Hello there,
This newsletter is a day early, to suit my vacation schedule. I hope you don't mind the intrusion.
Speaking of intrusions, spare a thought for Japan's economic revitalisation minister. thought he was meeting U.S. Treasury Secretary Scott Bessent at trade talks in DC today. Now President Donald Trump says he is going to join them.
The surprise turn shows how keen Trump is to oversee negotiations and use them to address a whole range of issues, including the cost of hosting U.S. troops in Japan. Tokyo had hoped to limit the scope of the discussions to trade and investment matters.
Japan is one of the first countries to begin face-to-face negotiations since Trump announced sweeping duties on dozens of countries - both friend and foe - earlier this month. Its progress will be closely watched by other trading partners, lining up to cut deals. Currency investors will also be watching proceedings: Bessent wants to discuss exchange rates, something that could add further volatility to the yen.
One country looking to work the angles with Trump is , the topic of last week's Reuters Econ World pod. Trump's probe into potential new tariffs on all U.S. imports creates an opportunity for Canberra and other friendly supplier nations. The order is seen as an attempt to pressure industry leader China, and given that Washington has previously flagged potential tariff carve outs for energy and other minerals that are not available domestically, it could offer the possibility of exemptions for Australia.
While countries prepare their negotiating stances, the economic forecasts are getting gloomier. The sharply cut its forecast for global merchandise trade from solid growth to a decline on Wednesday, saying further and spillover effects could lead to the heaviest slump since the height of the COVID pandemic.
Getting ahead of the tariffs seems to be the name of the game for U.S. consumers with money to spend. U.S. surged in March as households boosted purchases of cars to try and beat the tariffs. Consumers are also stocking up on other imported goods. The spending is being driven by high-income households with low-income households struggling.
With the stock market selling off, there are concerns high-income households could start retrenching if the values of their investment portfolios continue to shrink. "Nice to have" discretionary services spending already eased in March, according to Bank of America data. That's a warning sign as discretionary spending, which is mostly on services, is the main engine of the U.S. economy.
Speaking of the stock market, a U.S. decision to impose strict restrictions on is battering global chip stocks. Nvidia says it will take $5.5 billion in charges after the government limited exports of its H20 artificial intelligence chip to China, a key market for one of its most popular chips. expects charges of up to $800 million and Dutch chip-making tools giant raised doubts about its outlook. ASML also said it was ready to pass most of the tariff costs onto customers.
The U.S. moves on chips and critical minerals have put the dollar back under pressure. Trump's shifting trade policy is raising questions about the greenback's safe-haven status but is this really a "crisis of confidence" or a temporary bout of instability? We get into that on the latest episode of Reuters Econ World podcast. Listen here.
I am off next week so our European Economics Editor Mark John will be guest editing this newsletter.
Before I go to over-indulge on chocolate, I have a favour to ask. The pod has been nominated for a in two categories, and I would really appreciate your vote. It's for the pod's "Swiftonomics" episode. If you like what you hear, please vote and before midnight PT on April 17.
Wish us luck!
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