An ambitious solution would be a multilateral rearmament bank, based on a “coalition of willing” EU and non-EU countries, with enough paid-in capital to ensure that the bank could issue debt at an AAA rating. This would help increase defence spending more quickly and with less upward pressure on national governments’ bond yields. A rearmament bank could also usefully co-ordinate procurement efforts so that equipment sourced from European (including UK) companies can be produced quickly at scale and at lower cost to the taxpayer.So European leaders should stash away the compass for now. It’s time for them to take action that yields quick and lasting results.  More

Last week, President Donald Trump paused tariffs on some Canadian and Mexican imports, granting a reprieve for a month.
Should the duties go through, they could raise material costs for the average new home by as much as $10,000, according to the National Association of Home Builders.
The trade group said that softwood lumber is mainly sourced from Canada, while gypsum primarily comes from Mexico. Steel and aluminum, along with completed home appliances, come from China, the NAHB said.

A home is constructed at a housing development on June 21, 2023 in Lemont, Illinois.
Scott Olson | Getty Images

President Donald Trump’s tariffs could increase material costs for the average new home by as much as $10,000, according to the National Association of Home Builders.
The trade group said it has received anecdotal reports from members that Trump’s plan for levies would raise material prices by between $7,500 and $10,000 for the average new single-family home. While the association is planning a formal survey in the future, this figure offers an early glimpse of what businesses and consumers can expect if Trump’s controversial taxes on Canadian and Mexican imports go forward as planned.

“For years, NAHB has been leading the fight against tariffs because of their detrimental effect on housing affordability,” the association wrote in a blog post published last week. “In effect, the tariffs act as a tax on American builders, home buyers and consumers.”
Trump last week delayed 25% tariffs for some Canadian and Mexican imports by a month after implementing them just days earlier, a stunning reversal amid financial market turmoil. His additional hike to levies on China, which lifted duties on that nation’s goods to 20%, went forward.
The NAHB said softwood lumber is mainly sourced from Canada, while gypsum, a component of drywall, comes primarily from Mexico. Other materials like steel and aluminum — in addition to completed home appliances — are imported to the U.S. from China, the group said.
An implementation of the 25% tariff on Canada and Mexico as previously laid out by Trump would raise total costs for imported construction materials by more than $3 billion, according to the NAHB.

Homebuilders react

Homebuilders have had to respond to analysts and investors wondering what these taxes could mean for their bottom lines. The SPDR S&P Homebuilders ETF (XHB) has tumbled more than 22% from highs seen in late November as uncertainty rattled investors.

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The SPDR S&P Homebuilders ETF over the last 6 months

For D.R. Horton, around 20% of lumber is estimated to come from Canada. The Texas-based firm, like others, has made strides in recent years to shift supply chains away from China coming out of the Covid pandemic. But it still has to contend with the possibility of new taxes on components coming from Mexico, said Jessica Hansen, head of investor relations.
Tallying a total impact is difficult given the potential for Trump’s policy to change and a lack of clarity about how much of certain products are imported, Hansen said at a Barclays conference last month.
There’s “really no way to proxy what that could ultimately cost, but we’ll navigate it like we do anything,” Hansen said. “If we’ve got a cost category that’s inflating and we’re in a gross margin compressing environment, we’re going to renegotiate anything and everything that we can.”
There can also be a knock-on effect for builders that don’t rely as much on imports, like K.B. Home, whose Chief Operating Officer Robert McGibney said earlier this year sources a “majority” of products domestically. Tariffs can drive up prices for those American-made materials, he said, as competitors increase demand by localizing their supply chains.
Just last week, as international focus narrowed in on U.S. tariff policy, Taylor Morrison Home held its first-ever investor day. As part of the presentation, the homebuilder brought in Ali Wolf, chief economist at housing data provider Zonda, to explain the state of the market following years defined by high interest rates and little inventory.
Wolf said Zonda expects Trump’s tariffs to raise costs on materials for homebuilders between 6% and 14%. She also said builders in border states could also take a hit if Trump’s promise for mass deportations shrinks the workforce.
As Wolf evaluates where the market is heading in 2025, she said Trump is top of mind. The positive impact for homebuilders stemming from the administration’s posture for deregulation, she said, needs to be weighed against the concerns tied to immigration and trade policies.
“The first thing we’re paying attention to is the new administration: pro-growth, less regulation. We’re here for it. We love it,” Wolf said. “We want to see removing a lot of the red tape in particular that takes it particularly long to get new homes built.”
“With that being said, when you look at some of the policies — tariffs, immigration, interest rates — all of these disproportionately negatively impact our industry.” More