Connect with us

Economics

Why Nikki Haley, crushed in her home state, vows to fight on

Published

on

WHEN DOES the act of hoping against hope go from admirable to absurd? Not yet apparently for Nikki Haley, the last woman left standing against Donald Trump and his seizure of the Republican Party’s presidential nomination. You can forgive Ms Haley for persisting through losses in the early primary states of Iowa and New Hampshire. But the indignity suffered on February 24th—a 20-point walloping in the primary election in South Carolina, the state she was governor of for six years—should have proven fatal.

And yet even out of those grim statistics, Ms Haley managed to extract something hopeful: “Today in South Carolina, we’re getting 40% of the vote. That’s about what we got in New Hampshire. I’m an accountant. I know 40% is not 50%. But I also know that 40% is not some tiny group.” She vowed to carry on her campaign until at least March 5th, also known as Super Tuesday, at which point another 21 states and territories will have conducted their elections. The embers of optimism present today will, in all likelihood, be extinguished by then.

Why continue? The first reason is that Ms Haley simply can. In America, moribund presidential campaigns are not usually dealt the coup de grâce by voters but by donors. The cash-burning machines simply run out of fuel. The central problem of Ms Haley’s campaign is that she is extraordinarily popular with the Trump-despising donors of her party—who showered her with $16.5m in contributions in January alone—but unacceptable to the Trump-adoring base of her party.

You could see this dilemma on vivid display at her election-night party held in a grand hotel in Charleston, South Carolina: fewer than 40 supporters had managed to tear themselves from the spectacular array of catered dips before them—crab, pimento cheese, spinach and artichoke—and enter the ballroom by the time the race was called, just seconds after the polls closed. (Later the room would fill up with supporters, who managed a surprisingly spirited cheer when the television screens showed that Ms Haley’s margin of loss had narrowed to only 16 points.) Like her catering budget, Ms Haley’s advertising budget was significantly higher than Mr Trump’s, too. Ms Haley and her allied political groups spent $8.4m on advertising in the state; Mr Trump spent almost none by comparison. The former governor embarked on a two-week bus tour; the former president flew in for a few rallies and quickly departed. All the extra expenditure of time and money simply did not matter.

Ms Haley and her advisers are fuzzy about how exactly this starting sequence of consecutive losses will ultimately spell victory. “We know that this is an uphill battle. We know that the road is difficult. We know that the math is challenging,” says Betsy Ankney, Ms Haley’s campaign manager. But Ms Ankney argues that because Mr Trump is unelectable in the general election, Ms Haley has an obligation to remain in the race for as long as she can. Indeed, in head-to-head polls against President Joe Biden, Ms Haley runs, on average, several points ahead of Mr Trump. Some polls even show her leading the hypothetical national popular vote by lopsided margins of 16 points or so.

Such margins are unheard of in modern-day, hyperpolarised politics; they probably do not reflect an actual possible result in November as much as they do the wide discontent felt with the two elderly candidates the major parties are preparing to nominate. In her stump speech, Ms Haley is fond of citing these polls as proof of her viability (though she scrupulously ignores any primary polling, which by our tally, has her down 57 points to Mr Trump). But winning the general election requires winning the primary election. That requires winning multiple state contests; but Ms Haley is struggling to win even one.

Her refusal to quit plainly enrages Mr Trump, who has declared that she and her enablers are personae non gratae in MAGA-land. “I feel no need to kiss the ring,” she said in a speech on February 20th teased to reporters as a major update on the state of the race (the kind of language used when a candidate is planning to drop out). Mr Trump’s needs may be more urgent than mere vanity. If he is declared the presumptive nominee his campaign lieutenants—including his daughter-in-law—could take over the leadership of the Republican Party. This could allow him to use the party to fund his considerable legal bills, now that Mr Trump is running low on the donor-provided funds that he has used for the last three years.

Bless her heart

The tortured, seemingly inevitable, demise of Ms Haley’s presidential campaign mirrors the fate of the increasingly endangered Reaganite wing of the party. Ms Haley is an internationalist who emphatically makes the case that America needs to continue providing military aid to Ukraine; followers of Mr Trump are withholding funds while their leader muses about encouraging Russian attacks on NATO allies. She frets about the national debt, while Mr Biden and Mr Trump studiously avoid the subject. She sees America as already great and good, while Mr Trump venomously attacks it, presenting himself as its only saviour. “Your victory will be our ultimate vindication, your liberty will be our ultimate reward and the unprecedented success of the United States of America will be my ultimate and absolute revenge,” he said at an apocalyptic speech delivered to CPAC, a conservative gathering, on the same day as the South Carolina primary. Trumpism is often an inversion of the spirit of John F. Kennedy’s famous inaugural address. “Ask not what your country can do for you,” Mr Trump asks of his fellow citizens: “Ask what your country can do for me.”

Understand these stakes and Ms Haley’s refusal to bend the knee makes more sense. In Congress, too, her faction is being broken. In the House of Representatives, sensible Republicans who might have helped reconstitute a post-Trump future like Mike Gallagher and Patrick McHenry are choosing to leave without seeking re-election. The House leadership, thoroughly aligned with Mr Trump, is utterly shambolic and unable to complete basic tasks of governance. In the Senate, this takeover has been slower due to lower attrition rates, but it is happening all the same. Mitch McConnell, the Republican Senate leader, thinks that Ukraine needs continued American aid and that Mr Trump disgraced himself on January 6th 2021. That places him in the minority of his own party. His command of his fellow senators, given his age and the increasing possibility of Mr Trump’s return, is slipping away.

Many ambitious Republicans have chosen to turn accommodationist with Mr Trump despite their consciences. Indeed, Ms Haley was guilty of this herself: going from opposing him in 2016, to joining his administration, to criticising him, before pledging not to challenge him in the presidential election—then challenging him while studiously avoiding any criticism of him, to finally emerging as a strong critic of Mr Trump’s character and record. Courage, even if it arrives late, is commendable. It is just that in this case, it may not make any difference.

Stay on top of American politics with The US in brief, our daily newsletter with fast analysis of the most important electoral stories, and Checks and Balance, a weekly note from our Lexington columnist that examines the state of American democracy and the issues that matter to voters.

Economics

Trump tariffs’ effect on consumer prices debated by economists

Published

on

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.

Continue Reading

Economics

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

Published

on

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.”

Get Your Ticket to Pro LIVE

Join us at the New York Stock Exchange!
Uncertain markets? Gain an edge with 
CNBC Pro LIVE, an exclusive, inaugural event at the historic New York Stock Exchange.

In today’s dynamic financial landscape, access to expert insights is paramount. As a CNBC Pro subscriber, we invite you to join us for our first exclusive, in-person CNBC Pro LIVE event at the iconic NYSE on Thursday, June 12.

Join interactive Pro clinics led by our Pros Carter Worth, Dan Niles, and Dan Ives, with a special edition of Pro Talks with Tom Lee. You’ll also get the opportunity to network with CNBC experts, talent and other Pro subscribers during an exciting cocktail hour on the legendary trading floor. Tickets are limited!

Continue Reading

Economics

Euro zone inflation, March 2025

Published

on

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.

Continue Reading

Trending