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Slender, high-spirited and young, at least by the sagging standards of American politics, Nikki Haley, the former governor of South Carolina, and Chris Sununu, the current governor of New Hampshire, make a dynamic team as they barnstorm his state in advance of its primary on January 23rd. “What better place to meet the next president of the United States than in a candy shop,” boomed Mr Sununu, grinning, as he introduced Ms Haley recently to a gaggle of constituents in Chutters sweet store in Littleton, in the White Mountains. Smiling as brightly as her ally, she reeled off a list of policy objectives before warning that America could not hope to move forward with either Joe Biden or Donald Trump as president. “You can’t do it if you’ve got two 80-year-olds as the choice of where we’re gonna go,” she said.
That is the essence of her argument as Ms Haley tries, after Mr Trump’s thumping victory in the Iowa caucus, to block his march back to the Republican nomination. Ms Haley came in a close third there to Ron DeSantis, the governor of Florida, but both were out of hailing range of Mr Trump. The next day, her campaign began running a new advertisement in New Hampshire saying that Mr Trump and Mr Biden were America’s most disliked politicians, “consumed by chaos, negativity and grievances of the past”.
Yet the paradox of Ms Haley’s candidacy is that although she looks like the party’s future she, more than Mr Trump, can sound like its past. While Mr Trump continues to revise Republicanism, Ms Haley wants to return the party to its pre-Trump principles, to when it at least made a more substantial pretence of caring about cutting debt, reforming entitlement programmes and containing Russia, not to mention being polite and not getting indicted.
Though Mr Trump may have stolen Ronald Reagan’s campaign slogan (“Let’s make America great again”), he has otherwise shown little deference to the values Reagan laid down. In a sign of how Mr Trump has upended the party, and of his lingering anxiety about Ms Haley, he is running an ad in New Hampshire attacking her as wanting to cut Social Security, traditionally the kind of thing Democrats say Republicans are out to do.
There is a whiff of nostalgia in the very way Ms Haley is campaigning, not just in her commitment to retail politics but in the company she keeps. In 1988 another Governor Sununu—John, this Sununu’s father—rescued George H.W. Bush after he came in third in Iowa, delivering a victory that propelled him to the White House. “We’re copying a few pages out of that playbook,” Mr Sununu acknowledges, after snagging a chocolate bar from one of Chutters’s giant jars. “But only in that it’s tried and true.”
He argues that his state’s politics still depend on activating networks in towns such as Littleton, and that if Ms Haley, whom he endorsed last month, beats Mr Trump in New Hampshire, and then in her home state of South Carolina, “everything would flip upside down on him very, very quickly.” That is a very long shot but somehow, borne along on Mr Sununu’s stream of enthusiastic patter, it starts to sound more than barely plausible.
Mr Sununu, who is 49, has been elected to four consecutive two-year terms, most recently by more than 15 points, in a state whose two senators and two representatives are all Democrats. In his party he is a relative moderate on social issues, including abortion rights, but he boasts of being the most fiscally conservative governor in the country. He has little patience with the argument that Mr Trump has fundamentally changed the Republican Party, insisting he has merely hijacked it.
Mr Sununu thinks the anger of Americans over the failures of “elitists in Washington”, rather than any policies, led them to support Mr Trump in 2016 as a disrupter, and now as a victim. “He provides no leadership, no guidance, no basis in the Republican fundamentals of being fiscally conservative or limited government, or any of that,” Mr Sununu says. “His unique skill is making people feel like he’s sharing their troubles and chaos, right?” But Mr Trump is “using their anger for his own personal benefit. He’s not going to help them, at all. He didn’t before.” He fears a Republican wipeout at other levels of government if Mr Trump is re-elected.
He predicts that once Mr Trump leaves the scene—after a Haley victory, or further down the road—the old dynamics in the party will reassert themselves, “with no one individual trying to redefine where the party goes”.
Courage about conviction
This may sound wishful, or even delusional, particularly in light of Mr Trump’s showing in Iowa. But the picture remains more complicated than that. Less than 15% of registered Republicans turned out, and of them almost half preferred a different candidate from Mr Trump, a quasi-incumbent. More broadly, Republican governors—not just in New Hampshire but in states like Georgia, Ohio and even Iowa—are succeeding not as Trump acolytes, but with more conventionally conservative and pragmatic Republican politics. Congressional Republicans, particularly in the House, are falling in line behind Mr Trump, but Mr Sununu insists that is only because they need him to raise campaign money. He thinks they will also revert to previous form when “they won’t have this emperor, this, you know, this dictator, if you will”.
Maybe. For all his criticism of Mr Trump, Mr Sununu, a fierce opponent of Mr Biden, has also said he would support Mr Trump if he becomes the Republican nominee, even if he is convicted of a felony. Mr Sununu insists he was engaging in a “hypothetical” for “shock value”, to persuade Republicans they should not rely on the courts. “If you think Trump is a threat to democracy, then get up and participate in the democratic process and vote him out,” he says. “It happens in the primary.” But if it does not happen in the primary, conservatives such as Mr Sununu will have to ask themselves a hard question: whether they will really save their party by helping Mr Trump burn it down. ■
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The U.S. government is set to increase tariff rates on several categories of imported products. Some economists tracking these trade proposals say the higher tariff rates could lead to higher consumer prices.
One model constructed by the Federal Reserve Bank of Boston suggests that in an “extreme” scenario, heightened taxes on U.S. imports could result in a 1.4 percentage point to 2.2 percentage point increase to core inflation. This scenario assumes 60% tariff rates on Chinese imports and 10% tariff rates on imports from all other countries.
Price increases could come across many categories, including new housing and automobiles, alongside consumer services such as nursing, public transportation and finance.
“People might think, ‘Oh, tariffs can only affect the goods that I buy. It can’t affect the services,'” said Hillary Stein, an economist at the Boston Fed. “Those hospitals are buying inputs that might be, for example, … medical equipment that comes from abroad.”
White House economists say tariffs will not meaningfully contribute to inflation. In a statement to CNBC, Stephen Miran, chair of the Council of Economic Advisers, said that “as the world’s largest source of consumer demand, the U.S. holds all the leverage, which means foreign suppliers will have to eat the economic burden or ‘incidence’ of the tariffs.”
Assessing the impact of the administration’s full economic agenda has been a challenge for central bank leaders. The Federal Open Market Committee decided to leave its target for the federal funds rate unchanged at the meeting in March.
“There is a reason why companies went outside of the U.S.,” said Gregor Hirt, chief investment officer at Allianz Global Investors. “Most of the time it was because it was cheaper and more productive.”
U.S. President Donald Trump speaks alongside entertainer Kid Rock before signing an executive order in the Oval Office of the White House on March 31, 2025 in Washington, DC.
Andrew Harnik | Getty Images
President Donald Trump is set Wednesday to begin the biggest gamble of his nascent second term, wagering that broad-based tariffs on imports will jumpstart a new era for the U.S. economy.
The stakes couldn’t be higher.
As the president prepares his “liberation day” announcement, household sentiment is at multi-year lows. Consumers worry that the duties will spark another round of painful inflation, and investors are fretting that higher prices will mean lower profits and a tougher slog for the battered stock market.
What Trump is promising is a new economy not dependent on deficit spending, where Canada, Mexico, China and Europe no longer take advantage of the U.S. consumer’s desire for ever-cheaper products.
The big problem right now is no one outside the administration knows quite how those goals will be achieved, and what will be the price to pay.
“People always want everything to be done immediately and have to know exactly what’s going on,” said Joseph LaVorgna, who served as a senior economic advisor during Trump’s first term in office. “Negotiations themselves don’t work that way. Good things take time.”
For his part, LaVorgna, who is now chief economist at SMBC Nikko Securities, is optimistic Trump can pull it off, but understands why markets are rattled by the uncertainty of it all.
“This is a negotiation, and it needs to be judged in the fullness of time,” he said. “Eventually we’re going to get some details and some clarity, and to me, everything will fit together. But right now, we’re at that point where it’s just too soon to know exactly what the implementation is likely to look like.”
Here’s what we do know: The White House intends to implement “reciprocal” tariffs against its trading partners. In other words, the U.S. is going to match what other countries charge to import American goods into their countries. Most recently, a figure of 20% blanket tariffs has been bandied around, though LaVorgna said he expects the number to be around 10%, but something like 60% for China.
What is likely to emerge, though, will be far more nuanced as Trump seeks to reduce a record $131.4 billion U.S. trade deficit. Trump professes his ability to make deals, and the saber-rattling of draconian levies on other countries is all part of the strategy to get the best arrangement possible where more goods are manufactured domestically, boosting American jobs and providing a fairer landscape for trade.
The consequences, though, could be rough in the near term.
Potential inflation impact
On their surface, tariffs are a tax on imports and, theoretically, are inflationary. In practice, though, it doesn’t always work that way.
During his first term, Trump imposed heavy tariffs with nary a sign of longer-term inflation outside of isolated price increases. That’s how Federal Reserve economists generally view tariffs — a one-time “transitory” blip but rarely a generator of fundamental inflation.
This time, though, could be different as Trump attempts something on a scale not seen since the disastrous Smoot-Hawley tariffs in 1930 that kicked off a global trade war and would be the worst-case scenario of the president’s ambitions.
“This could be a major rewiring of the domestic economy and of the global economy, a la Thatcher, a la Reagan, where you get a more enabled private sector, streamlined government, a fair trading system,” Mohamed El-Erian, the Allianz chief economic advisor, said Tuesday on CNBC. “Alternatively, if we get tit-for-tat tariffs, we slip into stagflation, and that stagflation becomes well anchored, and that becomes problematic.”
The U.S. economy already is showing signs of a stagflationary impulse, perhaps not along the lines of the 1970s and early ’80s but nevertheless one where growth is slowing and inflation is proving stickier than expected.
Goldman Sachs has lowered its projection for economic growth this year to barely positive. The firm is citing the “the sharp recent deterioration in household and business confidence” and second-order impacts of tariffs as administration officials are willing to trade lower growth in the near term for their longer-term trade goals.
Federal Reserve officials last month indicated an expectation of 1.7% gross domestic product growth this year; using the same metric, Goldman projects GDP to rise at just a 1% rate.
In addition, Goldman raised its recession risk to 35% this year, though it sees growth holding positive in the most-likely scenario.
Broader economic questions
However, Luke Tilley, chief economist at Wilmington Trust, thinks the recession risk is even higher at 40%, and not just because of tariff impacts.
“We were already on the pessimistic side of the spectrum,” he said. “A lot of that is coming from the fact that we didn’t think the consumer was strong enough heading into the year, and we see growth slowing because of the tariffs.”
Tilley also sees the labor market weakening as companies hold off on hiring as well as other decisions such as capital expenditure-type investments in their businesses.
That view on business hesitation was backed up Tuesday in an Institute for Supply Management survey in which respondents cited the uncertain climate as an obstacle to growth.
“Customers are pausing on new orders as a result of uncertainty regarding tariffs,” said a manager in the transportation equipment industry. “There is no clear direction from the administration on how they will be implemented, so it’s harder to project how they will affect business.”
While Tilley thinks the concern over tariffs causing long-term inflation is misplaced — Smoot-Hawley, for instance, actually ended up being deflationary — he does see them as a danger to an already-fragile consumer and economy as they could tend to weaken activity further.
“We think of the tariffs as just being such a weight on growth. It would drive up prices in the initial couple [inflation] readings, but it would create so much economic weakness that they would end up being net deflationary,” he said. “They’re a tax hike, they’re contractionary, they’re going to weigh on the economy.”
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A man pushes his shopping cart filled with food shopping and walks in front of an aisle of canned vegetables with “Down price” labels in an Auchan supermarket in Guilherand Granges, France, March 8, 2025.
Nicolas Guyonnet | Afp | Getty Images
Annual Euro zone inflation dipped as expected to 2.2% in March, according to flash data from statistics agency Eurostat published Tuesday.
The Tuesday print sits just below the 2.3% final reading of February.
So called core-inflation, which excludes more volatile food, energy, alcohol and tobacco prices, edged lower to 2.4% in March from 2.6% in February. The closely watched services inflation print, which had long been sticky around the 4% mark, also fell to 3.4% in March from 3.7% in the preceding month.
Recent preliminary data had showed that March inflation came in lower than forecast in several major euro zone economies. Last month’s inflation hit 2.3% in Germany and fell to 2.2% in Spain, while staying unchanged at 0.9% in France.
The figures, which are harmonized across the euro area for comparability, boosted expectations for a further 25-basis-point interest rate cut from the European Central Bank during its upcoming meeting on April 17. Markets were pricing in an around 76% chance of such a reduction ahead of the release of the euro zone inflation data on Tuesday, according to LSEG data.
The European Union is set to be slapped with tariffs due in effect later this week from the U.S. administration of Donald Trump — including a 25% levy on imported cars.
While the exact impact of the tariffs and retaliatory measures remains uncertain, many economists have warned for months that their effect could be inflationary.
This is a breaking news story, please check back for updates.