WASHINGTON (Reuters) – A slowdown in U.S. growth last year was at least partly the fault of President Donald Trump’s global trade battles and the resulting hit to business investment, the administration’s top economist said on Thursday in an outlook for the coming years.
“Once we got renegotiation of trade agreements, we saw uncertainty in the market, and investment took a hit,” Tomas Philipson, acting chair of the Council of Economic Advisers, said in a briefing with reporters about the CEA’s annual Economic Report of the President.
Philipson said the CEA had only done internal estimates of the impact but referred journalists to a Federal Reserve study https://www.federalreserve.gov/econres/notes/feds-notes/does-trade-policy-uncertainty-affect-global-economic-activity-20190904.htm that said trade uncertainty may have reduced growth in U.S. and world gross domestic products by as much as 1%.
Trump has blamed the Fed as the economy slowed from a 2.9% annualized growth rate in 2018 to 2.3% last year, and the central bank did trim rates three times to boost the economy.
But policymakers cited trade-related risks as a chief reason for the rate cuts. Philipson agreed with Trump that it was necessary to confront China on trade but said it did cause short-term disruption.
“I don’t know if we fully agree on the quantitative point, but on the qualitative we certainly agree … It is well known, if we have uncertainty, investment takes a hit,” Philipson said.
It was a rare public acknowledgement from the administration of the costs of a trade war characterized as largely beneficial to the U.S. economy despite lingering questions about who pays the price of higher tariffs, whether global supply chains will be reorganized to the U.S. economy’s benefit and even whether China will deliver on commitments made under a Phase 1 trade deal.
Philipson said he expects investment to rebound this year “if uncertainty settles down, which we hope it will.”
The CEA report, an annual exercise that is one part review of events and one part aspirational statement, outlined what will likely prove key talking points for Trump’s reelection campaign: The economy now is doing better than it did under President Barack Obama; it only started doing better under Trump and is poised to thrive even more if Trump administration proposals are enacted.
Those conclusions are likely to get pushback from Democrats who note that the jobs recovery, for example, began under Obama and accelerated in his second term.
A rise in the net worth of the poorest half of Americans, cited in the report and in Trump’s recent State of the Union speech, has been largely driven by a rise in home ownership and home values that began late in Obama’s term.
The CEA report projected economic growth this year will hit 3.1% and continue at 3% annually through 2024, as long as a full suite of suggested reforms are enacted including trade deals, an infrastructure plan and immigration rules that would favor more skilled workers.
Those changes, the CEA contends, would boost the annual increase in labor productivity from below 2 percent annually to 2.6 percent, a rate more akin to the high-growth 1990s than the more tepid growth of recent years.
Fed policymakers, whose forecasts do not take into account any of the administration’s policy proposals, see the economy growing around 2% this year, with even the most optimistic seeing growth at no more than 2.3%, unchanged from last year’s pace.
(Reporting by Howard Schneider; Editing by Dan Burns and Cynthia Osterman)
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
