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What are the odds of an upset in Texas or Florida?

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“I’VE BEEN saying this for months now and a lot of people haven’t listened, but now they are: the stars are aligning in both Texas and Florida,” says Jaime Harrison, the chair of the Democratic National Committee. Aboard a swanky campaign bus in Jacksonville, Florida’s largest city, Mr Harrison’s tone shifts to distress as he explains that his party needs “multiple pathways to get the Senate majority”. In the final weeks of the campaign the map has become more daunting for Democrats. To their dismay, holding the upper chamber may now depend on flipping seats in America’s two biggest Republican-controlled states, where Donald Trump is expected to win comfortably.

New polls have Democrats like Mr Harrison feeling optimistic. Last week one in Texas showed Colin Allred, a linebacker-turned-congressman, in a dead heat with Ted Cruz, the Republican incumbent. In Florida Debbie Mucarsel-Powell, an Ecuadorean immigrant and one-term congresswoman, is trailing behind Rick Scott by as few as two or three points in her best polls. But The Economist’s forecast model, which accounts for other factors like candidate experience and the state’s voting history, shows a less rosy picture. By our reckoning, in each race Democrats have only a one-in-five chance of victory.

The Democratic Party is nonetheless hanging its hopes on these two races in part because the Republican incumbents are both deeply disliked. Mr Cruz, who has represented Texas since 2013, is a hardliner known for picking fights and not being a team player. “If you killed Ted Cruz on the floor of the Senate, and the trial was in the Senate, nobody would convict you,” Lindsey Graham, his colleague from South Carolina, teased in 2016. In 2021 Mr Cruz’s approval rating in Texas dropped when he jetted off to Cancún as his constituents suffered through a winter storm that left millions without power. On policy, his indelible support for Texas’s near-total abortion ban, one of America’s harshest, has done nothing to endear him to the plurality of Texans who support fewer restrictions.

Unpopularity contests

Mr Scott, in Florida, may be the rare politician with even fewer friends than Mr Cruz. He entered politics after the hospital chain he founded and ran had to pay out in America’s biggest Medicare fraud. After serving two terms as governor he won a Senate race in 2018 and was put in charge of the party’s campaign arm for the 2022 midterms. He presented a hard-right plan to remake the Republican Party, which included a proposal to sunset entitlement programmes that went over as poorly nationally as it did in Florida, a state where one in five residents is a pensioner. When Republicans did badly, they blamed him.

Mr Scott responded by challenging Mitch McConnell for the job of Senate majority leader. “Now I’m seeking to become the least popular man in Washington and I’m happy to report I’m making great progress,” he quipped in a speech at the Conservative Political Action Conference last year. At home his inability to curb Florida’s property-insurance crisis throughout his political career has left many locals reeling as hurricanes batter the coast and bankrupt families.

Democrats wanted both Republicans to have to confront these liabilities. Yet it was not until late September that the Democratic Senatorial Campaign Committee, responsible for getting Democrats elected, went on the offensive in Texas and Florida with a pair of multimillion-dollar ad-buys. Ms Mucarsel-Powell, Mr Scott’s opponent who says her initials stand for “Don’t Mess with my People”, reckons the money was too little, too late. In other battleground states, “you’re seeing investment and of course then you see shifts,” she says, but without that kind of cashflow to help the campaign talk to voters “nothing is going to happen.” Mr Scott, who in the past has written himself big cheques when he senses his rival in striking distance, has not spent even half of what he did in 2018, when he won by less than one point. Democrats hope that Florida’s ballot initiatives to legalise marijuana and codify abortion rights will give Ms Mucarsel-Powell a last-minute boost.

Plateauing poll numbers in Florida have national Democrats turning to Texas, where there seems to be better mojo after Mr Allred faced off with Mr Cruz in a debate two weeks ago. On October 25th Kamala Harris appeared at a rally with Mr Allred in Houston. It was the first time in decades that a Democratic presidential candidate has visited the state so close to election day. But on such conservative terrain any down-ballot Democrat is bound to struggle in a presidential cycle. This year “a vote against Ted Cruz is a vote against Donald Trump,” says Jason Sabo, a Democratic lobbyist in Austin.

Those paying attention to the campaigns could be forgiven for feeling a sense of déjà vu. Democrats have perennially promised that an increasingly diverse electorate would flip both states in their favour, only to suffer repeated losses. This time around some admit that they are playing the long game. In Texas a band of Democratic leaders launched the Agave PAC to build party infrastructure and “move past the boom-and-bust cycle of excitement”. And in Florida Nikki Fried, the state’s new Democratic Party chair, talks soberly about this year’s prospects. For the first time since the state flipped Republican the party is running state legislative candidates in every district, knowing they will lose in races big and small. “We’ve got to start somewhere,” she says.

Economics

Trump tariffs’ effect on consumer prices debated by economists

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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.

The researchers note that many other tariff proposals have surfaced since they published their findings in February 2025. 

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. 

The Fed targets its overnight borrowing rate at between 4.25% and 4.5%, with the effective federal funds rate at 4.33% on March 31, according to the New York Fed. The core personal consumption expenditures price index inflation rate rose to 2.8% in February, according to the Commerce Department. Forecasts of U.S. gross domestic product suggest that the economy will continue to grow at a 1.7% rate in 2025, albeit at a slower pace than what was forecast in January.  

Consumers in the U.S. and businesses around the world are bracing for impact. 
 
“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.” 

Watch the video above to learn how much inflation tariffs may cause.

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Economics

Trump’s tariff gambit will raise the stakes for an economy already looking fragile

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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.”

Tariffs could be a major rewiring of the domestic and global economy, says Mohamed El-Erian

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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Economics

Euro zone inflation, March 2025

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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.

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