Here's our summary of key economic events over the weekend that affect New Zealand with news about the start of a tariff trade war, a reprise of a 1930s effort, also started by the US, and one that ended badly for everyone.
The week ahead was supposed to be basically about jobs, both here and in the US with our HLFS data for December out on Thursday, and the US non-farm payrolls report out for January on Saturday. But Trump's imposition of 25% tariffs on Canada and Mexico, and 10% tariffs on China will no doubt dominate the news with its consequences.
However there will be other economic data news coming, including key Wall Street earnings reports, January PMIs, central bank decisions from India and the UK, and China's financial markets will return to work after their CNY break on Wednesday. Also, Chinese buyers may be back at Wednesday's GDT dairy auction on Wednesday, which will be an important event after last week's sharp run-up in the WMP price at the Pulse event.
And don't forget, this will be an interrupted week with a public holiday in New Zealand on Thursday, Waitangi Day. So Friday is likely to be a day many people also take off to get a four-day weekend. (But not us, of course.)
The big news over the weekend was the US imposing 25% tariffs on its neighbours Canada and Mexico. Worryingly, these mean the US has unilaterally broken its (Trump-imposed) CUSMA (or NAFTA 2.0) trade treaty obligations. And more of an issue for any country contemplating making a treaty with the new US Administration is that the basis for these new tariffs are essentially jingoistic and trumped-up, that pretend anecdotes are "common sense" when they are just raw self-servicing prejudice.
Mexico and Canada hit back immediately. Canada also imposed a 10% tariff on their oil exports to the US. China is going through the WTO dispute process.
An easy way to keep an eye on US inflation is to watch the daily US petrol price. As at today it is US$3.10/gal. We will check back regularly to watch how tariffs impact that. Of course demand will impact that too.
How will this affect New Zealand? Here are some early thoughts.
Earlier the alternate US inflation measure, "the one the Fed watches", their personal consumption expenditures price index, rose +0.3% in December from November, the highest gain in eight months, but it was the rise expected. That means their year-on-year PCE inflation came in at 2.6% and its highest in seven months by this measure. The new tariffs are likely to mean higher inflation, something Trump acknowledged in a Fox interview.
There were no surprises in any of the income, consumption, or savings data in the PCE release. This may turn out to be the low point in their inflation cycle.
The January Chicago PMI recovered from the weak December result on the back of better new order inflows and higher production levels. But it remains in deep contraction territory. The outlook responses in this regional survey weren't very bright.
In Canada, apart from the new tariffs from the US, they are wrestling with what the 25 year 'extreme' difference means between their policy interest rate, 3.00% and the US Fed's "4.25% to 4.50%". In market terms that is a 140 bps discount the Canadians carry. It has been thought that +/-100 bps is in the comfort zone for financial markets, so we may start to see reactions and implications. There could be lessons for other economies, although Canada may be facing extra pressures from the tariffs.
Japanese industrial production rose in December from November and that limited the year-on-year decrease to less than expected.
Japanese retail sales rose +3.7% in December from the same month in 2023, up from a +2.8% gain in November, and better than market expectations of a +3.2% rise. This is the 33rd straight month of expansion in retail sales and the fastest growth since June 2024. Rising pay levels are getting the credit for the expansion.
In India, a new Union (national) Budget has cut income taxes (see pages 28 and 29), in the hope it will arrest the cooling of their economic activity by enhancing domestic demand. Those earning about NZ$24,000 pa will pay no tax, and the tax bands above that have been indexed higher. They will still run a deficit of -4.4% of GDP if they can maintain a +6.8% growth rate. They will pay for the tax cuts by restraining their spend on updating their infrastructure. India also cut tariffs.
In Argentina, their central bank cut its policy interest rate by -300 bps to 29% on Friday NZT, as inflation eased again. But annual inflation in Argentina was still at 118% in December, the softest increase since July 2023, down from 166% in November.
EU inflation expectations rose to 2.8% in the ECB's December survey, taking it back to early 2024 levels. In the ECB MPS, they noted there is still more work to do to quash these expectations. Actual EU inflation ended 2024 at 2.7% and it too is rising.
Aussie producer prices rose +3.7% in December from a year ago, but even if that is high, it was their slowest rise since early 2021.
The UST 10yr yield is at 4.54%, up +3 bps from Saturday at this time. The key 2-10 yield curve is steeper at +34 bps. Their 1-5 curve is also slightly steeper at +18 bps. And their 3 mth-10yr curve is now at +22 bps and steeper than Saturday. The Australian 10 year bond yield starts today over 4.43% and down -2 bps. The China 10 year bond rate is unchanged (while they are on holiday) at 1.64%. The NZ Government 10 year bond rate is now at 4.59%, unchanged from Saturday.
The price of gold will start today at US$2799/oz and down -US$10 from Saturday and off its all-time high.
Oil prices are virtually unchanged at just on US$72.50/bbl in the US and the international Brent price is now US$75.50/bbl and holding the Saturday retreat.
The Kiwi dollar is now at 56.4 USc and down -40 bps from this time Saturday. Against the Aussie we are down -10 bps at 90.7 AUc. Against the euro we are little-changed at just under 54.4 euro cents. That all means our TWI-5 starts today just on 67.1, and down -10 bps from Saturday.
The bitcoin price starts today at US$98,142 and down a sharp -6.5% from this time Saturday. Apparently isolationism and tariffs are not good for crypto. Volatility over the past 24 hours has been moderate at +/- 2.1%.
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125 Comments
RIP markets this week.
This may be the black swan.
American people were expecting Trump to deliver on his promise that he would make them better off. And soon too. Majority of commentators know these measures will take everyday money out of everyday pockets. That’s Joe Blow’s family, not Richie Rich’s. Inflation was already doing that and Biden’s lot got blamed and booted. Trump has put “things” on a tightrope over a canyon and a big wind is building.
'essentially jingoistic and trumped-up, that pretend anecdotes are "common sense" when they are just raw self-servicing prejudice.'
When was the US anything else?
Monroe Doctrine on, smiling face gloved fist. Admittedly, there was the presumption that there was a brain behind it...
As you say, growth.Imperialism is imperative. The USA didn’t really feature that much internationally until post WW1. But there were harbingers. 1812, invasion of Canada. Secretary of State Seward wanted to invade a Sth American location as distraction to prevent the civil war but anyway after that, he got Alaska and in a more favourable political wind would have got Greenland & Iceland. Imperialism really didn’t start in earnest until under McKinley with the undeserved declaration of war on Spain, hence Cuba, the Philippines and before that of course the dubious takeover of Hawaii. Based on that, under the new captain, it looks like full steam ahead doesn’t it.
International US imperialism may not have begun in earnest until post WW1, but it was already happening domestically since 1492.
Imperialism is all we've known.
What's it really growing?
Same goes for "economic growth".
Now instead of global nation empires, it's all about personal empires.
No wish to split hairs but as posted, McKinley was pre WW1. More of interest though was the presence then of W R Hearst a public figure in his day not unlike Trump today, with a dose of Murdoch. It was largely Hearst’s media saturation of the falsehood of USS the Maine blowing up in Havana, which was in fact self inflicted, that forced McKinley to declare war on Spain. Similar to Trump, Hearst ran for the presidency, but didn’t get the Dems nomination and McKinley was returned in 1904. Interestingly, Trump in his inauguration, speech extolled the virtues of McKinley.
Here's an interesting question; while Trump is busy imposing tariffs on imports, how much of the raw resources his rejuvenated manufacturing will need are actually available from US controlled territories? I note the aluminium from the bluff smelter mostly goes to the US, although Rio Tinto is British - Australian.
In off shoring a great bulk of its manufacturing the USA has long lost industrial plant and skill. That is showing up in the like of Boeing and naval dockyards. As well there are minerals and componentry that they never have had. Based on that the success of the great internal rebuild looks highly shaky and certainly not fast.
I wonder how much more expensive onshoring will be if the current generation refuse to work in unsafe environments with unsafe practises? Or will they just onshore the manufacturing and onshore the workforce at the same time (like we do here)?
The tarrifs are being imposed to force action on stopping fentanyl. The biggest killer of under 50’s in the USA.
While Mexico and China are the primary source countries for fentanyl and fentanyl-related substances trafficked directly into the United States, India is emerging as a source for finished fentanyl powder and fentanyl precursor chemicals.
How much fentanyl comes into the USA from Canada?
Probably zero, they have a large bridge that just about everything crosses into the USA so it wouldn't be hard to monitor.
Please explain to me like I'm a 5 year old how tariffs across the board stop fentanyl use ? Sure if you put a 50% tariff directly on fentanyl or the precursors, sure. They are putting tariffs on to try and get businesses worldwide to move back to the USA, but as pointed out it takes a minimum of 24 months to build a large plant and then staff it so Trump will be gone and so will the tariffs by then.
They don't, it'll just push up the price and/or migrate to alternatives.
Part of the reason we got meth is because the war on drugs restricted the supply of cocaine.
Yep, and that just got turned around here too. I note on the weekend media reports that cocaine is finding it's way back in in large quantities to undercut meth. They've clearly found a new way past Customs. Until we find out what it is and how to stop it, cocaine will still rank highly.
They dont, it is just an excuse so Trump can bypass congress, which actually normally has the authority to set trade terms
It's hard to believe Trump will let this continue for any length of time. Likely using it to get some quick appeasement wins from trade partners, if he keeps it up, he will be shooting himself and his supporters in the feet.
A very rational view point. Possibly doesn't apply .
Ripping up their Free Trade Agreement to get some quick wins is a very shortsighted way of behaving. The post Trump US administrations are going to have to rebuild a lot of their reputation and soft power that is being quickly destroyed
The whole world is going to struggle to get back to peaceful cooperation where invasion of your neighbour is considered a 'no-go'.
Long term this means much, much higher military budgets as countries need to protect themselves without a world order to do so. That means less spending on the things that actually make life good.
So you're saying the USA's military industrial complex is in for a boom period? Who'd have thought that was a Trump goal, ay?
The Orange Swan event.
Get back to peaceful co-operation?
When did we ever have it? Especially when competition is the narrative, which means beating your competitors by any means.
We have just enjoyed a few decades of peace dividend with very low conflict across the world (obviously not zero, but inter-country wars were very rare). This is how so much of the West got away with 1-2% of GDP being spent on their militaries and instead invested in their populations - education, healthcare etc.
Looks like this will slowly unwind. Healthcare and education and other public priorities will be slowly relegated as military spending becomes more and more important to protect countries against their neighbours.
The US and allies have been a global policeman for a while now - when they step back everyone else has to step up.
The US essentially chose to be the Global Policeman I suggest. It was rooted in self interest in maintaining their hegemonic position of western nations. It was in this period when the US was truly 'great' if it could ever be described as such. Trump doesn't seem to understand that little bit.
What he is doing now is just bullying. Vance or Rubio made a comment about the US being respected again, but he didn't realise that it was fear, not respect. The US was respected when it recognised it was part of a larger world community and within some limits tolerated some other western countries challenging some of the things it did. But it also overstepped the mark on a few occasions too.
Another aspect is that possibly a few ME nations, and non-democracies may have seen the US as 'weak', and used that perspective to challenge it?
The US is weaker than ever. Just wait for the next month's $TRUMP auction and you can bribe the President from the comfort of your own Presidential Palace - corruption has never been easier.
I'd be more concerned about the lawless removal of oversight from the DOJ and FBI
Draining the swamp - for a free run at playing gangster overlord and running roughshod over the US constitution and US citizens
- First wave of inflation: Supply chain disruptions.
- Second wave of inflation: Countries imposing taxes on each other.
Will it lead to tariffs worldwide or just for the US? It could mean cheaper prices for us if China etc can’t sell it in US and dump it here.
Krugman on Bloomberg says it will be worldwide:
Krugman says Trump's tariffs are like "throwing sand in the gears of international commerce and manufacturing."
Trade blocks that exclude the US? I see that as a real possibility.
Note that Canada has put it's own tariffs in place to counter Trump's. When US exports dry up, what then?
Jobs get lost --> economic contraction combined with massive cutbacks in consumption spending --> US economy in deep do-do. Even more so if we see massive loan defaults and financial collapses. But fret not ... that will come much later. But the early signs, e.g. gas prices & other product price rises will be swift. And a reduction in consumer spending might likewise be swift. We may see corporate debt start to rise if this lasts for more than a month or two as firms try to 'hang on'.
It will be comical (kind of) to watch central banks and the commentariat dealing with rising prices while their economies are demonstrably running with ample spare capacity. Maybe we will take another step away from the idiocy of 'prices can't rise if we hike rates, bankrupt more businesses and throw another stadium full of people on the dole'.
'prices can't rise if we hike rates, bankrupt more businesses and throw another stadium full of people on the dole'.
I don't think that's the mantra, just that cash rates are one of only few tools central banks have to influence (not control) inflation. Obviously, if a natural disaster wiped out say, China, central banks are incapable of countering the cost implications.
It will depend upon the timeframe you view it over....inflation may lead to deflation.
That's not your mantra, no. But, I regularly have this debate with self-celebrating, investopedia-educated, know-littles who genuinely believe that there is no inflationary pressure that monetary policy can't cure. If we see CPI-measured inflation creeping back up in the next few months, we will no doubt see comments to that effect on this very website (above and within the comments section).
I’m probably one of those know-little Investopedia types, but if central banks wanted to stop inflation in its tracks, wouldn’t they just raise rates like Paul Volcker and cut the money supply? Slamming the brakes in a deflationary way.
Perhaps in the same way you can stop a car from skidding with a well-placed brick wall?
There is a pretty good chance that those self-celebrating, investopedia-educated, know-littles are right though. Have a look at historical charts of inflation. Since we been using the OCR to control inflation (1999) it has been much more stable than beforehand when 10% plus inflation was a fairly common event. Yes it could be a fluke or lucky timing, or it could be that the academics got it right.
Have a look here and click max: https://tradingeconomics.com/new-zealand/inflation-cpi
Correlation is not necessarily causation. Sorry, JFoe is 100% right IMO.
More than 20 years of fluky correlation...
My view is that relative global stability (and China) gave us price stability. Monetary policy failed its first real test in 2008 when rate hikes contributed to a crash in the global economy. Looser monetary policy then failed to stimulate the economy in 2009 (fiscal took over). The next test came in 2021 when energy prices spiked, and, again, monetary policy failed to contain the price shock.
It's the only tool they have to influence aggregate demand. It's obviously an ineffectual tool at influencing inflation, especially since we have at least 3 types of inflation. Which one is doing the most damage? Core, non core or asset inflation?
Methinks central banks will choose to 'look through' price rises in goods subject to tariffs as they are clearly neither capacity nor wage related.
Once that period has passed, central banks could quite easily respond by dropping central bank rates to keep everything afloat. They might even do that earlier than many here are anticipating. (The HFL crowd are going to be pissed.)
The price of gold will start today at US$2799/oz and down -US$10 from Saturday and off its all-time high.
Thanks to the crypto space, gold has been trading when traditional markets are shut down for the weekend. At present, the PAXGOLD price is USD2,911. JPM said that gold 'might' hit this price until 2026. Looks like something has potentially broken. But probably nothing.
Imagine what could happen if they reprice gold reserves to handle debt. It could be announced late on a Friday and people could 10x on a weekend.
And they all lived happily ever after
(s)
Would never happen in the climate change industry.
"...The entrenchment of the amyloid hypothesis has fostered a kind of groupthink where grants, corporate riches, career advancement and professional reputations often depend on a central idea largely accepted by institutional authorities on faith. It’s unsurprising, then, that most of the fraudulent or questionable papers uncovered during my reporting have involved aspects of the amyloid hypothesis. It’s easier to publish dubious science that aligns with conventional wisdom.
...That phenomenon is not isolated to Alzheimer’s research. The broader incentive structures in science — where pressure to publish, secure funding and achieve breakthroughs is immense — can lead even well-meaning scientists to make shocking choices."
https://www.nytimes.com/2025/01/24/opinion/alzheimers-fraud-cure.html?u…
I have argued similarly in the past. 'Conventional wisdom' has often been based on the charisma, political clout and connections of the proponents rather than evidence. And people who choose to challenge that 'wisdom' can face some serious negative consequences. Scientific research is only one area. Much of the discussion on this site, and my own experience, identifies that this attitude is rife through government departments too.
A total reliance on intelligence or knowledge alone can be problematic.
Knowledge will attest a tomato is a fruit
Wisdom will tell you not to put them in a fruit salad.
Good to see the role of peer sites such as PubPeer, "where scholars and sleuths challenge scientific papers".
One of the best things about the scientific approach is the publishing of workings and data, the opportunity for others to raise issues - along with the field being one where the easiest and fastest way to get attention is to disprove existing wisdom. AI should be quite useful for helping detect image manipulation too.
Of course, we've seen the corruption of science before - by the tobacco industry (paid men vs. the wider scientific community), pharma, supplements, oil and gas.
Could AI be used to selectively apply evidence to present a desired result?
"Peer Reviewed" could also come to mean AI reviewed, but how will we know what assumptions are being applied? Good research papers detail and list assumptions, but there is always the risk that we are not always aware of unconscious bias and assumptions.
AI has a lot, and I mean A LOT, of learning to do in the spaces real experts inhabit. Probably 10+ years away.
I mean, let's get real. Can 'public AI' operate in a relatively simple space like how best to structure a mortgage? Not a chance. But banks have 'private AI' to ensure it is structured best for them.
They include their assumptions, experiment design, their data, and their workings, yeah. Hence my suggestion of deploying AI very selectively and tactically on pattern analysis.
Problem is they don't always include their data - no AI blackbox is going to navigate that. As infamously stated by Phil Jones "Even if WMO agrees, I will still not pass on the data. We have 25 or so years invested in the work. Why should I make the data available to you, when your aim is to try and find something wrong with it."
https://www.science.org/content/blog-post/climategate-and-scientific-co…
And yet the key and telling thing is that this is on Science.org, and there are plenty of scientists ready and willing to highlight errors, omissions, poor practices etc. Meanwhile, the vast majority do publish their data with their workings, inviting disproving.
Meanwhile, interesting to see the purge of data being discussed in the US right now, from data.gov now under the new regime. One wonders what they have against data being freely available for analysis.
I posted it because it was on Science.org - he was one of the very few people to call it it out. The silence from the MSM and the rest of the scientific establishment was deafening.
What are the details about this data purging you mention?
Just want to preface this by saying that I'm sure we have a better grasp of the basic dynamics contributing to climate change (ie the physics of atmospheric heat absorption, as affected by its chemical constituents) than we do the brain. When it comes to understanding consciousness, we are children.
My main point is that the timing of this article is uncanny for me. I was just researching into potential alternative therapies for AD late last night (something I've never done) and this turns up in interest this morning (something I've never seen).
The idea I was researching was the potential for psilocybin to have a positive impact when it comes to countering neurodegenerative diseases such as AD. It is well documented that, even in micro doses, psilocybin and other psychedelics trigger neurogenesis and lasting increases in neural plasticity. The research paper I was reading mentioned the phenomenon of near-death lucidity in AD patients, pointing to the inherent flexibility in neural pathways, and the potential reversibility of the condition (or at least it's potential partial mitigation).
I don't know if you actually have an interest in AD, or if you were just posting to make the point around the fallibility of institutional organisations, but here is a link to a downloadable copy of the research if the former is true.
https://molecularneurodegeneration.biomedcentral.com/articles/10.1186/s…
I think we all have an interest in AD given the prevalence. Thanks for the link.
The main difference between the two fields being medical research is subject to randomized and double-blind trials whereas climate science is not. Climate science also has to grapple with the simple fact "The climate system is a coupled non-linear chaotic system, and therefore the long-term prediction of future climate states is not possible." Not that it stops resident doomsters, politicians, and our host, pushing all sort of baseless predictions about future climate!
https://archive.ipcc.ch/ipccreports/tar/wg1/index.php?idp=501
You are confusing weather, with climate. Again!
Given I haven't mentioned weather in my comment who is the confused one here? Try harder.
That's true, it's a pretty devastating condition for those in the midst of it, and those around them. It's crazy that the guy in the article you linked was able to get away with fabricating results for so long.
While I get that the Earth's climate is an incredibly complex beast and accurate predictions are probably impossible, my understanding is that the science suggesting the existence of human-induced global warming is relatively simple. Basically that without an atmosphere, the physics suggests we would have a frozen planet. The size of the Earth dictates that the peak of electromagnetic radiation emitted by the planet is in the infrared spectrum, and Carbon Dioxide has a known capacity to absorb infrared radiation. So that the data and knowledge of the mechanisms at play are relatively basic physical phenomenon.
Whereas, the mechanisms underpinning the brain, and consciousness, for that matter, are not well understood and there is very little consensus surrounding much of the field. And a specific field of study such as Alzheimer's disease research, where we don't even have a working theory of memory, seems to me to be much more vulnerable to someone pulling the wool over the eyes of the scientific community.
*I will say that I would love to see more evidence illustrating the degree to which CO2 impacts infrared absorption, surely there are experiments using infrared emitters and gas cylinders with different levels of CO2*
I do agree with your observations around groupthink being prevalent in every field of human activity, science included. But I am far more convinced of the accuracy of the global warming theory, based on the relatively well-known physical phenomenon it is based upon.
What is AD?
The bitcoin price starts today at US$98,142 and down a sharp -6.5% from this time Saturday. Apparently isolationism and tariffs are not good for crypto.
Crypto markets in turmoil as we speak, except for rat poison, which is holding up comparatively speaking.
Many of the altcoins that the hardcore degenerates play with are being absolutely slaughtered. Will be plenty of younger traders wiped out so don't be surprised if they go to the bank of Mum and Dad for a $10K loan to get back in the game. Plenty of disappointment as we're supposed to be in a bull market.
Lending a child 10k to gamble on the crypto market is pretty bad parenting.
Would you lend your child 10k to gamble on the pokies because they have a good system, they just got unlucky last time?
Is this just wishful thinking that the amount of money to be pumped into crypto is never ending, because the investors have parents and friends to take money off also?
"Lending a child 10k to gamble on the crypto market is pretty bad parenting."
Made me chuckle. You're thinking like an ordinary person. Which I guess you probably are.
You need to think like a billionaire parent. They're probably telling their children off for playing with 'only' $10k.
"Many of the altcoins that the hardcore degenerates play with are being absolutely slaughtered."
Quelle surprise !!
I tried to check how Trumps new coin was doing. Quickly got lost in the plethora of Trump coins. How do we know which is the coin he launched the day before inauguration? (the 2025 inauguration obviously. During his first administration Trump claimed crypo was a big fraud, now he's wised up)
Team Trump on the attack against USAID. While it may be difficult to understand, this is a good thing as most governments don’t want USAID funds flowing into their countries because they understand where much of that money actually ends up. While marketed as support for development, democracy, and human rights, the majority of these funds are funneled into opposition groups, NGOs with political agendas, and destabilizing movements.
At best, maybe 10% of the money reaches real projects that help people in need, but the rest is used to fuel dissent, finance protests, and undermine administrations that refuse to align with the globalist agenda. Cutting this so-called aid isn’t just beneficial for the United States; it’s also a big win for the rest of the world.
https://edition.cnn.com/2025/02/01/politics/usaid-website-offline-freez…
In his last term, I visited an orphanage for kids with Aids in Cambodia who's parents couldn't afford their care. The bulk of the funding came from the States, Trump cut it off, orphanage subsequently shut.
Big win aye JC.
USAID does not fund orphanages P. Nice try.
Potentially not a regular orphanage.
Examples of projects assisted by missions' Health and Family Planning offices are projects for the eradication of communicable diseases, strengthening of public health systems focusing on maternal-child health including family planning services, HIV-AIDS monitoring, delivery of medical supplies including contraceptives, and coordination of Demographic and Health Surveys. This assistance is primarily targeted to the poor majority of the population and corresponds to USAID's poverty relief objective, as well as strengthening the basis for socio-economic development.
I have worked for a few big and small NGOs in this space, overseas who have received USAID money. We used to track exactly what percentage of money was used for frontline work vs back office/project support work, in fact its part of the accounting demanded by almost every donor, often with targets around what percentages are used.
Your reckons of "At best, maybe 10%" are laughably low. Most of the places I worked were around a 60/40 to 80/20 split, with 60-80% going to frontline actions. The ones that were 60/40 often were lower because the extra administration/security/logistics of getting into areas of need.
The rest of the globalist agenda stuff is great conspiracy theory reading though, keep it up.
Apparently it's better to be a sycophant to the worst sorts of people than be an MSM shill.
If tariff's are a tax paid by the importer and passed on to consumer (ie US customers), then why do countries respond by imposing their own tariff's i.e a tax on their own citizens.
Seems to be the best response would be no response. i.e if Trump wants to send prices higher for US then go for it, but we aint doing the same for our people.
I don't get the logic of the retaliatory response tariffs.
If you're like the US and tax revenue from your own people doesn’t cover the deficit, you tax the rest of the world to pay off government debt.
If you're the US Govt, you deficit spend to offset your current account deficit (at least). This means that your population gets loads of stuff from the rest of the world, and the rest of the world gets your dollars (debt), which they typically convert into US Treasuries (also debt). You could argue that the flow of cheap stuff into the US is a 'tax' on the rest of the world.
The US is able to maintain a strong dollar because US dollars and Treasuries are a highly valued US export - the rest of the world needs and wants those dollars / Treasuries.
Before we get too sniffy about this, we should note that we have run current account deficits with the rest of the world for over 50 years. Our dollar has not crashed because our institutions are trusted - we are good for our debts and offshore investors are happy to hold and trade them. Last year we exported around $27bn of debt. Indeed, our debt exports are bigger than dairy!
.Our dollar has not crashed because our institutions are trusted - we are good for our debts and offshore investors are happy to hold and trade them.
NZD/USD fell 37.5% during the GFC.
NZD/JPY fell >50% over same time.
NZD and AUD are risk currencies whether we like it or not. Mainly because we live beyond our means.
You can pick some random drops and crashes by time or currency, or you can look at the trade-weighted index over the long-term. What do you see?
I chose the GFC because it represents a period of carry trade unwinding. AUD and NZD were punished more than any other OECD currencies during the GFC, particularly relative to JPY.
The TWI is relatively stable not volatile. The TWI overlooks the significant impact of capital flows on exchange rates. Because of financial globalization, the TWI doesn't necessarily represent a currency's actual strength.
https://www.rbnz.govt.nz/statistics/series/exchange-and-interest-rates/…
@Jfoe
The US is able to maintain a strong dollar because US dollars and Treasuries are a highly valued US export
"...highly valued US export". Historically, yes. Why have Japan and China, the two biggest holders of US debt, been aggressively selling Treasuries in recent years? China since 2018 and Japan since 2022.
Our dollar has not crashed because our institutions are trusted
If Japan and China are net sellers of US debt, do they still trust US institutions like the Treasury?
I’d appreciate a response from Jfoe.
I'd say they are Net Sellers of US Treasuries, because in good times you save and in hard times you cash in your savings. It's as simple as that.
Their overall share of US Treasuries is not longer that meaningful.
Japan sold Treasuries through 2022 to support the Yen but they have actually increased their holdings (a bit) since then.
I think the answer to your last question varies significantly between Japan and China! China have seen that the US is willing to weaponise it's currency (Russia, Afghanistan, etc). They are sensible reducing their risks here - switching their holdings to other assets.
Thanks, Jfoe. If the US starts imposing tariffs, the US dollar should strengthen. Would countries start selling US Treasuries to buy their own currencies, like Japan did with the yen?
Any countries buyers of US treasuries in a big way and if not are we going to see the bond market continue to sell-off?
yeah but loading on your own tariffs as a response just punishes your own citizens. The trump tariffs are a tax rise in disguise - leave him too it.
trumped-up
Trump's surname may be the most apt name since people started calling the local wagon maker "Wainwright".
And "Trump" isn't even a back-formation, it was a prophecy
Yeah but “Drumpf” made him sound like some German/immigrant/retard. Better to sound like a winning round of cards. Same with the Windsors of course…
Tump means fart in England.
In India, a new Union (national) Budget has cut income taxes (see pages 28 and 29), in the hope it will arrest the cooling of their economic activity by enhancing domestic demand. Those earning about NZ$24,000 pa will pay no tax, and the tax bands above that have been indexed higher.
Can someone offer some context here, what would the mean and median worker earn in India?
"This may turn out to be the low point in [the USA's] inflation cycle."
That depends on how long this goes on for. Yes, an initial burst of inflation is likely.
But as economic contraction sets in and people start getting laid off, inflation falls real fast, cash becomes king, and people get real cautious about spending.
In the US, businesses have been preparing for this, evidence: we saw "investment" fall about 1%. I expect globally, businesses have likewise been nervous about investing in new plant, machinery and/or business growth initiatives.
It all comes down to how long this lasts.
Canada would much better off with their Jacinda gone.
The snowboarding, drama-teaching Trustafarian?
Justin Trudeau, Justin Castro, Nepotism either way.
I'd prefer him to the golfing drama-creating trustafarian down south.
Jacinda Ardern documentary wins award at Sundance Film Festival
Should make a few here throw up on themselves.....(or soil their pants)
They had to remove the user reviews on IMDb. More censorship at play.
"We will continue to be your single source of truth..."
"Unless you hear it from us, it is not the truth."
I got to read them before they were taken down, and they were brilliant. "Hagiography of a Hag" made me laugh out loud.
Don't be a hua KW..
The right wing are anti-social.
https://www.nzherald.co.nz/nz/politics/number-of-threats-against-politi…
This film festival?
https://kinoavantgarde.com/en/sundance-embraces-woke/
Woke is extremely unfashionable these days.
"Woke" is the new "everything I don't like is communism". Great for riling up the usual suspects.
Clearly didn't read the article as it was pro-woke.
Please put more effort in next time.
Clearly responding to your comment "Woke is extremely unfashionable these days."
Please put more effort in next time.
I think Trump's tariffs have as much to do with getting Trudeau voted out and Poilievre in - presumably the new Govt will "have a plan" to work with Trump and eliminate tariffs that they can sell to the people, while Trudeau is simply doubling down on the anti-Trump rhetoric which won't benefit anyone.
It benefits sanity and world order to call out Trumps stupid actions. Why do you put the onus of civility on the already civil?
Regarding his master plans, he is not a 4D chess master, and he doesn't know what he is doing. He is stupidity and hubris combined. Listening to any speech by him makes that clear. Stop coming up with "what he really means" / "why he is doing this" ideas, and take him at face value. He got voted in because he says things that politicians shouldn't say (for good reason), and people find that entertaining. Some like that it legitimises their own bad behaviour as well. Anything that happens that has a well thought out plan is stuff that other people are getting him to do.
I'm sorry but it doesn't take an overly smart person to know when you pull the lever there are only 2 choices=Trump or Harris. Easy choice for the majority this time around. Inviting over 10 million to become "boat people" in the Aussie sense of the word was all it took to convince most American's they want no more of that. 2.2 million crossed in and were never intercepted according to audit of the Border cameras. Add to that the VP candiate was certainly underwhelming any time she faced a grilling interview.
I'm sorry but it doesn't take an overly smart person to know when you pull the lever there are only 2 choices=Trump or Harris. Easy choice for the majority this time around. Inviting over 10 million to become "boat people" in the Aussie sense of the word was all it took to convince most American's they want no more of that. 2.2 million crossed in and were never intercepted according to audit of the Border cameras. Add to that the VP candiate was certainly underwhelming any time she faced a grilling interview.
A question for someone who may know....do Airbus require U.S. inputs for their manufacture?
Most aircraft manufacturers provide a range of engine choices from different manufacturers. Pretty much Rolls Royce, P&W and GE, although I don't think P&W make large commercial engines?
So two US based engine manufacturers. Quick search revealed both Boeing and Airbus are unable to meet current demand with thousands of back orders so not likely to improve situation.
They make the engines for the narrow body Airbus A320 (which are also assembled in the USA). The new PW1100G's for the A320s are giving a few issues. Also a stakeholder in the older V2500.
Bit of a bugger for a remote economy hoping to increase its tourist numbers
The currency markets are adjusting for the tariffs.
"Let’s say that back in September, a Canadian exporter was happy to get paid 134 CAD. That translates into 100 USD for the importer. Let’s say that the Canadian exporter is still happy to accept the equivalent of 134 CAD. That drops the USD price to 90.86 for the importer. Making the new cost to the importer, including the tariff, $113.57 "
But now the stronger US dollar is making all US$ denominated imports cheaper for US manufacturers and consumers, including from non-tariffed countries.
Additonally, companies selling to the US in US$ can now afford to offer discounts to their US buyers as a result of the currency windfall. As an example, the US$ has appreciated from NZ$1.58 to NZ$1.79 over the same time frame, giving NZ companies 21c extra profit per US$ in their pockets.
But Canadians importing US products now have both the depreciated currency and retaliatory tariffs to deal with. This will not be an election winner.
Trump has also removed the di minimis duty exemption for shipments valued at less than USD 800 for products that are made in China, Canada or Mexico. That will include Chinese products that a shipped to Canada or Mexico in bulk to be warehoused there to fulfil e-commerce orders from the USA. It also affects shipments of products from China to Mexico that were having some transformation process in a Mexican factory and being exported to the USA as Mexican origin. Thus avoiding the existing China tariff. Chinese exports to Mexico have been growing at 10% per year for the past 5 years.
This means that the majority of e-commerce shipments to the USA will now need full customs clearance and have duties paid by the importer/buyer.
In short Temu, Shein, Ali Express ect are all screwed.
Ha lol - where do you think the Americans are going to get all their crap from now....Ohio?
The end user will be hurt the most...
Up to 30% of softwood lumber consumed in the U.S. each year comes from Canada. That lumber just got 25% more expensive for the US importers. Does that create opportunities for New Zealand sawmills to compete? Especially supplying to the South West where we have good ocean links and there is huge pending demand with the LA rebuilding.
We can't even sell our lumbar here for a good price!
Pine is a weed, Canada probably sells quality woods like Cedar that grow in colder climates. Would never have a house in NZ with Cedar on ever again, too hot here it doesn't do well in full sun.
Those are massive tax cuts in India.
According to https://en.wikipedia.org/wiki/Income_in_India, the average income is somewhere around ~$4,500 NZD per annum. No income taxes below $24,000 NZD per annum is massive.
Fisher & Paykel say: Costs forecast to increase under new US tariff regime
Shareprice down 10% today
They should have never tried to offshore F&P whiteware from New Zealand. Labour just let that one walk away.
This is not the whiteware F&P company (that was sold to Haier in 2012). This is the healthcare company.
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