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Buildings seen from Lake Ontario along the skyline of the city of Toronto, Ontario, Canada, on July 01, 2023.
Bank of Canada slashes interest rate, warns of tariffs
The Bank of Canada cut interest rates by half a point to 3.25% on Wednesday to kickstart some growth in the Canadian economy. Gov. Tiff Macklem indicated that further cuts would be more gradual.
Macklem said the outlook for the Canadian economy was uncertain, in part because President Donald Trump has threatened to impose tariffs on Canadian imports.
“If those things happen, they will have a big impact on the Canadian economy and will dramatically impact our forecast,” he said. “Let’s hope that does not happen.”
Bank of Nova Scotia economist Derek Holtsaid the rate cut was so steep that it seemed “like an apology note” after slowing the economy with earlier inflation-fighting increases.
Canada's economy has been shrinking on a per capita basis for six quarters, with most growth associated by an immigration-driven population increase. Figures released last Friday showed the unemployment rate rose to 6.8%, up from 6.5%.
But Macklem said Canada is not in a recession: “We’ve not seen widespread lay-offs or widespread job losses typically seen in a recession.”
Justin Trudeau welcomed the rate cut, clearly hoping to avoid more economic bad news while his Conservative opponents prosecute him as a hapless economic leader.
Can Trump's tariff plan boost the US economy?
President-elect Donald Trump has made no secret of his love of tariffs, vowing steep import taxes on China, Mexico, Canada, and almost every product that crosses the US border on his first day in office. Will they boost US jobs and manufacturing, as Trump promises, or lead to rising inflation, as many economists warn? On GZERO World, Oren Cass, founder and chief economist at conservative think tank American Compass, joins Ian Bremmer for an in-depth discussion about Trump’s tariff plan and the future of US-China trade policy. Cass believes that tariffs are a way to level the playing field with China, which he says “flouts international rules and any concept of a free market.” He says tariffs can help correct global trade imbalances and doesn’t believe they’ll lead to a dramatic spike in consumer prices.
“When you raise money through a tariff, you don’t set that money on fire. It’s also tax revenue,” Cass explains, “We have a $2 trillion deficit. If I told you that there was some other tax that was going to help reduce the deficit, you’d probably say that would help reign inflation in.”
Watch full episode: The case for Trump's tariffs
GZERO World with Ian Bremmer, the award-winning weekly global affairs series, airs nationwide on US public television stations (check local listings).
New digital episodes of GZERO World are released every Monday on YouTube. Don't miss an episode: subscribe to GZERO's YouTube channel and turn on notifications (🔔).
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.
The case for Trump's tariffs
What will President-Elect Donald Trump’s election win mean for the US economy? After years of inflation and stagnating wage growth, millions of voters elected Trump off the back of his promise to usher in a “golden age of America.” Trump has vowed to raise tariffs, slash business regulation, and deport millions of undocumented immigrants, policies he says will put Americans first. But what will that mean practically for workers and consumers? On GZERO World, Ian Bremmer is joined by Oren Cass, the founder and chief economist of the conservative think tank American Compass, who thinks Trump’s tariff plan will be a step in the right direction. Many economists argue that Trump's tariff plans will raise consumer prices and spark a global trade war, but Cass argues they're a necessary correction that will incentivize domestic manufacturing, reduce the deficit, and counter China’s unfair trade practices.
“If you actually believe that making things in America matters, then we are going to have to find a way to put a thumb on the scale for getting more of that investment back here,” Cass explains, “And I think that's what a tariff can help do.”
GZERO World with Ian Bremmer, the award-winning weekly global affairs series, airs nationwide on US public television stations (check local listings).
New digital episodes of GZERO World are released every Monday on YouTube. Don't miss an episode: subscribe to GZERO's YouTube channel and turn on notifications (🔔).
How Trump's tariffs could help (or hurt) the US economy
GZERO World with Ian Bremmer, the award-winning weekly global affairs series, airs nationwide on US public television stations (check local listings).
New digital episodes of GZERO World are released every Monday on YouTube. Don't miss an episode: subscribe to GZERO's YouTube channel and turn on notifications (🔔).
Graphic Truth: De massive problem with “de minimis” packages
Supporters of the current threshold say it streamlines trade, particularly in a world in which e-commerce is soaring. But critics point out that the US threshold is way higher than anyone else’s, and that foreign exporters often exploit that to evade import duties and inspections.
Chinese e-commerce exporters in particular use de minimis rules to skirt US tariffs, while drug cartels ship fentanyl to the US in a similar way. Someone even tried to import a helicopter from Venezuela by breaking it up into small packages labeled as “personal effects.”
The Biden administration recently cracked down on Chinese exporters’ abuse of de minimis thresholds, and the incoming Trump administration is certain to hit this issue even harder.
Here’s a snapshot of how the US threshold compares globally, along with a look at the massive rise in de minimis shipments to the US over the past 10 years.
Trump's huge holiday tariff threat
The incoming president takes on the US' biggest trade partner.
Watch more PUPPET REGIME!
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U.S. President Donald Trump talks with Canada's Prime Minister Justin Trudeau during a North Atlantic Treaty Organization Plenary Session at the NATO summit in Watford, Britain, December 4, 2019.
Hard Numbers: Trump says Canada should join the US, Ireland’s new government braces for Trump tariffs, Research confirms Kremlin abducted Ukrainian children, Vietnam real-estate tycoon faces death sentence for fraud
1,000: The winners of Ireland’s election last week are scrambling to put together a new coalition government before Donald Trump takes office in January, expediting a process that normally takes months. The rush comes from Irish lawmakers recognizing that they must form a government strong enough to withstand the threat of Trump’s tariffs and protectionist rhetoric. The nearly 1,000 American multinational companies operating in Ireland are by far the biggest contributors to the state’s income and corporate tax bases, leaving the Emerald Isle highly exposed if American companies begin reshoring to avoid tariffs.
314: Research from Yale’s School of Public Health revealed on Tuesday that Russia took 314 children from occupied Ukrainian territories, stripped them of their Ukrainian identity, and put them in the custody of Russian families using the Kremlin’s aircraft and funds. The report asserts that the deportations were part of a systemic, Putin-backed program to “Russify” Ukrainian children.
12.5 billion: A Vietnamese court on Tuesday upheld the death sentence for Truong My Lan, a real estate tycoon convicted of embezzling $12.5 billion. It offered to downgrade the sentence to life in prison if she reimbursed $11 billion, but her lawyers argued she had already repaid the money. The scale of Lan’s deception rattled Vietnam’s economic outlook earlier this year, spooking foreign investors at a time when Vietnam was trying to position itself as an alternative for businesses moving their supply chains away from China.