Global uncertainty and local risk
Uncertainty is the key term when it comes to the economic outlook. While there are still significant domestic challenges, the biggest concerns stem from the global scenario, reflecting the radical shift in U.S. policy with the beginning of Trump’s second administration.
Although changes in trade policy were expected, particularly the introduction and increase of import tariffs, the actual impacts were not as anticipated.
It was assumed that import duties, by reducing the supply of dollars (used to pay them), would lead to an appreciation of the U.S. currency against global currencies. At the same time, their effect of raising domestic prices would make monetary policy more cautious, as the Federal Reserve would need to assess whether such increases would be limited to affected goods (in which case no policy change would be necessary) or if they would spill over to other sectors, requiring a tighter monetary policy than originally expected.
Although these factors remain, the back-and-forth regarding tariff implementation had the opposite effect. Without clarity on which tariff structure will prevail, businesses cannot organize their supply chains, leading to reduced investment plans.
Now read on...
Register to sample a report