Economy

Video descriptionTranscriptDonald Trump gives a press conference on reciprocal tariffs for US trading partnersIt it’s a beautiful simple system, and we don’t have to worry about you we’re charging too much or too little, um, but traditionally India is right at the top of the pack pretty much there are a couple of smaller countries that are actually more, but India is a very, very, they, they charge tremendous tariffs. If you build here, you have no tariffs whatsoever and I think that’s what’s gonna happen. I think our country is gonna be flooded with. Jobs. Let’s see what happens. Nobody really knows what is going to happen other than. We know that jobs are going to be produced at levels that we haven’t seen before. We know that we think interest rates are gonna ultimately be coming down because of things that happen, and they go hand in hand with the tariffs, but we think that we think that the prices for some things, many things, it could be all things will go down, ultimately will go down. What’s the earliest date that you think tariffs will actually be implemented? Well, I would say maybe I’ll ask Howard to answer. Because he’s going to be the one that’s implementing. What do you think? Our studies should be all complete by April 1st, so we’ll hand the president the opportunity to start on April 2nd if he wants. So I think we’ll be ready to go on April 1st and we’ll hand it to the president and he’ll make his decisions. But remember, if they drop their tariffs, prices for Americans are coming down. You’ve talked about the VAT in the EU before and your concerns with how the EU treats you. Do you have a number in mind on the European Union? Do you have an idea of where that number is going to land? Well, what they are now is they have a 20% VAT tax, which we’re considering to be similar or the same as the tariff. Plus they charge lots of fees and you know they’re doing something else. The European Union’s been very tough on our companies. They sued Apple, they sued Google, they sued Facebook. They sued many other companies and the American companies and the kind of numbers are staggering. Canada’s gonna be a very interesting uh situation because, uh, you know, we just don’t need their product and yet they survive off the fact that we’re, you know, we do 95% of what they do and Canada is just absolutely I say it and sometimes people smile and sometimes they say great idea but. Uh, Canada, their taxes would come down greatly. The security would go up greatly. Amazing things happen to Canada and really Canada in this particular, why would we pay $200 billion a year in subsidies to Canada when they’re not a state? It’s the most beautiful, and I’ll tell you what I think really reciprocal tariffs, those two words, uh, reciprocal reciprocal makes tariffs really fair. This will eventually be the car companies and chip companies. We have to have chips made in this country right now everything’s made in Taiwan practically, almost all of it, a little bit in South Korea, but everything, almost all of it is made in Taiwan, and we want it to be made. We want those companies to come to our country in all due respect. when we straighten it all out, then I wanna have one of the first meetings I wanna have is with President Xi of China, President Putin of Russia. And I want to say let’s cut our military budget in half. And we can do that. If BRICS wants to play games, those countries won’t trade with us, we won’t trade with them, and if any trading gets through, it’ll be a 100% tariff at least. More

Defense stocks dropped sharply Thursday afternoon after President Donald Trump suggested the U.S. could massively cut defense spending.
Trump has sent mixed messages on military spending throughout his 2024 campaign and in the early days of his presidency.

U.S. President Donald Trump sits in the Oval Office of the White House in Washington on Feb. 13, 2025.
Kevin Lamarque | Reuters

Defense stocks dropped sharply Thursday afternoon after President Donald Trump suggested the U.S. could massively cut defense spending.
Trump said Thursday at the White House the U.S. could cut defense spending in half at some point in the future. The comments came in the context of Trump discussing a potential conference on defense spending with China and Russia.

“At some point, when things settle down, I’m going to meet with China and I’m going to meet with Russia, in particular those two, and I’m going to say there’s no reason for us to be spending almost $1 trillion on the military … and I’m going to say we can spend this on other things,” Trump said.
“When we straighten it all out, then one of the first meetings I want to have is with President Xi of China and President Putin of Russia, and I want to say let’s cut our military budget in half. And we can do that, and I think we’ll be able to do that,” he added.
Defense stocks that had been higher earlier in the day quickly fell. Shares of Lockheed Martin dropped 1.6%, Northrop Grumman sank 3.4% and General Dynamics lost 2.1%.
Trump has sent mixed messages on military spending throughout his 2024 campaign and in the early days of his presidency.
On one hand, Trump has enlisted Elon Musk and the so-called Department of Government Efficiency to find places to cut costs throughout the government. Trump has also pushed for a quick resolution of the war in Ukraine, which has involved the purchase of a lot of American weapons.

On the other hand, he has touted the importance of having a strong military and signed an executive order to explore building an “Iron Dome of America” missile defense system. Trump also said Thursday that the U.S. has the “greatest military equipment in the world.”
“Right now, people are confused by a number of different crosscurrents” on defense spending, TD Cowen policy analyst Roman Schweizer told CNBC last week.

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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.US President Donald Trump’s barrage of economic policies is a “real, genuine fundamental wake-up call” that is forcing Europe to address its competitiveness problem, according to the chief executive of the region’s biggest stock exchange operator. Stéphane Boujnah, head of Paris-based Euronext, said recent reports from Mario Draghi and Enrico Letta on competitiveness and the future of the single market, “combined with the shock created by the initial decisions announced by the Trump administration”, had led European policymakers to address “the structural weaknesses in Europe”.Trump has launched a blitz of policies in his first month in office — including tariffs against the US’s biggest trading partners — in staunch support of American businesses and jobs. His moves have left European policymakers rushing to protect the bloc and catch up at a time of stagnant economic growth. “Things will change [but] like everything in Europe it might take longer,” Boujnah added. Trump’s policies mean the valuation gap between US and European assets “is not justified”, he said. Fund managers were “in the process of connecting [the] dots” when it came to the impact of Washington’s new economic approach, Boujnah added, and have been pouring money into the continent’s undervalued markets. “If you restrict immigration, if you increase tariffs, if you reduce taxation and if you increase spending, at some point of time gravity leads to additional inflation,” said Boujnah, who has led Euronext since 2015 and previously worked as an M&A banker.The pan-continental Euro Stoxx 600 index has risen 8 per cent so far this year, outstripping the S&P 500 which has gained 3.5 per cent. “The US is perceived as being overvalued in many segments and Europe is perceived as being undervalued,” he said, adding that global asset managers were focusing on Europe “to capture undervalued growing assets”.He was speaking as Euronext reported €1.6bn in revenues for 2024, a 10 per cent increase on the previous year. The company runs stock exchanges in Amsterdam, Paris and Dublin, among other cities, and reported a 5 per cent rise in revenues from initial public offerings. On Thursday, Unilever said its ice-cream business would have a primary listing in Amsterdam rather than London, and Boujnah said the company had faced “very strong pressure coming from all over the world to consider alternatives”. More

The producer price index increased by a seasonally adjusted 0.4% on the month, compared with the Dow Jones estimate for 0.3%.
Stock market futures moved slightly higher following the release while Treasury yields fell. Wall Street strategists cited details of the report that suggested a slightly more benign inflation picture.

A gauge of wholesale prices rose more than expected in January, though some details of the report indicated that pipeline inflation pressures are easing.
The producer price index, which measures what producers get for their goods and services, increased by a seasonally adjusted 0.4% on the month, compared with the Dow Jones estimate for 0.3%, the Bureau of Labor Statistics reported Thursday.

Excluding food and energy, the core PPI was up 0.3%, in line with the forecast.
Stock market futures moved higher following the release while Treasury yields were sharply lower, despite the higher-than-expected headline number. Wall Street strategists cited details of the report that suggested a slightly more benign inflation picture.
In particular, some costs related to health care showed easing — physician care, for instance, fell 0.5%. Also, domestic airfares declined by 0.3% and brokerage services prices were off 2.2%.
Over the past year, the all-items PPI increased 3.5%, well ahead of the central bank’s objective. Futures pricing indicates the market now does not expect the Fed to lower its benchmark interest rate again until October.
While the producer and consumer price index releases are widely cited inflation gauges, they are not the principal ones the Fed uses. Rather, the central bank focuses on the personal consumption expenditures prices index, which the Commerce Department will release later in February. The PPI and CPI releases do feed into that measure.

Fed Chair Jerome Powell on Wednesday noted the Fed’s greater focus on the PCE measure, while telling the House Financial Services Committee that “we’re not quite there yet” on inflation though he cited “great progress” made so far.
Putting the data together, the core PCE measure likely will show a 0.22% increase, down from 0.45% in December, according to Citigroup estimates. That would push the annual inflation rate down to 2.5%, the firm said.
The PPI release comes the day after the BLS reported that the consumer price index rose 0.5% on the month, putting the annual inflation rate at 3% and well out of reach of the Fed’s 2% long-run goal.
Together, the reports are pushing back expectations for a rate cut until the second half of the year, though inflation data can be volatile and the outlook could change depending on what subsequent months show.
“Wholesale price growth came in slightly higher than expected for January, and the read for December was adjusted upward,” said Elizabeth Renter, senior economist at personal finance site NerdWallet. “In other words, inflation at the producer level remains high, and one concern is that this inflation could ultimately be passed along to consumers.”
Revisions to the December numbers also complicated the inflation picture, with the gain now put at 0.5%, compared with the 0.2% increase previously reported.
In January, producer prices for services increased 0.3% while goods rose 0.6%. Services prices were led by a 5.7% jump in the traveler accommodation services category, which the BLS said accounted for more than one-third of the gain.
On the goods side, a 10.4% surge in diesel fuel costs was a significant factor. The PPI data also reflected the massive jump in egg prices as farmers destroy millions of chickens to prevent the spread of avian flu. Eggs for fresh use exploded 44% higher on the month and were up 186.4% from a year ago.
In other economic news Thursday, the Labor Department reported that initial filings for unemployment claims changed little for the week ended Feb. 8. Claims totaled 213,000, a decrease of 7,000 from the prior period and close to the 215,000 estimate. Continuing claims, which run a week behind, fell to 1.85 million, down 36,000.

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Monterrey has grown rich on North American free trade. Industrial parks catering to some of the world’s biggest companies line the six-lane highway to the airport, while the city’s sleek high-rises sprawl across an ever-increasing area between the mountains.The regiomontanos, as local people are known, are hard-headed and entrepreneurial, or as one executive said: “While others cry, we sell the handkerchiefs.” Some admire President Donald Trump’s pro-business, anti-woke line.So Monterrey’s business leaders believe they can weather Trump’s threats to upend the free trade deal linking Mexico, the US and Canada.Julio Escandón, chief executive of Banco Base More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.Thyssenkrupp has warned that Donald Trump’s steel tariffs could deepen Europe’s overcapacity problems by squeezing the bloc’s exports while prompting Chinese producers to flood the market with even more shipments.Jens Schulte, chief financial officer of the steelmaker, told reporters on Thursday that the company would analyse “over the next couple of months” the indirect impact of the tariffs, which the US president announced on Monday.Schulte said the tariffs, of 25 per cent on all imports of steel and aluminium into the US, could prompt the world’s largest steel exporter to divert excess output to Europe.“It is possible that the Chinese players that deliver into the US today, and will now face higher tariffs, could try to deliver more into Europe,” Schulte said.European steelmakers last year called on EU regulators to take action over cheap Chinese imports as prices fell below the cost of production amid elevated energy costs in the region.Thyssenkrupp’s steel business — once a jewel of German industry — has suffered from a slump in European demand, driven by lower production by the region’s carmakers. In November, it announced a plan to slash 11,000 jobs — roughly 40 per cent of the Duisburg-based steel division’s work force — as it sought to reduce its production capacity by up to a quarter.Over the past two years, Thyssenkrupp has slashed the value of its steel unit by €3bn through a series of writedowns. At the same time, the company has been locked in negotiations with Czech billionaire Daniel Křetínský, whose plan to raise his stake in the steelmaker from 20 to 50 per cent has dragged on.Schulte made his comments after Thyssenkrupp on Thursday said an advance payment of €1bn to its naval division for a large submarine contract meant it expected cash flow before mergers and acquisitions to reach €300mn this year. The figure is a significant improvement on its previous guidance of a loss between €200mn and €400mn. Thyssenkrupp’s shares were up 9 per cent in mid-morning in Frankfurt on the news.Miguel López, Thyssenkrupp’s chief executive, said in a statement the company was “working hard” on the planned spin-off of its naval business Thyssenkrupp Marine Systems. The company developed plans to list a minority stake in the business after US private equity group Carlyle in October withdrew its interest in a partial takeover. Berlin had been hesitant over the potential sale of a strategically important company to a foreign entity. More

Hedge fund titan Ray Dalio issued a fresh warning about the U.S. economy, warning of dire consequences if debt is not significantly cut.
He stressed that governments are responsible, and that leaders should make a pledge to reduce the U.S. budget deficit from 7.5% to 3% of gross domestic product or resign.
U.S. gross national debt stood at approximately $36.22 trillion as of Feb. 11.

DUBAI, United Arab Emirates — Hedge fund titan Ray Dalio issued a fresh warning about the U.S. economy, warning of dire consequences if the Trump administration does not cut the country’s debt.
“It’s like if I was a doctor and I was speaking with you about your condition, I would say to you, this is now very, very serious. All of these are major problems,” Dalio told CNBC’s Dan Murphy at the World Governments Summit in Dubai. “What you need to do is cut your deficit from about seven and a half percent of GDP to 3% of gross domestic product, and you can do that. There are certain things that you can do that cut it in a certain way that’ll make it much healthier, so the real problem is a political problem.”

The U.S. gross national debt stood at approximately $36.22 trillion as of Feb. 11, with $28.8 trillion of that as debt held by the public in the form of securities owned by individuals, corporations, state or local governments, Federal Reserve banks, foreign governments, and other entities outside the U.S. government. 
High debt means the government spends more on interest payments and is more economically vulnerable in the event of future economic crises. It also leads to higher inflation and creates a burden for future generations.

“I want to alert people. I want to alert government officials,” the billionaire Bridgewater Associates founder said. “I want to help, you know, and so I feel like the doctor, and then I would say everybody, politically … if this doesn’t happen, and we have the equivalent of, you know, an economic heart attack, or a heart attack of the bond market, then you know who’s responsible, because it can happen.”
“So it requires the same kind of discipline as if I was to say to you, OK, you need to change how you eat, you need to change your exercise routine, and you need to do these things.”
Dalio stressed that governments are responsible, and that leaders should make a pledge to reduce the U.S. budget deficit from 7.5% to 3% of its GDP or resign.

When asked what his message was to the Trump administration, Dalio replied:
“I think they recognize the problem, and then in the actions that are being taken, how do you cut costs? How do you raise productivity? … Make sure that you really know what you’re doing and you’re practical, and do it on … the conservative side, because you know, how much can the cutting actually be? We’ll see, and what are the consequences of the cutting and each one of those. So you better take a sharp pencil and be conservative.”
Dalio also warned of debt in private credit, saying a “debt death spiral is that part of the cycle, when the debtor needs to borrow money in order to pay debt service, and it accelerates, and then everybody sees that, and they don’t want to hold the debt. That’s where we’re approaching.”
Dalio’s Bridgewater Associates is one of the world’s largest hedge funds. It had $171.7 billion in assets under management as of September 2023, according to the U.S. Securities & Exchange Commission. More