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U.S. House of Representatives Speaker Mike Johnson walks back to office, as Republican lawmakers struggle to pass U.S. President Donald Trump's sweeping spending and tax bill, on Capitol Hill, in Washington, D.C., U.S., July 3, 2025.
What We're Watching: House folds on Trump bill, Beijing lashes out at US-Vietnam deal, Nigerian opposition unites
House holdouts bluff then fold on Trump’s budget bill
The US House is set to pass President Donald Trump’s epic tax-and-spending bill any minute now. Some eleventh hour House Republicans holdouts had signaled that they would oppose the broadly unpopular bill because it boosts the national debt by trillions while threatening to leave millions without health insurance, but they quickly fell in line after under direct pressure from Trump. The imminent final passage of the bill will fulfil Trump’s wish to have the landmark legislation on his desk by the Fourth of July holiday.
US-Vietnam trade deal angers Beijing
The US and Vietnam struck a preliminary trade deal to lower their bilateral tariffs yesterday, and China is not happy about it. Why? Because as part of the deal the US will heavily tariff any goods that pass through Vietnam from another country en-route to the US. That’s a direct swipe at Beijing, which does this frequently to skirt high US tariffs. China’s commerce ministry said it “firmly opposes any party striking a deal at the expense of Chinese interests” and threatened “countermeasures.”
Nigeria sees huge political shakeup as opposition leaders join forces
In one of the biggest shake ups since the end of military rule in 1999, Nigeria’s two main opposition leaders – Atiku Abubakar and Peter Obi – have joined forces to try to oust President Bola Tinubu in the 2027 election. In the 2023 election, they won a combined 54% of the vote compared to Tinubu’s 37%, meaning a common front could win. The big question: Which of these two political heavyweights will agree to play second fiddle to the other when it comes time to pick a presidential candidate?Chancellor-designate Friedrich Merz (CDU) is standing in the Bundestag election for Chancellor. CDU leader Friedrich Merz has failed the first round of voting in the Bundestag election for Chancellor.
Friedrich Merz fails to secure chancellorship in shock vote
Christian Democratic Union leader Friedrich Merz did not become Germany’s chancellor as planned on Tuesday after at least 18 members of his coalition either abstained or voted against him. His centrist coalition holds 328 out of 630 seats in the Bundestag, Germany’s parliament, but he won just 310 of the 316 votes needed to confirm him as the next leader.
Merz isn’t kaput yet. The Bundestag will hold a second round of voting, possibly as soon as tomorrow, and if six of the lawmakers who withheld their support come around, Merz will take over from lame duck Olaf Scholz. That said, this is the first time since Germany reestablished democratic control after World War II that a leader has failed to win the parliament’s backing on the first round.
The culprits? Likely coalition lawmakers who disagree with Merz’s plan to take on significant debt to boost defense capacity and revitalize economic growth.
Merz’s far-right rivals pounced on him. Alternative for Germany leader Alice Weidel said the failure shows the incoming coalition’s “weak foundations” and called for fresh elections. Her party came in second place in February and some polls now show that she would win a new contest.
Looking forward: Ultimately, experts still expect Merz to prevail in becoming chancellor, but Tuesday’s stunning loss will damage his political credibility and mandate to govern. If, however, the Bundestag fails to elect a new chancellor within 14 days, Germany could be on the road to another election.
A man rides a scooter past a giant screen showing news footage of Chinese President Xi Jinping attending a Chinese Communist Party politburo meeting, in Beijing, China December 9, 2024.
China’s vows to pump up its economy — with one eye on Trump’s tariffs
China’s Politburo — the top leadership cabinet — said Monday it would take “more proactive” fiscal measures and loosen up its monetary policy in 2025 as it aims to boost domestic consumption. The body met ahead of the annual Central Economic Work Conference, reportedly scheduled for Wednesday and Thursday, at which the country’s economic policy priorities for the coming year are laid out — and one of those priorities is gearing up for Donald Trump.
The background: China has experienced over three years of economic turmoil that originated in the all-important property market, where most Chinese households keep their long-term savings. Defaults and halted constructions from major developers dovetailed with a local government debt crunch to place tremendous headwinds against economic growth, leading to stock market turbulence and high youth unemployment.
Beijing has attempted to goose growth with monetary easing (aka lowering central bank interest rates) since September and unveiled a $1.4 trillion debt package aimed at stabilizing growth in November. But kickstarting the economic engine is proving difficult.
Watch out for Trump: The incoming US president is promising to hike tariffs on Chinese goods, having mentioned figures as high as 60% on the campaign trail. While tariffs are a laborious way to cut off one’s nose to spite one’s face and are likely to hurt the US economy, Beijing’s exports are one of the few sectors doing well right now. Getting to a stable footing before the trade barriers go up must be a high priority.
China isn’t just playing defense though: US chip-making giant NVIDIA saw its stock slide 3% on Monday after news broke that Beijing was opening an antitrust investigation. NVIDIA has been a darling of investors during the AI boom, with shares nearly tripling in value this year — but this shot across the bows is a sign of what could come.United States President Joe Biden makes a statement on the general election.
Hard Numbers: Biden addresses Trump’s win, Earth keeps getting hotter, Starvation imminent in Myanmar, US forgives Somalia’s debt
74: In the wake of Kamala Harris’ loss in the presidential election, President Joe Biden addressed the country from the White House Rose Garden on Thursday, 74 days before he’s due to hand the keys back to Donald Trump. In his speech, Biden stressed that he would ensure a peaceful transition of power, called for unity, and said that he hoped the result would restore Americans’ faith in election integrity.
2.5: For the second year in a row, scientists at the European Climate Agency report that Earth is the hottest it’s ever been, breaking 1.5 degrees Celsius of warming compared to preindustrial averages. While factors like El Niño and volcanic eruptions are playing a part, they say the data clearly shows an unprecedented sequence of record-breaking temperatures that would be impossible without the levels of greenhouse gasses being emitted by humans.
2 million: Two million people in Myanmar’s Rakhine state, which borders Bangladesh, are on the brink of starvation because of trade blockades and violence that have led to a “total economic collapse,” according to the UN. People in the region are seeing their incomes plummet because of the violence while food prices are soaring due to junta-enforced trade blockades, creating a deadly cycle of conflict and economic crisis.
1.14 billion: The US has decided to cancel $1.14 billion of Somalia’s outstanding loans, a quarter of the country’s outstanding debt. The government has suffered under the crippling bill, borrowed under the era of Siad Barre’s military dictatorship, that went unpaid during the three decades of civil war that followed its collapse in the early 1990s. The forgiveness was part of an IMF and World Bank program that aims to relieve the poorest countries of unsustainable debt levels.
IMF Managing Director Kristalina Georgieva speaks to the media during an International Monetary and Financial Committee press briefing on Friday, Oct. 25, 2024.
IMF and World Bank close annual meetings with urgent call for fragile economies
“The world now faces a low-growth, high-debt trajectory,” said Georgieva. Governments in developing countries now face a “trilemma” of needing to increase spending – sometimes by as much as 14% – while being unable to raise tax revenues as they face fiscal buffers exhausted by the COVID-19 pandemic and its aftermath. And she acknowledged that the Fund’s projections include “a severe, but plausible scenario” in which global public debt could exceed the baseline by some 20%.
That risk is compounded by growing political opposition to free trade, which Georgieva characterized as a “retreat from global economic integration driven by both national security concerns and the anger of those who lost out.” Reduced trade will hamper growth and push countries to borrow more to make up the difference.
These pressures pose the highest risk for sub-Saharan Africa, already struggling with high debt and lacking the levels of growth necessary to get ahead. Speaking at a separate event on Friday, the IMF’s Africa Director Abebe Selassie said the region will likely grow by 4.2% in 2025, well below the 6-7% growth rates enjoyed previously. “This pace is not sufficient to significantly reduce poverty or to recover ground lost in recent years, let alone address the substantial developmental challenges ahead,” he said.
So what can be done? World Bank President Ajay Banga gave an introspective prescription at the closing plenary: Simplify, simplify, simplify. “Development delayed is development denied,” he explained while outlining progress on reducing the time the World Bank takes to approve projects from an average of 19 to 12 months, and faster where possible. The Bank has made a substantial improvement — they’re down to 16 months — but time is money, as the saying goes, and more haste will make the Bank’s programs more effective in Banga’s view.
On the IMF’s side (often more concerned with stabilization than development), Georgieva outlined three tools: rebuilding fiscal buffers in vulnerable economies, investing in growth that can ease debt burdens, and taking a cooperative approach across borders.
Of course, much depends on factors outside the control of these development finance institutions. We’re watching how the results of the US election, the roiling debt and property market problems in China, and the conflicts in Ukraine, the Levant, Sudan, and elsewhere affect the outlook.
Skyline von Bangkok Skyline von Bangkok. Panorama von Chinatown. Bangkok, Changwat Bangkok, Thailand, 26.01.2024
Thailand set to hand out $13 billion to citizens
Thai Prime Minister Srettha Thavisin announced Monday that citizens will be able to register for a digital wallet handout starting in August that will give about $275 each to 50 million people. It’s the latest in a series of populist policies put forward by the ruling Pheu Thai party, which cut a deal with the military to take power last year.
The idea is to offer folks an incentive to download the new digital wallet. Digital currencies are issued by a country’s central bank and function just like the fiat money you use every day. There are pilot programs in the EU, China, India, Saudi Arabia, and many other countries.
The government claims this handout, equivalent to roughly 66% of the average monthly income in Thailand, will help grow the economy by about 1.6%. The program is restricted to Thais who earn less than $23,000 a year (about three-quarters of the population) and they’ll have to spend it in small shops near their homes. But the Bank of Thailand has concerns – as do many economists, as it will push the debt-to-GPD ratio past 66% and increase the fiscal deficit.
That may be a risk Srettha is willing to run, considering his approval rate hovers around 12.85%. His efforts to pass popular policy, including a recriminalization of cannabis, and legalization of same-sex marriage, have done little to erase the stain Pheu Thai acquired by siding with the military to push out the Move Forward party, who won the largest share of seats in 2023. We are watching whether handing out cash can reverse his slide.A man walks in the Central Business District on a rainy day, in Beijing, China, July 12, 2023.
China picks a debt whiz to run its finances
Beijing announced that Lan Fo’an, currently provincial party secretary in Shanxi, will succeed Liu Kun at the Ministry of Finance, signaling a commitment to tackling the country’s mounting debt problem. China’s debt-to-GDP ratio has reached 280%, most of it held by local governments who borrowed heavily to fund development projects.
Lan has a reputation for being a whiz at reducing debt accumulation from his time as governor in Shanxi. He was praised by state media at the time for helping the province transform from a coal-mining to a manufacturing- and services-based economy even though Shanxi’s overall economic growth lagged behind the national average.
That’s just the kind of CV they’re looking for in Beijing these days. Lan is likely to continue his predecessor’s efforts to audit local government debt and push them to manage their own problems — but bailouts may be tempting if defaults spike.
One more thing: Don’t confuse Finance Minister Liu’s retirement with the recent ouster of former Foreign Minister Qin Gang and some military figures. Liu is above the normal retirement age for high party officials and was kept on after the National People's Congress session in March to signal policy stability. Lan will probably succeed him at the next National People’s Congress Standing Committee session before the end of the year.
Explaining the long history of US debt (& which other countries are saddled with debt)
Sovereign debt is, simply put, the money a country owes to its creditors around the world. Ian Bremmer explains a few more fun facts about debt on GZERO World.
Good old Ben Franklin once quipped, “Rather go to bed without dinner than to rise in debt.” Well, America didn’t exactly heed that advice, because never in its history did the US hit the hay hungry. In fact, the nation ended the Revolutionary War years about $75 million in debt.
US debt hit the billions by the time the Civil War was over, and was at $22 billion after World War One.
Nowadays, we’re talking trillions with a “T” of course, and public debt was at 115% of GDP last year in America. You don’t have to be an accountant to know…there’s a fair amount of red ink on that balance sheet.
America isn’t alone on Debtors Island. Based on the International Monetary Fund’s 2021 data on the top six global economies in 2021, Japan leads the pack with debt standing at 221 percent of their GDP, followed by Italy, and then the U.S-of A. The UK comes in 4th, followed by France and Germany. China is probably somewhere high in that mix, but the IMF can’t say for sure because, unsurprisingly, Beijing isn’t too forthcoming with their data.
And if the COVID pandemic taught us anything, it’s that when China pretends a problem doesn’t exist, everything works out just fine.
Watch the GZERO World episode: Sen. Mitt Romney on DC dysfunction, Russian attacks, and banning TikTok
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