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Italian daily Il Sole 24 Ore reported on Sunday Rome would set a 2025 GDP growth target of 1.3% or 1.4% when factoring in the expansionary impact of planned tax cuts and higher spending. Excluding policy changes, Rome expects growth of 1.1% next year, the newspaper added.”An estimate of 1.2% for 2025 works, if it is higher we will be happy,” Economy Ministry Undersecretary Federico Freni told Reuters on the sidelines of the TEHA business forum in Cernobbio.Last April the Treasury forecast gross domestic product growth of 1% this year and 1.2% in 2025 under a no-policy-change scenario, without setting more ambitious goals.The upcoming plan will also provide an updated framework for Italy’s strained public finances.Rome was put under a so-called Excessive Deficit Procedure by the EU this year, and the Treasury’s plan, which is aimed at cutting the fiscal gap in line with EU prescriptions, must also comply with the latest reform of the bloc’s fiscal rules.The infringement procedure obliges Italy to cut its structural budget deficit net of one-off factors and business cycle fluctuations by 0.5% or 0.6% of GDP per year.Sources told Reuters late last month that in its medium-term structural budget plan, the government of Prime Minister Giorgia Meloni would stick to a commitment to bring its deficit-to-GDP ratio below the EU’s 3% ceiling in 2026.Il Sole 24 Ore reported that Italy’s deficit-to-GDP ratio could fall below 4% this year against the expected 4.3% estimate made in April due to a positive trend in tax revenues. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.As they jostle for supremacy in semiconductor chips and green technology, America and China have been locked into an increasingly disruptive game of tit-for-tat trade warfare. They have unleashed a panoply of export controls, tariffs, and blacklisting against one another, and their allies, as a Financial Times series has highlighted. The latest salvo comes from Beijing. From September 15, it will impose export controls on antimony, an obscure metal used in armour-piercing ammunition, night-vision goggles and precision optics. It follows curbs implemented last year on shipments of germanium and gallium, which are needed for chips and military communications.China produces about 60 per cent of rare earth elements, and processes close to 90 per cent. Beijing cites “national security” as the reason for its measures, but its command over essential raw materials is ultimately its leverage over Washington in the trade war. America’s muscle comes from blocking exports of advanced semiconductor technologies to China, and hindering Chinese manufacturers’ ability to sell into its market.The cycle of retaliation has buffeted their economies, and set back global growth and innovation. It shows little sign of cooling. That means adapting to the new era of fragmented supply chains is necessary to cushion the economic fallout. For instance, China’s Huawei has worked with domestic chipmaker SMIC to boost cutting-edge chip development. There are also signs that Chinese buyers are finding ways to circumvent US restrictions on advanced processors. The US and its allies have set up initiatives like the Mineral Security Partnership to improve critical resource collaboration. But such forums need to move quickly from dialogue to action. Businesses fear Beijing will keep adding new critical metals to its restrictions, and are concerned that chip production will suffer under higher prices and without the right inputs.Stepping up mining and refining efforts is key. China dominates both, but there are still significant critical metal reserves outside the country to exploit, including in the west. Nyrstar, owned by commodities trading group Trafigura, reckons a zinc smelter facility in Tennessee could meet 80 per cent of annual US demand for gallium and germanium. Higher commodity prices, on the back of Beijing’s controls, should also make extraction more attractive. But western governments need to make it easier for the industry to operate. Price volatility makes extraction risky, and below-cost exports from China are difficult to compete against. Streamlining onerous planning laws and chemical regulations across countries would help, alongside adopting joint environmental standards. Better co-ordination on financial incentives is also warranted. Price insurance and public-private partnerships can help de-risk projects for the rarest metals, while long-term offtake agreements can provide security of demand.Some critical metals can be costly and hard to recycle or to substitute, but supporting strategic research and development remains important, too. For example, gallium can be extracted from coal fly ash, a waste product from coal combustion. Silicon can also be a less-expensive substitute for germanium in certain electronic applications.For decades, governments in the west lapped up cheap raw materials from China, while Beijing invested heavily in mining, refining and exploration. The economic hostility between the US and China is highlighting just how short-sighted it was to build up dependence on a single supplier of essential metals. China’s command of the sector looks unassailable. But if America and its allies want to dilute its leverage in the trade war, a more concerted effort on critical minerals would help. More

“It produces over 60% of the world’s semiconductors and 90% of the advanced chips, contributing 10% of the value-added in the global semi supply chain,” the analysts said. This has bolstered Taiwan’s economic strength, especially as semiconductor demand has surged with the rise of artificial intelligence (AI). Yet, analysts at BofA warn that Taiwan’s heavy reliance on its tech sector introduces substantial risks.Taiwan’s tech sector has been a key driver of its economic growth. Over the past few years, Taiwan’s GDP growth rates were 3.4% in 2020, 6.6% in 2021, and 2.6% in 2022, largely fueled by semiconductor exports. Even amid global economic volatility, Taiwan has sustained strong performance, helped by its tech exports. “We expect the AI-driven export recovery, along with better investment momentum, to help underpin solid GDP growth of 3.7% in 2024,” the analysts said.However, this reliance on technology brings with it significant vulnerabilities. A large share of Taiwan’s economic activity is linked to tech exports, which account for over 60% of its total exports. “Taiwan shipped as much as 35% of its exports to mainland China and Hong Kong in 2023, followed by the US (19%), ASEAN (18%) and Europe (10%),” the analysts said. This heavy concentration in trade connections poses considerable risks, as geopolitical tensions or trade disruptions could have serious consequences for Taiwan’s economy.Despite attempts to diversify its trade partners with initiatives such as the New Southbound Policy, Taiwan continues to rely heavily on the tech sector. While there has been some progress in redirecting foreign direct investment from China to other regions, these efforts have not fundamentally changed the inherent risks in Taiwan’s economic structure.Additionally, Taiwan faces several structural constraints that compound its vulnerability. Energy security is a pressing issue; nearly 98% of Taiwan’s energy is imported, with a big portion coming from fossil fuels. As the island moves to phase out nuclear power, the pressure on its energy supply is expected to intensify. The growing demand for electricity, driven in part by the tech sector’s needs, exacerbates this challenge, making energy policy reform a critical area of focus.The shortage of skilled tech professionals is another major concern. Taiwan has been struggling with a talent gap, with a significant number of unfulfilled positions in the semiconductor industry. This issue is exacerbated by a declining youth population and fierce global competition for tech talent. Despite various government initiatives aimed at addressing these shortages, the gap remains a significant threat to the long-term sustainability of Taiwan’s tech sector.Additionally, Taiwan’s macroeconomic stability is affected by large capital flows linked to the global tech cycle. These fluctuations make it difficult for Taiwan’s central bank to manage economic stability, contributing to volatility in property markets and other areas. The rapid movement of capital, driven by tech cycles and geopolitical shifts, further complicates Taiwan’s economic management.BofA analysts recommend that Taiwan pursue several strategic measures. Improving energy security is essential, and investigating new energy technologies, including advanced nuclear options, could help alleviate supply constraints. Tackling talent shortages through enhanced educational programs and initiatives to attract international professionals is also important. Moreover, Taiwan must accelerate its efforts to diversify its economy by investing in high-value industries such as semiconductor design, biotechnology, renewable energy, and intelligent machines. Expanding the services sector, especially in areas like healthcare, could offer new avenues for growth. More

Tariffs, which are taxes on imported goods, were a key part of trade policy during the Trump administration. As the U.S. considers returning to higher tariffs, analysts at UBS take a look at the potential economic and investment impacts of such actions.Tariffs act as a tax on imported goods, directly raising the prices of these goods within the domestic market.According to UBS, the inflationary impact of tariffs is straightforward but significant. “Thus a 10% universal tariff applied to imports to the US should raise overall price levels in the US economy by 1.3%,” the analysts said. This increase is not merely a one-off; there is a risk of “profit-led inflation” where companies might raise prices beyond the tariff’s direct impact, capitalizing on consumer expectations that prices should rise by the full tariff percentage.Higher tariffs are generally expected to slow economic growth. UBS analysts suggest that tariffs can reduce domestic consumption by increasing the cost of goods, particularly those that lower-income households rely on. Additionally, tariffs increase the production costs for domestic firms that use imported components, thereby reducing their competitiveness relative to foreign producers. This can lead to a decrease in economic activity and potentially lower employment​.Under scenarios where selective or universal tariffs are imposed, UBS forecasts a negative cumulative impact on GDP over three years. For example, the U.S. GDP could decline by 1.0% to 1.5% under a universal tariff scenario.The broader the application of tariffs, the more severe the economic impact, as rerouting supply chains becomes less feasible and the costs are more broadly felt across the economy.Another economic consequence of higher tariffs is the likelihood of retaliatory measures from trading partners. This tit-for-tat escalation could further depress global trade, slow economic growth, and lead to higher costs for both consumers and businesses. Retaliatory tariffs by other countries could specifically target industries that are politically sensitive, thereby amplifying the negative impact on the U.S. economy​.UBS analysts anticipate that higher tariffs, particularly if applied universally, would put downward pressure on U.S. equities. The imposition of a 10% universal tariff, along with corresponding retaliatory measures, could lead to a decline in U.S. equity markets by about 10%. “A higher cost of imports would most likely impact retailers, automotive manufacturers, tech hardware, semiconductors, and parts of industrials,” the analysts said.Conversely, sectors that are more domestically focused and less exposed to imports, such as U.S.-based steel producers, might benefit from reduced foreign competition. However, the overall market sentiment is likely to be negative, especially if tariffs lead to broader economic downturns and increased policy uncertainty​.In response to the economic challenges posed by higher tariffs, UBS expects the Federal Reserve to take a more cautious approach, likely lowering interest rates to prevent a recession. Although tariffs might initially drive up inflation, the overall impact on economic growth is expected to push long-term interest rates down as the Fed focuses on maintaining economic stability over short-term inflation worries.UBS predicts that under a universal tariff scenario, the yield on 10-year U.S. Treasury notes could decline to around 2.5% to 3%, as investors seek the relative safety of government bonds amid economic uncertainty.The immediate reaction in currency markets to the imposition of higher tariffs is likely to be an appreciation of the U.S. dollar, driven by a flight to safety and the negative impact on major trading partners’ economies. However, UBS analysts caution that this strength may be short-lived. As the U.S. trade deficit widens due to reduced exports and higher import costs, the dollar could come under pressure in the longer term​. More

According to the firm’s analysis, two key themes will shape advanced economies: the normalization of inflation and the loosening of monetary policy, “both of which should offer some support to GDP growth,” said the firm.Additionally, China’s recovery is expected to pick up as fiscal stimulus takes effect, although ongoing trade tensions with the U.S. and its allies may limit its growth potential.However, several risks remain on the horizon, according to Capital Economics. The firm highlights the “stickiness of inflation, especially in Europe,” which could hinder real income growth and reduce the scope for policy easing.Moreover, political transitions in various countries are said to pose uncertainties, with potential risks around debt-funded stimulus and financial market reactions.The firm believes the rise of isolationist trade policies and stronger pushback against immigration are also flagged as concerns, potentially leading to stagflationary effects in advanced markets.While some fear that recession is on the horizon for 2025, Capital Economics remains cautiously optimistic.They note warning signs such as a downturn in manufacturing surveys, rising unemployment, and increasing loan delinquencies, but emphasize that these indicators alone don’t guarantee a recession.”Trends in credit, employment, retail sales, and construction still paint a broadly positive picture,” said Capital Economics.Overall, they predict that a “soft landing is the most likely outcome” for 2025, though they are closely monitoring the evolving risks. More

First, the U.S. consumer market is the largest globally, and although China has diversified its exports, the U.S. remains a critical market, BCA said in a recent note.The report suggests that Chinese policymakers may find it hard to resist the appeal of boosting weak domestic demand by relying more on American consumers, especially since they are reluctant to implement large-scale fiscal stimulus.The U.S. is now geopolitically and politically prepared to negotiate with China on its own terms, which could explain why it might allow China continued access to its market.The second pressure point is China’s current account (CA) balance, which is heading towards a deficit.China’s surplus, which had been bolstered by a surge in pandemic-related exports and restrictions on international travel, is unlikely to be sustained, especially if overseas tourism returns to pre-pandemic levels.”China already flirted with a CA deficit back in 2018, when it almost entered a deficit,” BCA notes. “It then built back a robust surplus, thanks to the pandemic-induced exports splurge and the zero-COVID-19 policy that made it difficult to travel abroad.” Since 2023, the surplus has stabilized at around $253 billion.For the U.S., reducing China’s current account surplus is viewed as a national security priority.While the Trump administration emphasized the trade imbalance in goods, the U.S. holds a stronger position in services, making it crucial for future trade talks to focus on opening the Chinese market to U.S. service exports.At the moment, the U.S. appears ready to restrict China’s access to its domestic market and could use this access as both “a carrot, not only a stick,” BCA notes.Republican nominee Donald Trump, in his bid for the presidency this November, has threatened to hike tariffs on Chinese exports from the current 10% to as high as 60% across the board if he secures the second term.With Trump running neck and neck with his Democratic opponent Kamala Harris in key swing states, Beijing faces the looming possibility of a second major trade war. More

(Reuters) -U.S. Treasury Secretary Janet Yellen said on Saturday that she is “probably done” serving at the highest levels of government after President Joe Biden’s term ends in January, but will likely meet again soon with her Chinese counterpart.Asked at the Texas Tribune Festival in Austin, Texas whether she was “done” when a new administration takes over in January, or might continue in her job or take on a new administration role, Yellen said: “Probably done, but … we’ll see.”The comments are the closest that Yellen, 78, has come to announcing her future plans as the presidential race between Vice President Kamala Harris and former president Donald Trump heats up. Yellen has been the first woman to serve as Treasury Secretary, Federal Reserve Chair and director of the White House National Economic Council.Yellen told the event in Austin that she still has a lot of work to do at Treasury in coming months, including another likely meeting with Chinese Vice Premier He Lifeng, her Beijing counterpart, to try to manage an often tense relationship. The two met in April in Beijing, where Yellen warned China to rein in excess industrial capacity ahead of Biden’s decision to impose steep tariff increases on Chinese-made electric vehicles, batteries, solar products and semiconductors.Yellen said she would welcome a visit to the U.S. but also may return to China herself, adding: “My guess is that we will have, one way or another, a visit.”The Treasury’s top economic diplomat, Undersecretary Jay Shambaugh, will lead a delegation to Beijing “very soon” to discuss economic issues. Shambaugh leads a U.S.-China economic working group that has made addressing China’s excess factory production a top issue Yellen said the U.S.-China relationship “needs to be prioritized and nurtured” by the next U.S. administration, with discussions at the highest levels and among agency staffs.”We have enough differences and without a chance to discuss them and put them in context, it’s certainly possible for tensions to rise,” Yellen said. “So this is something that really requires ongoing attention. I hope that it would get it.”‘SOLID ECONOMY’Yellen also said the U.S. economy has largely reached a “soft landing” with lower inflation after U.S. August jobs data on Friday showed a slight decline in the unemployment rate despite slower hiring.”When you see pace of job creation diminishing over time, what I love to see is that it stabilizes roughly where it is now, and we have to be careful to make sure that it’s not going to weaken further,” Yellen said.She said consumer spending remains “quite solid” and while there is “less frenzy” in hiring, there are not meaningful layoffs”I’m attentive to downside risks now on the employment side, but I what I think we’re seeing, we will continue to see, is a good, solid economy,” Yellen said. More