Tag: Production

“HOW am I going to compete?” asks Sohel Sareshwala. He runs Accu-Swiss, a Californian company making customised components for the manufacture of semiconductors and cars. President Donald Trump’s tariffs on steel and aluminium, both of which he uses as inputs, are eating into his profit margins and delaying his orders. Meanwhile, Mr Sareshwala’s competitors abroad, free of such concerns, can undercut him.

Mr Sareshwala is not alone in his frustration. On June 1st Mr Trump extended tariffs to countries that supplied 81% of America’s steel imports and 96% of aluminium imports in 2017, arguing that this was necessary to protect national security. Tight quotas apply to most of the rest. Only Australia was let off, perhaps because of a friendship between the president and Greg Norman, an Australian golfer, who lobbied on his government’s behalf. Mr Trump’s tariffs and quotas have drawn a chorus of disapproval from American buyers of metal, the governments of Mexico, Canada and the European…Continue reading

HERE we go again. Financial markets don’t much like uncertainty. Thanks to Italy’s politicians, in recent days they have had plenty. By May 30th some calm had returned: it seemed possible that a pair of populist parties, the Five Star Movement and the Northern League, would form a government after all (see article). Markets had been in turmoil for two days, unsettled by a farcical back-and-forth between the populists and the country’s president, who had rejected the parties’ choice of a Eurosceptic economist as finance minister. The politicians may have done the markets a service, by shaking them out of complacency. Investors may have returned the favour, by shaking some sense into the politicians—at least for now.

Italy is perennially slow-growing and groans under public debt of around €2.3trn ($2.7trn), or 132% of GDP. The drama…Continue reading

IT IS not clear precisely how Donald Trump will govern, the extent to which he will carry out some of his scarier promises on trade and immigration, and who will be his economics top brass at the Treasury and in the White House. But a decent first guess is that President Trump will be bad for the world economy in aggregate; and a second is that his actions are likely to do more harm, in the short term at least, to economies outside America.

When America has in the past stepped aside from its role at the centre of the global economic system, the damage has spread well beyond its borders. In 1971, when Richard Nixon ended the post-war system of fixed exchange-rates that had America at its centre, his Treasury secretary, John Connally, told European leaders, “The dollar is our currency, but your problem.” This election result, to paraphrase Connally, belongs to America but is potentially a bigger economic problem for everyone else.

The scale and nature of that problem depend on the interplay of the two main elements of Mr Trump’s economic populism. The first is action to boost aggregate demand. Mr Trump favours tax cuts and extra public…Continue reading