US EXCEPTIONALISM IN QUESTION
Whereas Mr Powell calmed nerves by taking part in down the probabilities of a US recession and hinting that the Fed stays heading in the right direction for price cuts this 12 months, the query is whether or not such cuts may have the identical impression on the financial system the place coverage uncertainty triumphs over geopolitical and commerce norms.
In the meantime, falling shopper sentiment and spending, potential slowdown in hirings, falling manufacturing facility output, diminishing enterprise confidence and rising import costs threaten to take the shine off “US exceptionalism”.
That is vital as a result of for the final 80 years, it’s this so-called “exceptionalism” that has fuelled the expansion of quite a few economies world wide. Extra than simply US navy dominance, it’s US “financial exceptionalism” and dominance that has supported economies from Peru to Poland, Jamaica to Japan, and Austria to Australia. Even China lifted itself on the again of US shopper demand.
For now, projections of an outright US recession appear considerably exaggerated, given the intrinsic energy of that financial system. That mentioned, economists had as early as mid-2024 projected a US financial slowdown someday later this 12 months. Mr Trump’s muscular commerce insurance policies may merely speed up and intensify the method.
On Mar 13, the Organisation for Financial Co-operation and Improvement (OECD) printed its interim report Steering Via Uncertainty, the place it warned of a softening of global growth prospects.
Whereas the organisation nonetheless expects the US financial system to develop by 2.2 per cent this 12 months, this development may sluggish to 1.6 per cent in 2026 as uncertainty and tariffs play out its full results.
Canada and Mexico, the topic of US tariffs, will see better impression, OECD reckons. OECD took down Canada’s development to 0.7 per cent this 12 months and subsequent, whereas Mexico is anticipated to slip right into a recession. China, dealing with 20 per cent tariffs whereas dealing with an ailing financial system, will wrestle.
However Europe, regardless of dealing with the specter of larger sanctions, may see a revitalisation, if authorities stimulus (Germany, Europe’s largest financial system, simply introduced a large €500 billion (US$540 billion) stimulus package deal) and elevated defence spending have their meant impact.
