FT News Briefing: April 1st
Trade tariffs and inflation squeeze global markets amid stock rebound
US stocks rallied yesterday after President Trump said that when it comes to Iran, 'the hard part is done'. The S&P 500 ended the day nearly 3 per cent higher. The Nasdaq composite jumped close to 4 per cent. They had their biggest one-day gains in more than a month.
Data from the New York Federal Reserve showed foreign central banks have slashed their holdings of Treasuries. They're at their lowest level since 2012. One analyst told the FT that oil-importing countries like Turkey and India are looking to sell US government debt to afford the higher prices of dollar-denominated oil.
The Middle East conflict created an energy shock around the world, and yesterday we got a glimpse of what's doing to Europe. A preliminary estimate showed that Eurozone inflation jumped to two and a half per cent in March, a little more than half a per cent higher than what we saw in February and above the European Central Bank's 2 per cent target.
Interview with Chris Giles
Chris Giles is the FT's economics commentator, and he joins me now to discuss this.
Marc Filippino: So I have to assume that this is causing a bit of a headache for the ECB.
Chris Giles: It's a real pain for the ECB because in Europe, which is a net energy importer, imports both oil and natural gas. Higher prices just means less money for everything else, so it's just means some form of lower growth, higher inflation.
Marc Filippino: Yeah, and actually you were at a conference in Frankfurt last week where ECB President Christine Lagarde spoke.
Chris Giles: Yeah, absolutely. So all the scenarios are bad, but the best one is a short, sharp shock. So energy prices go up and they quickly come down again.
Tariffs and Their Impact on Businesses
When US President Donald Trump announced a sweeping and aggressive set of tariffs last year, it ushered in a new era of uncertainty for businesses.
Interview with Eva St Clair and Rebecca Melsky
Marc Filippino: Hi. I'm Marc.
Eva St Clair: Welcome to my house. Nice to meet you.
Eva St Clair's house is on a quiet street in suburban Maryland, right outside of Washington, DC. She and Rebecca Melsky started Princess Awesome over 10 years ago. They make quirky clothing for children and adults with things like dinosaurs and math formulas on them.
Marc Filippino: Princess Awesome manufactures their clothes at factories around the world. So it was hit really hard by Trump's tariffs. The company had to pay a lot more to the US government when they subsequently imported the garments.
Eva St Clair: And then April 2nd, 2019 hit and all hell broke loose. It was a very bad day.
Rebecca Melsky: Yes, and they shared our experience and our email with other people, which meant that within a couple days we had been contacted by the Pacific Legal Foundation, who asked us, would you like to join the lawsuit that we're filing against the IEEPA tariffs?
Marc Filippino: How did you absorb the costs without passing them on to customers?
Eva St Clair: We cut our salaries, we cut production, and actually. The moment that we're experiencing the repercussions from that is right now. We are at our lowest inventory levels in 10 years.
Conclusion
The Trump administration might look at your situation and say, this is the point of the tariffs, right? To make it so expensive to manufacture overseas that you bring it back to the US.
Rebecca Melsky: Yeah. How? How is that going to happen? First of all, no one knows how to make clothes here, so if we want somebody to run our factory for us, we would have to import that person from another country, and we would have to import all of the machinery that that person would be using to run that factory.
You could read more on all these stories for free when you click the links in our show notes, including a link to what we've run in our tariffs series so far. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.
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