Economy

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Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldDonald Trump’s administration has backtracked further from its threat to impose sweeping 25 per cent tariffs on Mexico and Canada, in a major climbdown from its aggressive trade agenda.In the second U-turn in two days, the US president signed an executive order on Thursday saying that all goods that met the rules of a 2020 free trade deal with the US’s neighbours would be granted a one-month reprieve from the duties.The move caps a tumultuous week that has roiled markets and frayed diplomatic relations between the US and its largest trading partners. On Wednesday, Trump had said that just carmakers compliant with the USMCA would be granted a month-long carve-out.Thursday’s executive order grants the reprieve from tariffs until April 2. However White House officials signalled that Canada and Mexico could be granted relief beyond that date if they succeeded in cracking down on trafficking of the deadly opioid fentanyl.The abrupt policy shift came after Trump doubled down on his tariffs plan in his address to Congress this week, saying: “There will be a little disturbance, but we’re OK with that.”Show video infoThe levies’ imposition on Tuesday prompted a turbulent market reaction after Canada and Mexico announced plans to retaliate. All the S&P 500’s post-election gains have been erased following further declines on Thursday.Howard Lutnick, Trump’s commerce secretary, said on Thursday that movements in the stock market would not drive US trade policy. “The fact that the stock market goes up or down a half per cent on any given day is not the driving force of our outcome,” he said.The Trump administration’s shift is the latest in a chaotic policy rollout that has shaken America’s trade partners. According to the US trade representative, US goods and services trade under the USMCA totalled about $1.8tn in 2022.Washington’s latest move came hours after data showed the US trade deficit swelled in January to a record $131.4bn, from a $98.1bn deficit in December. Economists said the increase was partly because of companies rushing to stockpile goods before the imposition of tariffs.US car manufacturers, which have highly integrated supply chains across all three countries, have lobbied hard against steep tariffs being imposed.Some content could not load. Check your internet connection or browser settings.Thursday’s executive order notes that automotive production is “integral to United States economic and national security”, adding that the pause on tariffs will “minimise disruption” to the US car industry.According to analysis by Kyle Handley, an economist at the University of California San Diego, only about 9 per cent of the $60bn of car-related imports to the US from Canada did not comply with USMCA in 2023.Handley found that about a quarter of car-related imports from Mexico were not compliant.To qualify for the exemption from Trump’s tariffs, cars manufactured in Canada and Mexico must source between 65 per cent and 75 per cent of their parts from the region.Automakers are also likely to be affected by planned US tariffs of 25 per cent on steel and aluminium, which are set to come into force next Wednesday.Trump has said he plans to impose so-called reciprocal tariffs on trading partners from April 2 to retaliate against taxes, levies, regulations and subsidies that Washington considers unfair.Lutnick said on Thursday that if Canada and Mexico made progress on fentanyl trafficking, the White House would “move just to the reciprocal tariff conversation”.The Trump administration’s reversal on tariffs sparked gains in the Canadian and Mexican currencies on Thursday. Canada’s dollar rose 0.3 per cent against the dollar, while Mexico’s peso rallied 0.7 per cent.US stocks were volatile, with the S&P 500 trading down 1.8 per cent and the tech-heavy Nasdaq Composite trading 2.6 per cent lower.The executive order also lowered the duty on potash imports from Canada that do not comply with the USMCA to 10 per cent, providing relief to American farmers, who import around 80 per cent of the fertiliser from Canada. More

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Markets will get another snapshot into the health of the labor market when the Labor Department’s Bureau of Labor Statistics releases its February nonfarm payrolls report Friday at 8:30 ET.
Economists expect growth of 170,000 jobs, up from 143,000 in January, with the unemployment rate holding steady at 4%.
While that represents a stable labor market, there are a number of caveats that point to more difficult times ahead.

People walk past digital billboards at the Moynihan Train Hall displaying a new initiative from New York Governor Kathy Hochul titled ‘New York Wants You’, a program designed to recruit and employ displaced federal workers across New York State, in New York, U.S., March 3, 2025. 
David Dee Delgado | Reuters

Mixed signals lately from the labor market are adding to angst for investors already on a knife’s edge over the potential threat that tariffs pose to inflation and economic growth.
Depending on the perspective, employers either are cutting workers at the highest rate in years or skating by with current staffing levels.

What has become clear is that workers are increasingly uncertain of their employment status and less prone to seek other opportunities, at the same time as job hunters are reporting it harder to find new positions, according to several recent surveys.
The sentiment indicators counter otherwise solid numbers showing up in more traditional data points like nonfarm payrolls growth and the jobless rate, which is still at a level historically associated with full employment and a bustling labor market.
Sound fundamentals
“Fundamentally speaking, things are still relatively sound in the United States. That doesn’t mean there are no cracks,” said Tom Porcelli, chief U.S. economist at PGIM Fixed Income. “You can just whistle past that and just hang your hat on the payrolls report, or recognize that the payrolls report is a lagging indicator and some of those other indicators that give you a better flavor of what’s happening under the surface are looking softer by comparison.”
Markets will get another snapshot of labor market health when the Labor Department’s Bureau of Labor Statistics releases its February nonfarm payrolls report Friday at 8:30 ET. Economists surveyed by Dow Jones expect growth of 170,000 jobs, up from 143,000 in January, with the unemployment rate holding steady at 4%.
While that represents a stable labor market, there are a number of caveats that point to more difficult times ahead.

Outplacement firm Challenger, Gray & Christmas reported Thursday that layoff announcements from companies soared in February to their highest monthly level since July 2020. A big reason for that move was the effort by Elon Musk’s Department of Government Efficiency to cull the federal workforce. Challenger reported more than 62,000 DOGE-related cuts.
DOGE actions as well as other labor survey indicators showing worker angst likely won’t be reflected in Friday’s jobs number, primarily due to the timing of the cuts and the methodology the BLS uses in its twin counts of household employment and jobs filled at the establishment level.
Consumer confidence drop
But a recent Conference Board report showed an unexpectedly large drop in consumer confidence that coincided with a spike in respondents expecting fewer jobs to be available as well as harder to get. Similarly, a University of Michigan’s survey saw a slide as respondents worried about inflation.
In the world of economics, such fears can quickly become self-fulfilling prophecy.
“If workers don’t feel confident that they’re going to be able to find a new job … then that’s going to be reflected in the economy, and the same in terms for how willing employers are to hire,” said Allison Shrivastava, economist at the Indeed Hiring Lab. “Don’t ever discount sentiment.”
In recent days, economists have been ramping up the potential impact for DOGE cuts, with some saying that multiplier effects involving government contractors could take the total labor force reduction to half a million or more.
“They’re going to have some trouble being reabsorbed into the economy,” Shrivastava said. “It also does shake people’s confidence and sentiment, which can certainly impact the actual economy.”
For now, Goldman Sachs said the DOGE cuts probably will lower the headline payrolls number by just 10,000 or so and exepcts weather-related impacts to be small. Overall, the bank said the current picture, according to alternative figures, is one of “a firm pace of job creation, and we expect continued, albeit moderating, contributions from catch-up hiring and the recent surge in immigration.”
In addition to the employment numbers, the BLS will release figures on pay growth. Average hourly earnings are expected to show a 0.3% monthly gain, up 4.2% from a year ago and about 0.1 percentage point above the January level. More

Treasury Secretary Scott Bessent on Thursday offered a full-throated defense of the White House’s position on tariffs, insisting that, “Access to cheap goods is not the essence of the American dream.”
In a speech delivered to a crowd of leading economists, Bessent indicated that Trump is willing to take strong measures to achieve his trade goals.
Earlier in the day, Commerce Department data underscored how far the U.S. has fallen behind its global trading partners. The imbalance swelled to a record $131.4 billion in January

Scott Bessent, US treasury secretary, speaks during an Economic Club of New York (ECNY) event in New York, US, on Thursday, March 6, 2025. Sanctions on Russia “will be used explicitly and aggressively for immediate maximum impact” at President Donald Trump’s guidance, Bessent said Thursday. 
Victor J. Blue | Bloomberg | Getty Images

Treasury Secretary Scott Bessent on Thursday offered a full-throated defense of the White House’s position on tariffs, insisting that trade policy has to be about more than just getting low-priced items from other countries.
“Access to cheap goods is not the essence of the American dream,” Bessent said during a speech to the Economic Club of New York. “The American Dream is rooted in the concept that any citizen can achieve prosperity, upward mobility, and economic security. For too long, the designers of multilateral trade deals have lost sight of this.”

The remarks came with markets on edge over how far President Donald Trump will go in an effort to attain his goals on global commerce. Stocks fell sharply Thursday despite news about some movement from the administration on Mexican imports.
In a speech delivered to a crowd of leading economists, Bessent indicated that Trump is willing to take strong measures to achieve his trade goals.
“To the extent that another country’s practices harm our own economy and people, the United States will respond. This is the America First Trade Policy,” he said.
Earlier in the day, Commerce Department data underscored how far the U.S. has fallen behind its global trading partners. The imbalance swelled to a record $131.4 billion in January, a 34% increase from the prior month and nearly double from a year ago.
“This system is not sustainable,” Bessent said.

Economists and market participants worry that the Trump tariffs will raise prices and slow growth. However, White House officials point out that tariffs did little to stoke inflation during Trump’s first term, touting growth potential from reshoring as companies look to avoid paying the duties.
“Across a continuum, I’m not worried about inflation,” Bessent said. He added that Trump considers tariffs to have three benefits: as a revenue source with the U.S. running massive fiscal deficits, as a way to protect industries and workers from unfair practices around the world, and as “the third leg to the stool” as Trump “uses it for negotiating.”
Thursday’s talk was hosted by Larry Kudlow, the head of the National Economic Council during Trump’s first term.
In addition to discussing tariffs, the two chatted about deregulation as well as the onerous debt and deficit burden the government is facing. The budget is already $840 billion in the hole through just the first four months of fiscal 2025 as the deficit runs above 6% as a share of gross domestic product, a level virtually unheard of in a peacetime, expansionary economy.
“This is the last chance bar and grill to get this done,” Bessent said of imposing fiscal discipline. “Everyone knows what they should do. It’s, do they have the willpower to do it?”
Bessent also advocated a deep examination of bank regulations, particularly for smaller institutions, which he said are burdened with rules that don’t help safety.
As Bessent spoke, stocks added to losses in what has been a tough week for Wall Street.
“Wall Street’s done great, Wall Street can continue doing well. But this administration is about Main Street,” he said. More

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Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldIn his first address to Congress since beginning a tumultuous second term, US President Donald Trump proudly claimed on Tuesday night that he was “just getting started”. That is a bad omen for the world’s largest economy. The optimism among companies and investors that came with the businessman’s election victory is rapidly waning. After the president confirmed tariffs on Mexico, Canada and China on Monday night, the S&P 500 initially erased all the gains it had made since the November polls. Consumer confidence has plunged. Manufacturers are reporting steep declines in new orders and employment, and bearish investor sentiment has shot well above its historic average.Uncertainty is clouding the data and forecasts. Still, it is clear that the president has squandered what was a decent economic inheritance. Not long ago price pressures were fading, the US Federal Reserve was on the cusp of a steady rate-cutting cycle into a resilient economy, and the S&P 500 was gliding upwards. This is no longer true.The depressing turnaround is a product of the administration’s pursuit of on-and-off import duties, and a chaotic policy agenda. The White House may believe it has a plan but America’s economic exceptionalism, from its relentless consumer spending and booming stock market to its reputation for dependable economic governance, is the collateral damage.Personal expenditure — a bulwark of recent US growth — fell in January, by its most in nearly four years. With pandemic-era inflation not yet fully extinguished, and the reality of Trump’s price-raising tariff plans now dawning, consumers’ expectations for inflation in the year ahead have surged. The Fed has so far responded to forthcoming price pressures by putting rate cuts on hold, leaving borrowers facing a higher cost of credit. Elon Musk’s planned clear-out of public sector employees is also set to raise joblessness in an already cooling labour market.Animal spirits are under pressure too. Perhaps naively, many businesses and investors expected import duties to be merely a negotiating tool. But Trump also believes tariffs are about “protecting American jobs”. After the latest salvo towards North American neighbours, the president offered a one-month reprieve for automakers on Wednesday, and was moving to broaden it on Thursday. The unpredictability of tariff carve-outs, reversals and steps against other trading partners makes it impossible for businesses to plan. Retaliatory measures will also hurt exporters. The broader deluge of policy announcements — some of which have had significant geopolitical ramifications — adds to the decision-making paralysis facing boardrooms and traders. Faith in US economic and financial institutions is also being tested. Trump has filled regulatory bodies with his chums. The Fed’s independence is an ongoing concern. Then there are zany economic ideas, from building a cryptocurrency reserve to a rumoured “Mar-a-Lago accord” to devalue the dollar. Some analysts note that the dollar’s recent weakness amid economic turmoil suggests financial markets may be beginning to question the safe haven status of the currency.It is true that the administration’s tax cuts and deregulation efforts are yet to get started. But since they are likely to be paired with tariffs on more trading partners, rash policymaking and a clampdown on undocumented immigrants — which make up an estimated 5 per cent of workers — optimism around near-term US economic growth feels increasingly like blind hope. The contours of Trump’s economic agenda have sharpened. It is already worse than everyone thought, and he is just six weeks in. More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldUK business secretary Jonathan Reynolds has vowed to “stand up” for the British steel industry and warned Washington that retaliatory measures “already exist”, as the reimposition of US sanctions loom.Reynolds said he was due to speak to US commerce secretary Howard Lutnick on Thursday night in a bid to seek a carve-out from a 25 per cent levy set to be imposed globally on steel and aluminium imports to the US from Wednesday. In an interview with the Financial Times, the business secretary said he wanted to keep the conversation with Lutnick “constructive” but signalled that tit-for-tat measures remained an option.Asked about possible retaliatory measures, Reynolds noted the UK had measures on the shelf that the country had used in response to steel and aluminium tariffs President Donald Trump imposed in his first term in office.They “already exist, because obviously there were the tariffs in place [previously under Trump] and the set of retaliatory measures in the UK . . . It’s not so much about drawing up contingencies, because we know what was there in the past,” he said on a trip to Tokyo.The tariffs between the UK and the US were suspended under a deal agreed in March 2022 between the then-Conservative government in London and then-president Joe Biden.Reynolds stressed no decisions had been made on retaliation. However, British officials said they were aware that Indian and other investors in UK steel were watching to see Britain’s response to Trump’s threatened tariffs. Failing to retaliate if the tariffs were imposed could chill inward investment, the officials said.The UK steel industry is dominated by Indian-owned Tata Steel and Chinese-owned British Steel, which still employ the majority of workers. Smaller players include Liberty Steel and UK state-owned Sheffield Forgemasters.“We’re proud of the inward investment that we have received over the years. The British steel industry has foreign ownership in it, but that has brought at times expertise, capital that we’d be seeking to defend,” Reynolds said, vowing to “stand up for the whole of the sector”.Trump in 2018 imposed tariffs of 25 per cent on steel and 10 per cent on aluminium from most countries, citing national security grounds. The EU, which at the time included the UK, responded by imposing tariffs on a range of US imports, including steel but also iconic US products such as bourbon whiskey. Since returning to office in January, Trump has again unsettled global markets with tariff threats as investors in exposed industries fret over whether he will follow through or grant exemptions. Trump last month signalled the UK could yet escape any tariff action, telling reporters he was working on a trade deal with Britain after a White House meeting with Prime Minister Sir Keir Starmer.Describing Starmer as a “very tough negotiator”, Trump said the two countries could “very well end up with a real trade deal where the tariffs wouldn’t be necessary”. Reynolds said a UK exemption to the steel and aluminium tariffs was “very strongly in the US’s interests”, pointing to “the supply of steel to the US Navy for the submarine programme”.UK business secretary Jonathan Reynolds More