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Donald Trump does exactly what he was expected to do

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IOWA IS SUPPOSED to surprise. Ted Cruz won there in 2016, Rick Santorum in 2012, Mike Huckabee in 2008. There was no upset this year: Donald Trump won the Iowa caucuses by 30 points, in line with his polling lead before Iowans gathered in a blizzard to do their thing. Mr Trump won 98 of Iowa’s 99 counties. The only other candidate to win one was Nikki Haley, Mr Trump’s former ambassador to the UN. She came first in Johnson County, home to the University of Iowa and therefore a good place to gauge the mood of college-educated Republicans, by a margin of 0.03%. With a few votes yet to be counted, that mini-triumph could yet be reversed.

Mr Trump was magnanimous in victory, congratulating his opponents—one of whom, Vivek Ramaswamy, dropped out and endorsed him. Mr Ramaswamy has called Mr Trump “the best president of the 21st century”, so it was never really clear why he was running against his idol. Mr Trump only releases the crazy when he loses. In 2016, to steal attention from Mr Cruz after his win, he came up with a bizarre riff about the senator’s father being involved in JFK’s assassination. “You need controversy for traction sometimes,” Mr Trump mused before the caucuses this year. Even when he wins, though, Mr Trump still likes to assert his dominance by making things up and watching his fans accept them as truth: he claimed to have won the Iowa caucuses for the third time in a row.

One early conclusion from the Republican primary is that there is not much appetite among Republicans for Trump fans like Mr Ramaswamy when the real thing is on offer. Ron DeSantis, whose political rise can be dated to a video in which his infant daughter appeared in a Make America Great Again onesie, came a very distant second, failing to win a single county despite visiting all of them. But nor is there appetite for a candidate who is straightforwardly opposed to Mr Trump: Chris Christie, who had described the former president as “a liar and a coward”, dropped out before a vote was cast.

That leaves the primary as a race for second place. Next up, on January 23rd, is New Hampshire, where Mr Trump is again ahead in the polls. Journalists are trying to make it into a contest. Trailing candidates repeat the cliché that nobody has voted yet. But Mr Trump is about ten points ahead of Ms Haley in New Hampshire polls, which have a margin of error of plus or minus five points. Looking at the national polls—The Economist’s poll tracker has Mr Trump at 65% and Ms Haley at 11%—it seems likelier that the New Hampshire polls are undercounting Mr Trump’s support than that they conceal a Haley surge. (The same may be true in national polls, which undercounted Mr Trump’s support in 2016 and 2020.)

If Mr Trump were to win in New Hampshire he would still need to wait until Super Tuesday, at the beginning of March, to build an insurmountable lead in the delegate count. In political terms, though, if he wins in New Hampshire and comes first in South Carolina’s primary on February 24th, beating Ms Haley in her home state, the contest would be over. Mr Trump would then be the de facto Republican nominee when he is due to appear as the defendant in court in Washington, DC, on March 4th, accused of attempting to overturn the result of the 2020 presidential election. One of the charges in that case carries a maximum sentence of 20 years in prison. The slow-moving collision of America’s electoral system with its courts, from which neither can escape unhurt, just came a little nearer.

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Economics

German inflation, March 2025

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Customers shop for fresh fruits and vegetables in a supermarket in Munich, Germany, on March 8, 2025.

Michael Nguyen | Nurphoto | Getty Images

German inflation came in at a lower-than-expected 2.3% in March, preliminary data from the country’s statistics office Destatis showed Monday.

It compares to February’s 2.6% print, which was revised lower from a preliminary reading, and a poll of Reuters economists who had been expecting inflation to come in at 2.4% The print is harmonized across the euro area for comparability. 

On a monthly basis, harmonized inflation rose 0.4%. Core inflation, which excludes food and energy costs, came in at 2.5%, below February’s 2.7% reading.

Meanwhile services inflation, which had long been sticky, also eased to 3.4% in March, from 3.8% in the previous month.

The data comes at a critical time for the German economy as U.S. President Donald Trump’s tariffs loom and fiscal and economic policy shifts at home could be imminent.

Trade is a key pillar for the German economy, making it more vulnerable to the uncertainty and quickly changing developments currently dominating global trade policy. A slew of levies from the U.S. are set to come into force this week, including 25% tariffs on imported cars — a sector that is key to Germany’s economy. The country’s political leaders and car industry heavyweights have slammed Trump’s plans.

Meanwhile Germany’s political parties are working to establish a new coalition government following the results of the February 2025 federal election. Negotiations are underway between the Christian Democratic Union, alongside its sister party the Christian Social Union, and the Social Democratic Union.

While various points of contention appear to remain between the parties, their talks have already yielded some results. Earlier this month, Germany’s lawmakers voted in favor of a major fiscal package, which included amendments to long-standing debt rules to allow for higher defense spending and a 500-billion-euro ($541 billion) infrastructure fund.

This is a breaking news story, please check back for updates.

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Economics

First-quarter GDP growth will be just 0.3% as tariffs stoke stagflation conditions, says CNBC survey

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U.S. President Donald Trump speaks to members of the media aboard Air Force One before landing in West Palm Beach, Florida, U.S., March 28, 2025. 

Kevin Lamarque | Reuters

Policy uncertainty and new sweeping tariffs from the Trump administration are combining to create a stagflationary outlook for the U.S. economy in the latest CNBC Rapid Update.

The Rapid Update, averaging forecasts from 14 economists for GDP and inflation, sees first quarter growth registering an anemic 0.3% compared with the 2.3% reported in the fourth quarter of 2024. It would be the weakest growth since 2022 as the economy emerged from the pandemic.

Core PCE inflation, meanwhile, the Fed’s preferred inflation indicator, will remain stuck at around 2.9% for most of the year before resuming its decline in the fourth quarter.

Behind the dour GDP forecasts is new evidence that the decline in consumer and business sentiment is showing up in real economic activity. The Commerce Department on Friday reported that real, or inflation-adjusted consumer spending in February rose just 0.1%, after a decline of -0.6% in January. Action Economics dropped its outlook for spending growth to just 0.2% in this quarter from 4% in the fourth quarter.

“Signs of slowing in hard activity data are becoming more convincing, following an earlier worsening in sentiment,” wrote Barclays over the weekend.

Another factor: a surge of imports (which subtract from GDP) that appear to have poured into the U.S. ahead of tariffs.

The good news is the import effect should abate and only two of the 12 economists surveyed see negative growth in Q1. None forecast consecutive quarters of economic contraction. Oxford Economics, which has the lowest Q1 estimate at -1.6%, expects a continued drag from imports but sees second quarter GDP rebounding to 1.9%, because those imports will eventually end up boosting growth when they are counted in inventory or sales measures.

Recession risks rising

On average, most economists forecast a gradual rebound, with second quarter GDP averaging 1.4%, third quarter at 1.6% and the final quarter of the year rising to 2%.

The danger is an economy with anemic growth of just 0.3% could easily slip into negative territory. And, with new tariffs set to come this week, not everyone is so sure about a rebound.

“While our baseline doesn’t show a decline in real GDP, given the mounting global trade war and DOGE cuts to jobs and funding, there is a good chance GDP will decline in the first and even the second quarters of this year,” said Mark Zandi of Moody’s Analytics. “And a recession will be likely if the president doesn’t begin backtracking on the tariffs by the third quarter.”

Moody’s looks for anemic Q1 growth of just 0.4% that rebounds to 1.6% by year end, which is still modestly below trend.

Stubborn inflation will complicate the Fed’s ability to respond to flagging growth. Core PCE is expected at 2.8% this quarter, rising to 3% next quarter and staying roughly at that level until in drops to 2.6% a year from now.

While the market looks to be banking on rate cuts, the Fed could find them difficult to justify until inflation begins falling more convincingly at the end of the year.

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Tariffs to spike inflation, stunt growth and raise recession risks, Goldman says

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U.S. President Donald Trump announces that his administration has reached a deal with elite law firm Skadden, Arps, Slate, Meagher & Flom during a swearing-in ceremony in the Oval Office at the White House on March 28, 2025 in Washington, DC. 

Andrew Harnik | Getty Images

With decision day looming this week for President Donald Trump’s latest round of tariffs, Goldman Sachs expects aggressive duties from the White House to raise inflation and unemployment and drag economic growth to a near-standstill.

The investment bank now expects that tariff rates will jump 15 percentage points, its previous “risk-case” scenario that now appears more likely when Trump announces reciprocal tariffs on Wednesday. However, Goldman did note that product and country exclusions eventually will pull that increase down to 9 percentage points.

When the new trade moves are enacted, the Goldman economic team led by head of global investment research Jan Hatzius sees a broad, negative impact on the economy.

In a note published on Sunday, the firm said “we continue to believe the risk from April 2 tariffs is greater than many market participants have previously assumed.”

Inflation above goal

On inflation, the firm sees its preferred core measure, excluding food and energy prices, to hit 3.5% in 2025, a 0.5 percentage point increase from the prior forecast and well above the Federal Reserve’s 2% goal.

That in turn will come with weak economic growth: Just a 0.2% annualized growth rate in the first quarter and 1% for the full year when measured from the fourth quarter of 2024 to Q4 of 2025, down 0.5 percentage point from the prior forecast. In addition, the Wall Street firm now sees unemployment hitting 4.5%, a 0.3 percentage point raise from the previous forecast.

Taken together, Goldman now expects a 35% chance of recession in the next 12 months, up from 20% in the prior outlook.

The forecast paints a growing chance of a stagflation economy, with low growth and high inflation. The last time the U.S. saw stagflation was in the late 1970s and early ’80s. Back then, the Paul Volcker-led Fed dramatically raised interest rates, sending the economy into recession as the central bank chose fighting inflation over supporting economic growth.

Three rate cuts

Goldman’s economists do not see that being the case this time. In fact, the firm now expects the Fed to cut its benchmark rate three times this year, assuming quarter percentage point increments, up from a previous projection of two rate cuts.

“We have pulled the lone 2026 cut in our Fed forecast forward into 2025 and now expect three consecutive cuts this year in July, September, and November, which would leave our terminal rate forecast unchanged at 3.5%-3.75%,” the Goldman economists said, referring to the fed funds rate, down from 4.25% to 4.50% today.

Though the extent of the latest tariffs is still not known, the Wall Street Journal reported Sunday that Trump is pushing his team toward more aggressive levies that could mean an across-the-board hit of 20% to U.S. trading partners.

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