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Higher rates to linger, Fed may make cuts in September

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Market expectations are calling for two interest rate cuts before the end of the year. (iStock)

The Federal Reserve announced plans on Wednesday to keep the federal funds rate range at 5.25% to 5.5%, where rates have held steady since last July. 

Fed Chair Jerome Powell told reporters that the central bank has gained greater confidence that inflation is moving towards its 2% target rate, indicating that rates were not lowered this time but could soon be. Market expectations are forecasting a 25 basis point rate cut by the central bank’s September meeting. On Wednesday, the Mortgage Bankers Association said they anticipate two rate cuts this year, with the expectation that inflation will continue to moderate.

“The Fed is walking a tightrope regarding the nation’s economy as it seeks to balance the risks of a slowing labor market while ensuring continued disinflation,” CoreLogic Chief Economist Dr. Selma Hepp. “At this point, the odds of soft-landing keep growing, but there will not be any actions until their next meeting in September. Lower mortgage rates in recent weeks suggest the mortgage markets are also anticipating a rate cut, which should boost buyer demand at the end of the year.” 

Homebuyers can find competitive mortgage rates by shopping around and comparing options. You can visit an online marketplace like Credible to compare rates with multiple lenders at once.

MIDDLE-INCOME AMERICANS FEEL MORE OPTIMISM ABOUT FINANCES AND ECONOMY’S DIRECTION: SURVEY

Rate reduction could spur borrowing

Consumers could finally start to see some relief with the possibility of two rate reductions for 2024 still on the table, according to Michele Raneri, vice president and head of U.S. research and consulting at TransUnion.

Lower rates will likely grow consumer demand for credit for large purchases such as homes and autos. Mortgage rates have already started to drop as the likelihood of interest rate cuts heats up and early indicators suggest that consumers are becoming more interested in new mortgages, according to Raneri.   

“Consumers continue to have demand for credit, although when it comes to extending new credit, lenders have begun pivoting more to those consumers in higher credit risk tiers as a way of mitigating risk,” Raneri said. “It remains to be seen if a reduction in interest rates allows for credit to once again be more accessible for riskier potential borrowers. “

Using a personal loan to pay off high-interest debt at a lower rate could help you reduce your expenses and put money back in your wallet. Visit Credible to find your personalized interest rate today.

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U.S. consumer cuts back on economic activity

Most U.S. consumers think interest rates are too high and have had to cut back on spending as a result, according to a recent Morning Consult survey. Over half (68%) of respondents said rates were to say it’s affected their household finances. As a result, 75% have cut back on non-essential spending and 63% have reduced their spending on essentials. 

Moreover, even as the Fed has signaled that it plans to do at least one rate cut this year, 34% of respondents believe that interest rates will be higher at this point next year (34%) than lower (25%). 

“The Fed decided today to not reduce interest rates and did not give a clear signal that a decrease would be coming in September,” Morning Consult economist Sofia Baig said. “Continuing to keep rates elevated could be harmful for consumers and the economy as a whole, which is already showing signs of cooling. Furthermore, Morning Consult survey data reveals that a majority of consumers believe rates are too high and are cutting back on their economic activity as a result, a warning sign of downside risks going forward.”

If you’re worried about the state of the economy, you could consider paying down high-interest debt with a personal loan at a lower interest rate. Visit Credible to speak with a personal loan expert and get your questions answered.

HIGH HOMEOWNERS INSURANCE RATES SCARING AWAY FLORIDA HOMEBUYERS, OTHER STATES FACE THE SAME ISSUE

Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.

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Chinese factories stop production, eye new markets as U.S. tariffs hit

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Textile manufacturing workers in Binzhou, Shandong, China, on April 23, 2025.

Nurphoto | Nurphoto | Getty Images

BEIJING — Chinese manufacturers are pausing production and turning to new markets as the impact of U.S. tariffs sets in, according to companies and analysts.

The lost orders are also hitting jobs.

“I know several factories that have told half of their employees to go home for a few weeks and stopped most of their production,” said Cameron Johnson, Shanghai-based senior partner at consulting firm Tidalwave Solutions. He said factories making toys, sporting goods and low-cost Dollar Store-type goods are the most affected right now.

“While not large-scale yet, it is happening in the key [export] hubs of Yiwu and Dongguan and there is concern that it will grow,” Johnson said. “There is a hope that tariffs will be lowered so orders can resume, but in the meantime companies are furloughing employees and idling some production.”

Around 10 million to 20 million workers in China are involved with U.S.-bound export businesses, according to Goldman Sachs estimates. The official number of workers in China’s cities last year was 473.45 million.

President Trump says U.S. met this morning with China, declines to identify individuals involved

Over a series of swift announcements this month, the U.S. added more than 100% in tariffs to Chinese goods, to which China retaliated with reciprocal duties. While U.S. President Donald Trump on Thursday asserted trade talks with Beijing were underway, the Chinese side has denied any negotiations are ongoing.

The impact of the recent doubling in tariffs is “way bigger” than that of the Covid-19 pandemic, said Ash Monga, founder and CEO of Guangzhou-based Imex Sourcing Services, a supply chain management company. He noted that for small businesses with only several million dollars in resources, the sudden increase in tariffs might be unbearable and could put them out of business.

He said there’s so much demand from clients and other importers of Chinese products that he’s launching a new “Tariff Help” website on Friday to help small business find suppliers based outside China.

Livestreaming

The business disruption is forcing Chinese exporters to try new sales strategies.

Woodswool, an athleticwear manufacturer based in Ningbo, near Shanghai, quickly turned to selling the clothes online in China via livestreaming. After launching the sales channel about a week ago, the company said it’s received more than 30 orders with gross merchandise value of more than 5,000 yuan ($690).

It’s a small step toward salvaging lost business.

“All our U.S. orders have been canceled,” Li Yan, factory manager and brand director of Woodswool, said in Mandarin, translated by CNBC.

More than half of production once went to the U.S., and some capacity will be idle for two to three months until the company is able to build up new markets, Li said. He noted the company has sold to customers in Europe, Australia and the U.S. for more than 20 years.

The venture into livestreaming is part of an effort by major Chinese tech companies, at the behest of Beijing, to help exporters redirect their goods to the domestic market.

Woodswool is selling its products online through Baidu, whose search engine app also includes a livestreaming e-commerce platform. Li said he chose the company’s virtual human livestreaming option since it allowed him to get up and running within two weeks, without having to spend time and money on renovating a studio and hiring a team.

Baidu said it has worked with at least several hundred Chinese businesses to launch domestic e-commerce channels after this month announcing it would provide subsidies and free artificial intelligence tools — such as its “Huiboxing” virtual humans — for 1 million businesses. The virtual humans are digitally recreated versions of people that use AI to mimic sales pitches and automate interactions with customers. The company claimed that return on investment was higher than that of using a human being.

Domestic market challenges

E-commerce company JD.com was one of the first to announce similar support, pledging 200 billion yuan ($27.22 billion) to buy Chinese goods originally intended for export — and find ways to sell them within China. Food delivery company Meituan has also announced it would help exporters distribute domestically, without specifying an amount.

However, $27.22 billion is only 5% of the $524.66 billion in goods that China exported to the U.S. last year.

“A few businesses have told us that under 125% tariffs, their business model is not workable,” Michael Hart, president of the American Chamber of Commerce in China, told reporters Friday. He also noted more competition among Chinese companies in the last week.

Tariffs from both countries will likely remain in place at a certain level, with exemptions for certain tariffs, Hart said. “That’s exactly what they’re backing into.”

Products branded and developed for a suburban U.S. consumer might not directly work for a Chinese apartment dweller.

Manufacturers have gone directly to Chinese social media platforms Red Note and Douyin, the local version of TikTok, to ask consumers to support them, but fatigue is growing, pointed out Ashley Dudarenok, founder of ChoZan, a China marketing consultancy.

Looking outside the U.S.

Fewer and fewer Chinese companies are considering diverting exports to the U.S. through other countries, given rising U.S. scrutiny of transshipments, she said. Dudarenok added that many companies are diversifying production to India over Southeast Asia, while others are turning from U.S. customers to those in Europe and Latin America.

Some companies have already built businesses on other trade routes from China.

Liu Xu runs an e-commerce company called Beijing Mingyuchu that sells bathroom products to Brazil. While his business has run into challenges from fluctuating exchange rates and high container shipping costs, Liu said he expects trade with Brazil will ultimately not be that affected by China’s tensions with the U.S.

China’s exports to Brazil have doubled between 2018 and 2024, as have China’s exports to Ghana.

During the Covid-19 pandemic, Ghana-based Cotrie Logistics was founded to help businesses with sourcing, coordinate shipments amid port delays and build dependable logistics routes, said CEO Bright Tordzroh. The company primarily works in trade between China and Ghana and now makes $300,000 to $1 million annually, he said.

The U.S.-China trade tensions have led many companies to explore sourcing and manufacturing locations outside the United States, Tordzroh said, which he hopes can create more opportunities for Cotrie.

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These are 3 big things we’re watching in the stock market this week

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A security guard works outside the New York Stock Exchange (NYSE) before the Federal Reserve announcement in New York City, U.S., September 18, 2024. 

Andrew Kelly | Reuters

The stock market bounce last week showed once again just how dependent Wall Street has become on the whims of the White House.

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These U.S. consumer stocks face higher China risks

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