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Checks and Balance newsletter: Joe Biden’s state-of-the-union speech

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This is the introduction to Checks and Balance, a weekly, subscriber-only newsletter bringing exclusive insight from our correspondents in America.

Joe Biden delivered a party-convention (state-of-the-union) speech, writes James Bennet, our Lexington columnist

No one got whacked over the head with a cane, but in other respects Joe Biden’s state-of-the-union speech proved to be one of those moments in which I found myself wondering if American politics is returning to its 19th-century mores—thanks in part to social media and other 21st-century technology. The Progressive era introduced institutions that restrained some of the excesses of partisanship, such as the civil service. It also inculcated ideals of bipartisanship and decorum that are now fading away. They may have been debts vice was paying to virtue—even at its most seemingly decorous, politics is always a rough business—but I think we will miss them if they truly disappear. 

It is a bit melancholy that Mr Biden, with his veneration for the rites of Washington, would find himself compelled to deliver a state-of-the-union address that was in many respects more like a party-convention speech. But this has been coming for years, since even before a Republican congressman shouted “You lie” at President Barack Obama in 2009 during an address to a joint session of Congress. The next year, in a state-of-the-union speech, Mr Obama took the extraordinary step of chiding the Supreme Court, for a decision related to campaign finance—precedent for the shot Mr Biden took Thursday night at the justices for overturning Roe v Wade. In 2020 Nancy Pelosi, then speaker of the House, theatrically tore apart her copy of President Donald Trump’s speech after he finished delivering it.

Mr Trump, with his contempt for what he sees as the pretences of a cynical, transactional business, accelerated the trend towards open partisanship in all aspects of governing. The clownish displays by his minions in the House chamber on Thursday night, with their heckling and their MAGA hats or t-shirts, undermined the subsequent pious outrage of Republicans over Mr Biden’s politicking. 

It is an axiom of American politics that presidential elections are a referendum on the incumbent. But in this campaign Americans have a choice between two presidents, neither of whom they much like. For each man the path to a second term lies through negative partisanship, ie, persuading voters that the other guy is worse. It will be a brutal campaign. 

And that made the more humane moments in the House chamber on Thursday night seem all the more precious, even if they were flashes of old-style senatorial clubbiness. “I know you don’t want to hear any more, Lindsey, but I gotta say a few more things,” Mr Biden said towards the end of his speech, singling out Lindsey Graham, a senator from South Carolina. Mr Graham has remade himself as an acolyte of Mr Trump, but, clearly delighted by the presidential attention, he roared with laughter. 

And Mr Biden drew his most powerful contrast with Mr Trump by closing on a high note. It is another axiom of American politics that presidential campaigns are about the future, and Mr Biden is out to paint Mr Trump as obsessed with grievances from his past. Mr Biden’s refrain at the end of the speech became “I see a future,” as he envisioned more freedom, fairer taxation, less gun violence. “I see a future for all Americans,” he said, and—the partisanship of his speech notwithstanding—he added, “I will always be a president for all Americans.”

Economics

How did the U.S. arrive at its tariff figures?

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U.S. President Donald Trump speaks during a “Make America Wealthy Again” trade announcement event in the Rose Garden at the White House on April 2, 2025 in Washington, DC.

Chip Somodevilla | Getty Images

Markets have turned their sights on how U.S. President Donald Trump’s administration arrived at the figures behind the sweeping tariffs on U.S. imports declared Wednesday, which sent global financial markets tumbling and sparked concerns worldwide.

Trump and the White House shared a series of charts on social media detailing the tariff rates they say other countries impose on the U.S. Those purported rates include the countries’ “Currency Manipulation and Trade Barriers.”

An adjacent column shows the new U.S. tariff rates on each country, as well as the European Union.

Chart of reciprocal tariffs.

Courtesy: Donald Trump via Truth Social

Those rates are, in most cases, roughly half of what the Trump administration claims each country has “charged” the U.S. CNBC could not independently verify the U.S. administration’s data on these duties.

It didn’t take long for market observers to try and reverse engineer the formula — to confusing results. Many, including journalist and author James Surowiecki, said the U.S. appeared to have divided the trade deficit by imports from a given country to arrive at tariff rates for individual countries.

Such methodology doesn’t necessarily align with the conventional approach to calculate tariffs and would imply the U.S. would have only looked at the trade deficit in goods and ignored trade in services.

For instance, the U.S. claims that China charges a tariff of 67%. The U.S. ran a deficit of $295.4 billion with China in 2024, while imported goods were worth $438.9 billion, according to official data. When you divide $295.4 billion by $438.9 billion, the result is 67%! The same math checks out for Vietnam.

“The formula is about trade imbalances with the U.S. rather than reciprocal tariffs in the sense of tariff level or non-tariff level distortions. This makes it very difficult for Asian, particularly the poorer Asian countries, to meet US demand to reduce tariffs in the short-term as the benchmark is buying more American goods than they export to the U.S., ” according to Trinh Nguyen, senior economist of emerging Asia at Natixis.

“Given that U.S. goods are much more expensive, and the purchasing power is lower for countries targeted with the highest levels of tariffs, such option is not optimal. Vietnam, for example, stands out in having the 4th largest trade surplus with the U.S., and has already lowered tariffs versus the U.S. ahead of tariff announcement without any reprieve,” Nguyen said.

The U.S. also appeared to have applied a 10% levy for regions where it is running a trade surplus.

"Absolutely nothing good coming out" of Trump tariff announcement, veteran economist Rosenberg says

The Office of the U.S. Trade Representative laid out its approach on its website, which appeared somewhat similar to what cyber sleuths had already figured out, barring a few differences.

The U.S.T.R. also included estimates for the elasticity of imports to import prices—in other words, how sensitive demand for foreign goods is to prices—and the passthrough of higher tariffs into higher prices of imported goods.

“While individually computing the trade deficit effects of tens of thousands of tariff, regulatory, tax and other policies in each country is complex, if not impossible, their combined effects can be proxied by computing the tariff level consistent with driving bilateral trade deficits to zero. If trade deficits are persistent because of tariff and non-tariff policies and fundamentals, then the tariff rate consistent with offsetting these policies and fundamentals is reciprocal and fair,” the website reads.

This screenshot of the U.S.T.R. webpage shows the methodology and formula that was used in greater detail:

A screenshot from the website of the Office of the United States Trade Representative.

Some analysts acknowledged that the U.S. government’s methodology could give it more wiggle room to reach an agreement.

“All I can say is that the opaqueness surrounding the tariff numbers may add some flexibility in making deals, but it could come at a cost to US credibility,” according to Rob Subbaraman, head of global macro research at Nomura.

 — CNBC’s Kevin Breuninger contributed to this piece.

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Economics

Analysts react to latest U.S. levies

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Charts that show the “reciprocal tariffs” the U.S. is charging other countries are on display at the James Brady Press Briefing Room of the White House on April 2, 2025 in Washington, DC. 

Alex Wong | Getty Images

U.S. President Donald Trump on Wednesday laid out the “reciprocal tariff” rates that more than 180 countries and territories will face under his sweeping new trade policy.

The announcement sent stocks tumbling and prompted investors to seek refuge in assets perceived to be safe.

Analysts generally had a pessimistic take on the announcement, with some even predicting an increased risk of a recession for the U.S.

Here is a compilation of reactions from experts and analysts:

Tai Hui, APAC Chief Market Strategist, J.P. Morgan Asset Management

“Today’s announcement could potentially raise U.S. average tariff rates to levels not seen since the early 20th century. If these tariffs persist, they could materially impact inflation, as U.S. manufacturing struggles to ramp up capacity and supply chains pass on costs to consumers. For instance, advanced semiconductor manufacturers in Taiwan may not absorb tariff costs without viable substitutes.

“The scale of these tariffs raises concerns about growth risks. U.S. consumers may cut back on spending due to pricier imports, and businesses might delay capital expenditures amid uncertainty about the tariffs’ full impact and potential retaliation from trade partners.”

David Rosenberg, President and founder of Rosenberg Research

“There are no winners in a global trade war. And when people have to realize, when you hear this clap trap about how consumers in United States are not going to bear any brunt. It’s all going to be the foreign producer. I roll my eyes whenever I hear that, because it shows a zero understanding of how trade works, because it is the importing business that pays the tariff, not the exporting country.

And a lot of that will get transmitted into the consumer, so we’re in for several months of a very significant price shock for the American household sector.”

Anthony Raza, Head of Multi-Asset Strategy, UOB Asset Management

“They’ve come up with the most extreme numbers that we can’t even comprehend. How they’re coming up with these? And then in terms of timing, I think we were hopeful that maybe this would be something that was rolled out over the course of a year, that would allow like time for negotiations or whatever. But it does seem like the timing is much more immediate and is, again, worse than our worst-case type scenario in terms of flexibility.”

David Roche, Strategist, Quantum Strategy

“These tariffs are not transitional. They are core to President Trump’s beliefs. They mark the shift from globalisation to isolationist, nationalist policies – and not just for economics. The process will last several years and be felt for decades. There will be spillovers into multiple policy domains such as geopolitics.

Right now, expect retaliation, not negotiation by the EU (targeting U.S. services) and China (focusing on U.S. strategic and business interests). The Rose Garden tariffs will cement the bear market. They will cause global stagflation as well as U.S. and EU recession.”

Shane Oliver, Head of Investment Strategy and Chief Economist, AMP

“Our rough calculation is that the 2nd April announcement will take the US average tariff rate to above levels seen in the 1930s after the Smoot/Hawley tariffs which will in turn add to the risk of a US recession – via a further blow to confidence and supply chain disruptions – and a bigger hit to global growth.

“The risk of a US recession is probably now around 40% and global growth could be pushed towards 2% (from around 3% currently) depending on how significant retaliation is and how countries like China respond with policy stimulus.”

Tom Kenny, Senior International Economist, ANZ

“Today’s announced US reciprocal tariffs are worse than expected. The effective tariff rate on U.S. merchandise imports is likely to climb to the 20-25% range, the highest since the early 1900s.

Yields on inflation-indexed bonds were higher and equities sold off after the announcement, suggesting the market thinks these tariffs will hurt growth and add to inflation. Market pricing of the federal funds rate points to cuts from the Federal Reserve coming sooner.”

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Economics

EC President von der Leyen

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The European Union is preparing further countermeasures against U.S. tariffs if negotiations fail, according to European Commission president Ursula von der Leyen.

U.S. President Donald Trump had imposed 20% tariffs on the bloc on Wednesday.

Von der Leyen’s comments come after retaliatory duties were announced by the bloc after the U.S. imposed tariffs on  last month in a bid to protect European workers and consumers. The EU at the time said it would introduce counter-tariffs on 26 billion euros ($28 billion) worth of U.S. goods.

Previously suspended duties — which were at least partially in place during Trump’s first term as president — are set to be re-introduced alongside a slew of additional duties on further goods.

Industrial-grade steel and aluminum, other steel and aluminum semi-finished and finished products, along with their derivative commercial products, such as machinery parts and knitting needles were set to be included. A range of other products such as bourbon, agricultural products, leather goods, home appliances and more were also on the EU’s list.

Following a postponement, these tariffs are expected to come into effect around the middle of April.

This is a developing story, please check back for updates.

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