Economy

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldCanada’s Ontario province has hit US power exports with a 25 per cent surcharge as the nation steps up its retaliation against Donald Trump’s tariffs. The levy will have an impact on 1.5mn homes and businesses in Michigan, Minnesota and New York and cost families and businesses in the three states up to $400,000 a day, Ontario premier Doug Ford said on Monday. “On an average, this will add around $100 per month to the bills of hard-working Americans,” Ford said, adding that “until the threat of tariffs is gone for good, Ontario will not relent”. He also said that, “if necessary, if the United States escalates, I will not hesitate to shut the electricity off completely”.Ontario’s threat to the North American power grid highlights how the president’s tariffs on Canada and Mexico, the US’s two biggest trading partners, are taking a growing economic toll on the US economy. Trump last week imposed 25 per cent tariffs on most Canadian and Mexican goods, but eventually U-turned by creating a carve-out for those subject to the sweeping United States-Mexico-Canada Agreement. Several other Canadian provinces supply US states in the Midwest and west through cross-border transmission lines. The premier of the oil-rich province of Alberta, Danielle Smith, on Monday said the country’s oil hub would “continue to provide energy to the United States and support America’s vision of global energy dominance”. But she cautioned Canada should prioritise the expansion of infrastructure to export its crude to other markets in Europe and Asia. “We want to get more products from the west coast of Canada to the east coast as well and to the northern coast. We need to find new markets for that extra oil and gas, and we want to be a safe, secure and reliable supplier for European and Asian allies,” she said at S&P Global’s CERAWeek conference in Houston. The North American Electric Reliability Corporation, a regulatory body that monitors the reliability of the power systems in the US and Canada, warned last week that energy stability could be imperilled if the two countries restricted cross-border electricity and gas supplies in a trade war. “If some of the sabre-rattling around ‘turning off exports’ occurs, it could create a significant resource adequacy problem for the Canadian provinces that benefit from US exports as well as the [US] states along the border that benefit from Canadian imports,” said Jim Robb, Nerc’s chief executive. Ontario’s Independent Electricity System Operator confirmed it had implemented the charge Ford requested on all electricity exports to US jurisdictions.“As requested in the minister’s letter, the IESO is applying a charge of $10/MWh to electricity exports, which equates to a charge of approximately 25 per cent,” it said. The US consumed $2.1bn worth of electricity imports from Canada last year, according to BloombergNEF, a research group. More

With fears brewing over tariffs and jobs, President Donald Trump and his top lieutenants are acknowledging there could be some short-term pain for the economy and markets before it gets better.
“What I have to do is build a strong country,” the president said Sunday. “You can’t really watch the stock market.”
An emerging theme from the administration is that any slowdown or reversal in growth is a legacy from Trump’s predecessor, Joe Biden.

President Donald Trump and other senior White House officials have spent the past several days bracing Americans for a potential economic slowdown that they say will then lead to stronger growth ahead.
With fears brewing over the potential tariff impact, the labor market slowing and indicators pointed toward possible negative growth in the first quarter, the president and his top lieutenants are projecting a mostly optimistic outlook tempered with warnings about near-term churning.

“There is a period of transition, because what we’re doing is very big,” Trump said Sunday on the Fox News show “Sunday Morning Futures.” “We’re bringing wealth back to America. That’s a big thing. … It takes a little time, but I think it should be great for us.”
Asked whether he thinks a recession is imminent, Trump said, “I hate to predict things like that.” He later added, “Look, we’re going to have disruption, but we’re OK with that.”

U.S. President Donald Trump gestures as he walks to board Marine One, while departing the White House en route to Florida, in Washington, D.C., U.S., March 7, 2025. 
Evelyn Hockstein | Reuters

The comments come during a tumultuous period for markets, with stocks riding a continuing roller coaster depending on the news of the day. Major averages slid again Monday, with the most recent White House assurances doing little to assuage jangled market nerves.
While Trump used Wall Street as a continuous barometer of his progress during his first term in office, he discouraged making it a yardstick this time around.
“What I have to do is build a strong country,” he said. “You can’t really watch the stock market.”

‘A detox period’ from spending

An emerging theme from the administration is that any slowdown or reversal in growth is a legacy from Trump’s predecessor, Joe Biden, and his debt-and-deficit fueled stimulus. Treasury Secretary Scott Bessent has called for a “rebalancing” of the economy away from fiscal and monetary largesse.
“There’s going to be a natural adjustment as we move away from public spending to private spending,” Bessent said Friday on CNBC. “The market and the economy have just become hooked and we’ve become addicted to this government spending, and there’s going to be a detox period.”
That adjustment could come sooner rather than later.
The Atlanta Federal Reserve’s closely followed GDPNow gauge of incoming economic data is tracking a 2.4% decline in the growth rate for the first quarter. If it holds up — the measure can be volatile, particularly early in the quarter — it would be the first quarter to go negative in three years and the biggest retrenchment since the Covid pandemic.
National Economic Council Director Kevin Hassett, in a Monday interview with CNBC, called the GDPNow outlook “a metric of the inheritance of President Biden” and “a very, very temporary phenomenon.”
“There are a lot of reasons to be extremely bullish about the economy going forward,” he said. “But for sure, this quarter, there are some blips in the data, including the negative GDPNow, which are related both to the Biden inheritance and to some timing effects that are happening ahead of tariffs.”
Speaking Sunday to NBC’s “Meet the Press,” Commerce Secretary Howard Lutnick said: “There’s going to be no recession in America. … If Donald Trump is bringing growth to America, I would never bet on recession, no chance.”

Worries about jobs and the consumer

One big mover for the Fed model was a surge in the trade deficit to a record $131.4 billion in January, in part the product of a jump in gold imports as well as companies stockpiling ahead of the tariffs.
However, there also are rising concerns about consumer spending following a pullback in January. Consumer activity accounts for more than two-thirds of GDP, so any further decline would be added cause for concern.
At the same time, a decent headline payrolls gain in February of 151,000 masked some underlying trouble spots for the economy.
While the commonly cited unemployment rate just nudged up to 4.1%, the so-called real rate that measures discouraged workers and those at work part time but would rather have full-time jobs soared to 8%, a half percentage point gain to the highest level since October 2021.
The increase came as rolls of those holding part-time jobs for economic reasons rose by 460,000, a 10% jump to the highest level since May 2021. Most of the move in the category came from those citing slack work or business conditions. Further, the level of those reporting at work full time slumped by 1.2 million while part-timers spiked by 610,000.
Market veteran Jim Paulsen, a former economist and strategist with Wells Fargo and other firms, noted in a Substack post that the labor market is approaching “stall speed” and that the gains in the real unemployment rate are consistent with a recession, though that’s not necessarily his forecast.
The rise, he wrote, “highlights increasing stress in the U.S. jobs market. Moreover, this is yet another indicator which will fan recession fears among investors and boost worries about a potential bear market.”
Few economists on Wall Street are expecting a recession. Goldman Sachs, for instance, cut its GDP outlook for 2025 to 1.7%, down half a percentage point from the previous forecast, while nudging up the 12-month recession probability to just 20%, from 15%.
Trump administration officials insist the current soft patch, including the tariff uncertainty, is part of a broader strategy.
“What we’re doing is we’re building a tremendous foundation,” Trump said on the Fox show.

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Global market volatility and geopolitical turbulence in the wake of President Donald Trump’s return to the White House have led to warnings that the U.S. economy could be heading for a recession.
Economists say Trump is proving to be an “agent of chaos” with his unpredictable trade tariff policies — but note that a downturn isn’t in the cards just yet.

U.S. President Donald Trump attends the White House Crypto Summit at the White House in Washington, D.C., U.S., March 7, 2025. 
Evelyn Hockstein | Reuters

Global market volatility and geopolitical turbulence in the wake of President Donald Trump’s return to the White House have led to warnings that the U.S. economy could be heading for a recession — but economists say that a downturn isn’t in the cards just yet.
“I don’t think we will talk about a U.S. recession. The U.S economy is resilient, I would say, largely despite Donald Trump,” Holger Schmieding, chief economist at Berenberg Bank, told CNBC’s “Squawk Box Europe” on Monday.

Dubbing Trump an “agent of chaos and confusion,” Schmieding said the president’s “zigzagging on tariffs shows that he has little idea of the potential consequences of his tariff policies.”
Nonetheless, “U.S. consumers have money to spend, [and] they probably will. The labor market in the U.S. remains reasonably firm, and with energy prices coming down a bit and probably some tax cuts and deregulation coming, I don’t think there’s an imminent recession risk,” according to Schmieding.

“But what is becoming ever clearer in the long run, Trump is hurting U.S. trend growth, that is growth in the years beyond 2026. And he stands for higher prices for U.S. consumers, which means, in my view, the Fed [Federal Reserve] has no reason to cut rates with Trump as president, and Trump sowing chaos and confusion,” he noted.
CNBC has contacted the White House for a response and is awaiting a reply.
International stock markets have been rocked to their foundations in recent weeks amid fears that Trump intended to revive a global trade war after announcing hard-hitting import tariffs on goods from China, Mexico and Canada.

Confusion and uncertainty have followed, as the president last Friday announced that there would be a reprieve and delay to April 2 on some tariffs on the U.S.’ neighbors and closest trading partners.
Trump’s unconventional approach to trade and international diplomacy has left markets unimpressed, with U.S. indexes whipsawing, while strategists warned that negative market sentiment was bound to continue in the Trump 2.0 era. U.S. stock futures fell earlier Monday morning, indicating another rocky ride for American markets at the start of the new trading week.

Business leaders and economists have voiced concerns that tariffs will lead to further inflationary pressures on the U.S., with consumers likely to bear the brunt of higher prices on imported goods.
They also warn that investment, jobs and growth could suffer, as consumers tighten their belts and hunker down to wait out a period of economic unpredictability and potential “stagflation” marked by high inflation and high unemployment.
That would put pressure on the Fed to keep interest rates on hold, rather than cutting from their current benchmark rate in a range between 4.25%-4.5%, in a bid to stimulate the economy. Lower interest rates can fuel more spending, and, in turn, inflation.
Fed Chairman Jerome Powell on Friday said that the central bank can wait to see how Trump’s aggressive policy actions play out before it moves again on interest rates.

‘A period of transition’

Recent economic data showing consumer confidence has taken a hit in February will be food for thought for the Trump administration. The Federal Reserve Bank of Atlanta’s GDPNow tracker of incoming metrics also indicated last week that the U.S. gross domestic product could shrink by 2.4% for the period between January and March. A technical recession is defined as taking place when at least two consecutive quarters log negative growth.
Last week’s jobs data also showed that while the U.S. labor market is still expanding, signs of weakness could also be starting to creep in. Nonfarm payrolls data indicated employment growth was weaker than expected in February and while jobs growth is still stable, the data comes amid Trump’s efforts to cut the federal workforce.
Nonfarm payrolls increased by a seasonally adjusted 151,000 on the month, exceeding the downwardly revised 125,000 of January, but coming in below the 170,000 consensus forecast from Dow Jones, the Labor Department’s Bureau of Labor Statistics reported Friday. The unemployment rate edged higher to 4.1%.
TS Lombard’s chief U.S. economist, Steven Blitz, said the latest jobs data “tell us the economy continues to grow” and did not signal “increased recession risks created by the array of Trump’s policies.”
However, he said in a note Friday that “the sum of Trump’s actions can yet skew the economy in any which way, including an implosion of capital spending.”
“Keep in mind that presidents have been known to accept downturns in year one of their presidency. It is a free pass, they blame the previous president and take credit for the recovery. My base case is still growth and the Fed holding still. My base concern comes from the capital markets side, break trade and you will break the capital inflows that support the economy,” Blitz said.

U.S. President Donald Trump gestures as he walks to board Marine One, while departing the White House en route to Florida, in Washington, D.C., U.S., March 7, 2025. 
Evelyn Hockstein | Reuters

Trump has refused to rule out the possibility of a recession this year, but insisted this weekend that the economy was in a “period of transition.”
Asked about the Atlanta Fed’s warning of an economic contraction on Fox News Channel’s “Sunday Morning Futures,” Trump seemed to acknowledge that his tariff plans could affect U.S. growth.
“I hate to predict things like that,” he said in an interview aired Sunday, when asked if the recession warning was a concern.
“There is a period of transition because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing.” The White House leader added, “It takes a little time. It takes a little time.”
JPMorgan’s U.S. Market Intelligence unit last week noted that the U.S. economy was entering “another period of uncertainty” given the unpredictable nature of tariffs. The analysts said they were taking a “bearish” position on U.S. stocks, expecting markets to see more volatility and for U.S. growth to potentially “crater.”
“We have already seen the negative impact that policy/trade uncertainty has had on both household and corporate spending, so it seems likely that we see a larger magnitude of this over the next month. Keep an eye on the unemployment rate, layoffs, WARN notices, etc. If we start to see the unemployment rate rising rapidly, then that likely which push the market back into the ‘Recession Playbook,'” JPMorgan noted.
While a U.S. recession was not the bank’s base-case scenario, JPMorgan analysts warned that “the undetermined length of tariffs and the potential for the trade war to see an acceleration in new tariffs [means] we think stocks will be challenged as U.S. GDP growth estimates are cut.”
“Given the lack of a potential end to this escalation, the expectation is that tariffs of these magnitude with drive both Canada and Mexico into a recession. Look for U.S. GDP growth expectations to crater and for earnings revisions to be materially lower, forcing a re-think of year-end forecasts. With this in mind, we are changing our view to Tactically Bearish,” they noted. More

Inflation could prove sticky while prices might pick up again, Federal Reserve Governor Adriana Kugler warned, signaling that the U.S. central bank should keep interest rates steady for the time.
“I’m actually quite concerned about some of the persistence in inflation that we have been seeing,” she said at a conference late on Friday.
In prepared remarks, Kugler also said that it “could be appropriate” for the Federal Reserve to hold interest rates steady “for some time.”

Adriana Kugler, member of the Board of Governors of the US Federal Reserve, speaks on the economy in Washington, DC, US, on Wednesday, Feb. 7, 2024. 
Al Drago | Bloomberg | Getty Images

Inflation could prove sticky while prices might pick up again, Federal Reserve Governor Adriana Kugler warned, signaling that the U.S. central bank should keep interest rates steady for the time.
“I’m actually quite concerned about some of the persistence in inflation that we have been seeing,” she told CNBC’s Silvia Amaro during a fireside chat at the Conference on Monetary Policy Transmission and the Labor Market on Friday.

She pointed to a recent acceleration of inflation expectations, which she said she watches closely for their effect on how businesses set prices and how workers negotiate wages. This in turn means they could feed back into inflation.
Several recent data points have indicated concerns from consumers about prices increasing, with the latest Consumer Confidence Index from the Conference Board showing 12-month inflation expectations jumped to 6% in February, up from 5.2% the prior month.
“I have been one of those who has supported strongly any policy that really keeps inflation expectations well anchored. And I think that’s critical, and it has served us well,” Kugler said.
Looking ahead, the Fed’s Kugler indicated that prices could also rise again.
“I think you know there is reason to believe, potentially, that there could be price increases and more persistent inflation,” she said, adding that higher prices could come from “some of the policies that maybe are being considered and some that have already been put into place.”

Such policies could also impact economic activity, Kugler noted.
“We need to probably take account of some of this persistence that I mentioned, because of different categories of prices, because of inflation expectations, and potentially because some of the new policies that are ahead of us,” Kugler said.
Touching on the frequently changing developments surrounding the U.S. administration’s decision to impose tariffs on goods imported from key trading partners, including negotiations and potential retaliatory moves, the Fed’s Kugler said there was still “considerable uncertainty.”
Analysts and economists have widely indicated that they expect potential tariffs, and any reciprocal measures to bump prices higher for countries on both sides of the measures.
In prepared remarks Kugler gave at the conference, she likewise warned of inflation risks also weighing in on the outlook for interest rates from the Fed.
“Given the recent increase in inflation expectations and the key inflation categories that have not shown progress toward our 2 percent target, it could be appropriate to continue holding the policy rate at its current level for some time,” she said in the address.
The Fed has cut interest rates three times since September, for a combined full percentage point, before holding steady in January. The bank’s overnight borrowing rate currently sits in a range between 4.25%-4.5%.
According to CME Group’s FedWatch tool, traders were last pricing in a 97% chance of the central bank also leaving rates unchanged when it next meets later this month. The picture then appears to become less clear, with an around 63% likelihood of rates also being held at the Fed’s May meeting, before tipping toward a rate cut in June. More

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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Almost two-thirds of the arms imported by European members of Nato over the past five years were produced by the US, according to new research that underlined the continent’s deep reliance on American-made weapons. Arms imports by the European nations more than doubled between 2020 and 2024 compared with the previous five years, as the region responded to Russia’s full-scale invasion of Ukraine in 2022, according to data from the Stockholm International Peace Research Institute (Sipri). The US supplied 64 per cent of these arms, up from 52 per cent between 2015-2019. Mathew George, director of the Sipri Arms Transfers Programme, said states moved forward with decisions to buy US arms despite public calls “to take steps to reduce their dependence on arms imports and to strengthen the arms industry in Europe”. The figures emphasise the scale of the challenge facing European leaders as they seek to reduce their military dependence on the US, as President Donald Trump has demanded that Europe become more responsible for its own security.Although the continent’s Nato allies have been looking to bolster their national capabilities since Russia’s invasion three years ago, Trump’s return to the White House has added fresh momentum.Some content could not load. Check your internet connection or browser settings.Leaders from the EU’s 27 members last week endorsed new defence funding initiatives proposed by Brussels, including an instrument that would provide €150bn in loans to capitals to spend on military capabilities.European Commission President Ursula von der Leyen said on Sunday that she wanted to use the loans to reduce reliance on arms bought outside the bloc. She said it was “very important” that the injection was used to deliver “on research, development and good jobs here in Europe”. The €150bn fund has become a new flashpoint in a long-standing battle between France and Germany over the continent’s rearmament drive and whether it should include countries outside the bloc. The commission chief believed it was important to be “smart” and keep good connections with Norway and the UK. Industry executives have echoed calls that the region needed to reduce dependency on non-European suppliers in order to boost its resilience. There are growing concerns that the US could even decide to withhold critical support for key weapon systems, such as the advanced F-35 fighter jet.Pieter Wezeman, senior researcher at Sipri, said that faced with an “increasingly belligerent Russia and transatlantic stress during the first Trump presidency, European Nato states had taken steps to rescue their dependence on arms imports and to strengthen the European arms industry”. Some content could not load. Check your internet connection or browser settings.But he also stressed the “deep roots” of Europe’s arms relationship with Washington, noting how European Nato capitals had “almost 500 combat aircraft and many other weapons still on order from the US”.Throughout the postwar era, European governments spent lavishly on expensive American weapons, seeing this as the price of keeping Washington committed to the continent’s security. Władysław Kosiniak-Kamysz, Poland’s defence minister, told journalists last month: “Europe should invest more in security to retain the presence of the Americans in Europe, and not to replace them.” He added that this “insurance policy” would show the new administration that they were meeting the two conditions that Trump frequently underlines as the quid pro quo for US support — higher defence spending and “mutual economic relations for American business”. Sipri’s annual analysis of global arms transfers also underlined how the US had cemented its position as the world’s top arms exporter, increasing its share of exports from 35 per cent to 43 per cent over the five-year period.Some content could not load. Check your internet connection or browser settings.Ukraine, meanwhile, became the world’s largest importer of major arms over that timeframe, with imports rising nearly 100 times as the country sought to fight off Russia’s forces. For the first time in two decades, the largest share of US arms went to Europe rather than the Middle East, although Saudi Arabia was the top single recipient of US weapons.The US remained the supplier of choice for advanced long-range strike capabilities like combat aircraft, Sipri said. The data also showed that the top 10 arms exporters in the past five years were the same as those in the previous period, but that Russia fell to third place behind France as exports slid. Italy jumped from tenth to sixth place. Russian arms exports fell by 64 per cent between 2015 and 2019, and 2020 and 2024, as the Ukraine war “accelerated” the decline in Moscow’s ability to export weaponry.Wezeman said this was because Russia needed to keep more of its domestic production to use on the battlefield, as well as the challenge of sanctions and western pressure on other countries not to buy from Moscow.Two-thirds of Russian arms exports went to India, China and Kazakhstan, according to the research. China’s imports of arms shrunk by 64 per cent between the two periods as the country increasingly substituted imports — mainly from Russia — with locally designed and produced weapon systems. China’s arms imports are likely to keep falling as the capacity of its domestic arms industry grows, according to Sipri. Additional reporting by Henry Foy in Brussels More