Economy

Donald Trump and his team of economic advisers are racing ahead with an attempt to radically reshape the US economy from a consumption behemoth with a huge trade deficit to a manufacturing powerhouse. The economic pivot, which has focused on aggressive tariffs and significant cuts to government spending, has sent US equities reeling and prompted concerns about a potential slowdown in growth in the world’s largest economy. But Trump has insisted in recent days that he will press ahead.“Markets are going to go up and they’re going to go down but, you know what, we have to rebuild our country,” the president said on Tuesday.He later added in a speech to leaders of big US companies that levies against America’s biggest trading partners were designed to boost domestic jobs and industrial production: “The biggest win is if [businesses] move into our country and produce jobs. That’s a bigger win than the tariffs themselves,” he told the Business Roundtable. White House press secretary Karoline Leavitt said earlier on Tuesday that the Trump administration had kicked off an “economic transition”. “The president is unwavering in his commitment to restore American manufacturing and global dominance,” Leavitt said, as she vowed that “the America last globalist era is ending” and would be replaced by an “America first economic agenda”.Trump has tapped a cadre of former business leaders to direct his economic efforts. But compared with his first term, the new team is missing figures such as former Goldman Sachs chief operating officer Gary Cohn and ex-Treasury secretary Steven Mnuchin to moderate the excesses of his economic shock therapy.Top officials have instead backed the president’s message that the US may need a period of recession before reaping what they claim are the substantial benefits of Trumponomics.Kevin Hassett, the director of the National Economic Council, told CNBC on Monday that there were still “a lot of reasons to be extremely bullish about the economy going forward” and that any slowdown in the first quarter of this year was the result of “blips in the data”.Remarks by Treasury secretary Scott Bessent — a former hedge fund manager initially welcomed by Wall Street as a moderating influence — that the US economy would need a “detox period” and that there was no longer a “Trump put” preventing a fall in stocks have also provoked concern among investors.“Their approach is that you can’t make an omelette without breaking some eggs first,” said Paul Mortimer-Lee, a US-based economist for the National Institute of Economic and Social Research. “Trump has always said there would be pain before there was gain. I guess at some stage he will blink. If [stock markets] are down 20 per cent, there will be somebody to blame, somebody will get the sack.”Bessent in November also backed another broadly held view among Trump’s economic team — that Washington should push countries with big trade surpluses with the US to seek “Bretton Woods realignments” and peg their currencies at a higher level against the dollar. If they do not, they will no longer be seen as allies and face tariffs and fewer security guarantees.While Cohn publicly stood against tariffs during his time as head of the National Economic Council, and eventually resigned in March 2018 after losing a battle against steel and aluminium levies, Trump’s current advisers have tended to keep any disagreements about trade policies private.Differences in approach — such as commerce secretary Howard Lutnick’s more moderate stance and Bessent’s idea for any tariffs to be introduced gradually — have remained largely behind the scenes, even while markets have slumped and Wall Street banks have cut their growth forecasts.That has handed more power to Trump loyalists such as Peter Navarro, a staunch supporter of aggressive trade policy who often struggled to get his views turned into policy during the first administration. The rise of more radical figures during the president’s second term has helped turn an initial bump in stocks, amid promises of tax cuts and rapid deregulation, into a rout as investors wake up to just how fierce the administration’s resolve to press ahead with its agenda is.Some content could not load. Check your internet connection or browser settings.The uncertainty stoked by the possibility of more punitive tariffs on Mexico and Canada, two of the US’s biggest trade partners, as well as levies on the EU and other traditional allies, have driven the stock market sell-off.“As [businesses and investors] have started to see the effects come through, they realise these tariffs really are a killer,” said John Llewellyn, partner at advisers Independent Economics. “They work in the exact opposite direction to everything that has brought prosperity in the whole period of 80 years since the second world war.”The climate of uncertainty surrounding the new administration is also leading markets to second guess what comes next, with investors flagging up potential risks from several unorthodox policies Trump’s economic team has tabled.Some content could not load. Check your internet connection or browser settings.Lutnick earlier this month said he was considering ripping government spending out of the commerce department’s calculations of GDP to mitigate the impact of Elon Musk’s attempts to rein in federal spending on US growth through the tech billionaire’s so-called Department of Government Efficiency.“We’ve seen, not least in the collapse of inward investment into China, the extent to which it can sap confidence if people lose confidence, including in the data,” said Llewellyn. “People think the authorities must be hiding something and that therefore the economy must be doing less well.”Market speculation of a so-called Mar-a-Lago Accord — an idea dreamt up late last year by future chair of Trump’s Council of Economic Advisers Stephen Miran to weaken the dollar — has also raised concerns about the administration’s understanding of the complexities of the US Treasury market.An idea Miran put forth is his November paper — that countries hand over their current holdings of US government debt in return for century bonds and security guarantees — “could be seen by rating agencies as a technical default”, said Mahmood Pradhan, global head of macro at Amundi Asset Management.Some think the idea of an accord to weaken the dollar, which — as proposed by Miran and Bessent — would aim to mirror an earlier agreement signed in the Plaza hotel in New York in 1985, is wishful thinking in an environment where the US administration is destroying its relationship not only with markets, but also with foreign governments.“For the Plaza [Accord] of course, we had [James] Baker and [Ronald] Reagan and they were artists at making friends and influencing people. So they got a lot of people on board,” said Steve Hanke, a professor of applied economics at Johns Hopkins University who served under the Reagan administration. “I can’t really think of any country now, except maybe Argentina, that is very friendly with the United States.”Hanke added: “The idea of getting the gang together? I mean, can you imagine China agreeing to it?” Additional reporting by Steff Chávez in Washington; data visualisation by Oliver Roeder in London More

In its most recent survey of national eating habits, Japan’s government discovered something unsettling. Adults in this wealthy, healthy country were now eating the smallest daily volume of vegetables since 2001.The reason? Inflation. At the beginning of March, prices of the three key ingredients of Japanese hotpot, a traditional winter dish — Chinese cabbage, leek and carrots — were respectively 227, 167 and 140 per cent above their long-term average. The Engel coefficient, which measures food as a proportion of household spending, is at a 43-year high. The collective decision to cut back on greens has come as the country undergoes what some see as its biggest economic inflection in over 30 years: the much-heralded “normalisation” of Japan’s relationship with money after a long period of stagnant prices and moribund growth. While many other countries have fought to keep inflation down, in Japan its return has been encouraged — at least by the central bank, and specifically in a broad-based form led by consumption and growth. In March 2024, the BoJ ended negative rates for the first time in 17 years, and has twice raised rates since then. The bank has implied that it will gradually push interest rates from 0.5 per cent, their current level, towards an unimaginable 1 per cent.The aim is to foster a virtuous cycle of rising prices and wages that could spur demand and generate moderate and steady growth. But, despite some positive signs, it has been a bumpy ride. A small increase in interest rates to 0.25 per cent in July caused a record one-day crash in the Tokyo equity market. And the increases are putting unfamiliar pressure on everyone from mortgage holders to chief financial officers, just as shareholders are pushing companies to make huge structural changes.Some content could not load. Check your internet connection or browser settings.Even if the broad measure of inflation excluding energy and fresh food shows prices still increasing steadily — 2.5 per cent in January — the acceleration in food costs is stoking a perception that the overall pace is faster. This has introduced fears about whether Japan’s attempt to normalise is actually producing the “wrong” type of inflation.Although companies are increasing wages at near-historic rates, they are not keeping pace with consumer prices. And consumers, rather than spending more, are feeling the pain and struggling to adjust. “When you go shopping for food, everything is going to be a bit more expensive,” says Ritsuko Ikeda, who is buying vegetables in Tokyo’s Sangenjaya district. “A couple of years ago, shops and food companies used to apologise when they raised prices, but now they don’t seem sorry: they just go ahead and do it.”For many Japanese people these new realities are disconcerting, says Naomi Fink, chief global strategist at Nikko Asset Management. “Your experience over years matters. But expectations can be broken suddenly.”“We are now at the point of shock,” she adds. “Even [with inflation] at 2 per cent, that for Japanese households is a shock.” Japan’s great inflection is happening under an extraordinary confluence of pressures. Geopolitics have pushed up prices of energy as well as food, both of which Japan imports in abundance. The yen, partly because of the Japanese corporate and institutional tendency to invest abroad, has been weak for an extended period. And the rate of population shrinkage in the country is approaching an average of two people every minute, reordering the way business thinks long term about labour supply and a historic duty to keep unemployment low. A crowded Ameyoko shopping street in Taito Ward, Tokyo, in December. While companies are increasing wages at near-historic rates, they are not keeping pace with consumer prices More

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American farmers could ultimately feel even more pain as a result of President Donald Trump’s tariffs on Canada, Mexico and China.
The latest Purdue University/CME Group Ag Economy Barometer reading showed that almost half of farmers think a trade war leading to a significant decrease in U.S. agricultural exports is “likely” or “very likely.”
The February sentiment data comes amid worries among experts that farmers won’t be as profitable in 2025.

Soy farmer Caleb Ragland on his farm in Magnolia, Kentucky
Courtesy: American Soybean Association

Caleb Ragland, a soybean farmer in Magnolia, Ky., voted for President Donald Trump in 2016, 2020 and 2024. Now, however, he has to navigate a tariff minefield at a time when the sector is already facing major headwinds.
Ragland works with his wife and three sons and has deep roots in the community. His family has been farming on the land for more than two centuries. But over the past few years, he has seen a double-digit percentage decline in crop prices while production costs rise. Soybean futures have gone down more than 40% over the past three years along with corn futures.

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Soybean futures vs. corn futures since 2022

As pressures mount in the industry as a result of tariffs imposed by the second Trump administration — as well as retaliatory levies from other countries — he’s worried about the longevity of his business.
“My sons potentially could be the 10th generation if they’re able to farm,” Ragland, who is also the president of the American Soybean Association, told CNBC. “And when you have policies that are completely out of our control – that they manipulate our prices 20%, 30%, and on the flip side, our costs go up – we won’t be able to stay in business.”
This isn’t the first time farmers have had to deal with new tariffs. Back in Trump’s first term, the trade war with China in 2018 — a time when Ragland said the agricultural economy was “in a much better place than it is right now” — cost the U.S. agriculture industry more than $27 billion, and soybeans made up virtually 71% of annualized losses.
That trade war has caused lasting damage. To this day, the U.S. has yet to fully recover its loss in market share of soybean exports to China, the world’s number one buyer of the commodity, according to the ASA.
“Tariffs break trust,” Ragland said. “It’s a lot harder to find new customers than it is to retain ones that you already have.”

‘Insult to injury’

The White House last week imposed a 25% tariff on goods from Canada and Mexico alongside an additional 10% duty on Chinese imports.
While Trump soon reversed course by granting a one-month tariff delay for automakers Wednesday, then pausing tariffs a day later for some Canadian and Mexican goods until April 2, he said in an interview that aired Sunday on Fox News that tariffs “could go up” over time.
Tariffs on China were not included in these exemptions. China retaliated with levies of its own, which mainly target U.S. agricultural goods. Specifically, U.S. soybeans are now subject to an additional 10% tariff, while corn gets hit with an extra 15% charge.
“We’re already at the point that we’re unprofitable,” Ragland said. “Why on earth are we trying to add insult to injury for the ag sector by basically adding a tax?”
Ragland pointed out that he “appreciates the president’s ability to negotiate” and wants Trump to be successful for the sake of the country. However, he emphasized that those in the industry, especially soybean producers, don’t have any “elasticity in our ability to weather a trade war that takes away from our bottom line.”
“Folks are upset,” Ragland said about sentiment from other farmers, stressing that they all need relief through deals that reduce barriers to trade and a new five-year comprehensive farm bill – legislation that provides producers with key commodity support programs, among others. “You’re talking about people’s livelihoods,” he remarked.
Agriculture Secretary Brooke Rollins said last week that the Trump administration was reportedly weighing exemptions on some agricultural products from tariffs on Canada and Mexico. Trump’s adjusted measures Thursday included a reduced 10% tariff on potash, which is used for fertilizer.
More than 80% of American farmers’ potash needs are supplied by Canada, said Ken Seitz of Nutrien – a crop inputs and services provider based in Canada – during the BMO Global Metals, Mining & Critical Minerals Conference last month.
“As we look at the implications of tariffs for Nutrien, of course the biggest discussion is around potash, and that’s because in a market that’s kind of 10 million to 11 million tons in any given year, we ourselves supply about 40% of that market,” the company’s chief executive underscored during the conference. “We believe that the cost of tariffs will be passed on to the U.S. farmer.”

Weighing the outcomes

Even in the runup to the implementation of Trump’s tariffs, American farmers were sounding the alarm. Despite the latest Purdue University/CME Group Ag Economy Barometer reading showing that farmer sentiment overall improved in February, 44% of survey respondents disclosed that month that trade policy will be most important to their farms in the next five years.

“Usually when you ask a policy question, by far and away the most important policy is crop insurance,” Michael Langemeier, agricultural economist at Purdue University, said. “Crop insurance is right up there with apple pie and baseball. It’s a program that’s very well liked, because it provides a very effective safety net.”
“The fact that crop insurance was a distant second to trade policy speaks volumes,” he also said.
The February survey also showed that almost 50% of farmers said that they think a trade war leading to a significant decrease in U.S. agricultural exports is “likely” or “very likely.” Langemeier estimated that between mid-February and early March, there was a 33% per acre drop in net return for soybeans and corn related to the tariffs. That’s on top of the fact that 2025 was “not ending up to be an extremely profitable year before this,” he revealed.

The economist thinks there may be a bit of a downward adjustment in overall farmer sentiment in the near term. Nevertheless, a constructive consequence of the tariffs could be that they speed up the signing of a new farm bill, he said.
“Well, how in the world can you come up with the amounts for the trade payments if you don’t even know what the amounts for the farm bill are going to be,” Langemeier asserted. He expects that the new farm bill signing will take place at some point this year.
Looking to the upcoming spring season, Bank of America analyst Steve Byrne wrote in a Feb. 25 note that tariffs could lead to “more conservative purchases of crop inputs.” That would mean a risk of lower fertilizer purchases, which could affect not only Nutrien but others like Mosaic and CF Industries, the analyst noted.
Shares of those companies, as well as other farming-related stocks like AGCO and Deere, all sold off on March 3 and March 4 on the heels of Trump’s tariff announcement.
“I think we’ve seen the ag stock sell-off just because of general concerns that the farmer is going to not be as profitable this year,” Morningstar’s Seth Goldstein said in an interview with CNBC.
Over the past month, Mosaic has slid almost 8%, while CF Industries has fallen nearly 10%. Nutrien has also lost more than 1%. AGCO and Deere have fared better in that time, gaining 1.7% and 0.3%, respectively.
When it comes to how this trade war will affect American farmers in the long term, Goldstein doesn’t see that meaningful of an impact. He anticipates that global trade flows will shift and cancel each other out over the next two to three years or so.
“While there may be a near-term impact this year of soybeans sitting in warehouses without really available buyers, I think eventually we would see other countries then start to buy more U.S. soybeans,” the equity strategist said. “Maybe China buys more soybeans from Brazil, but maybe a place like Europe then buys more soybeans from the U.S., and we get … not that much difference.”
As it stands, Brazil is forecast to be the world’s largest soybean producer ahead of the U.S. for the 2024/2025 marketing year, accounting for 40% of global production in the period, per the Department of Agriculture. For corn, on the other hand, the U.S. is forecast to be in the top spot, making up 31% of global production in the marketing year.
Others on Wall Street believe that tariffs will be more consequential on trade dynamics, however.
Kristen Owen, an analyst at Oppenheimer, predicts that the duties will likely solidify Brazil becoming the primary global producer for both corn and soy, whereas the U.S. will become a sort of incremental supplier to the world.
“Brazil specifically has more capacity to grow their acreage, more capacity to grow to increase their share of the global grain trade,” she said to CNBC. “Tariffs and some of the other decisions that the administration is making just accelerate some of that.” More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldDonald Trump has backed down from plans to double US tariffs on Canadian steel and metal imports to 50 per cent just hours after first threatening the levies, rattling investors by intensifying the North American trade war. The move by the president comes after the Canadian province of Ontario earlier in the day suspended its own surcharge of 25 per cent on exports of power to the US, which Trump had cited as a reason for boosting tariffs on imports from Canada. The reversal marks a swift de-escalation of unprecedented trade warfare between the world’s largest economy and one of its three largest trading partners, and marks the second consecutive week in which Trump has softened planned tariffs on Canada. The US would still impose tariffs of 25 per cent on Canadian steel and aluminium imports from midnight, the White House confirmed, as part of broader tariffs on all steel and aluminium imports.In a statement released late on Tuesday, hours after Trump announced he would issue tariffs of 50 per cent on the Canadian metals, the White House said the president had “once again used the American economy . . . to deliver a win for the American people”.Ontario premier Doug Ford said earlier on Tuesday afternoon that he would suspend the 25 per cent surcharge following a “productive” conversation with US commerce secretary Howard Lutnick. Ford said he would meet Lutnick and US trade representative Jamieson Greer in Washington later this week to discuss the trade tensions.The premier’s U-turn was announced just a day after the surcharge was imposed, and came hours after Trump said the US would impose 50 per cent tariffs on Canadian steel and aluminium on Wednesday. “I have instructed my Secretary of Commerce to add an ADDITIONAL 25% Tariff, to 50%, on all STEEL and ALUMINUM COMING INTO THE UNITED STATES FROM CANADA, ONE OF THE HIGHEST TARIFFING NATIONS ANYWHERE IN THE WORLD,” the US president wrote on his Truth Social platform on Tuesday morning.The latest trade dispute sparked a further increase in volatility on Wall Street, briefly sending the US S&P 500 index sharply lower on Tuesday following a heavy sell-off the previous day. The S&P closed 0.8 per cent lower, cutting some of its losses. Shortly after his inauguration, Trump said he would impose 25 per cent tariffs on Canada and Mexico, but last week he granted a one-month reprieve for goods that met the rules of a 2020 free trade deal.The aluminium and steel tariffs are part of a separate set of duties to be imposed on producers across the world, which is due to take force on Wednesday.White House officials said the global 25 per cent tariffs on imports of the metals were intended to protect US domestic industry.Show video infoMark Carney, Canada’s incoming prime minister, described Trump’s latest escalation as “an attack on Canadian workers, families, and businesses”.Carney added that his government would “ensure our response has maximum impact in the US and minimal impact here in Canada”.The White House on Tuesday continued to dismiss widespread concerns over the market turmoil.“When it comes to the stock market, the numbers that we see today, the numbers we saw yesterday . . . are a snapshot of a moment of time,” said press secretary Karoline Leavitt.“We are in a period of economic transition,” she added.A closely tracked measure of the difference in US and London aluminium prices, called the Midwest premium, rose sharply on Tuesday, underscoring the rising costs facing American industrial groups. Futures tracking the premium, which follows prices of the metal delivered to plants in the US Midwest, rose as much as 18 per cent, according to FactSet data.Trump said that if Canada did not drop its “long time” tariffs, he would “substantially increase” levies on cars coming into the US, a move he said would “essentially, permanently shut down” the country’s carmaking industry. The president, who also suggested the US’s northern neighbour could no longer be assured that Washington would protect it militarily, added that “the only thing that makes sense is for Canada to become our cherished Fifty First State. This would make all Tariffs, and everything else, totally disappear.”Canada has strongly rejected such suggestions by Trump since his inauguration in January.Additional reporting by Steff Chávez in Washington More

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