US EXCEPTIONALISM IN QUESTION
Whereas Mr Powell calmed nerves by enjoying down the possibilities of a US recession and hinting that the Fed stays heading in the right direction for price cuts this yr, the query is whether or not such cuts could have the identical affect on the financial system the place coverage uncertainty triumphs over geopolitical and commerce norms.
In the meantime, falling shopper sentiment and spending, potential slowdown in hirings, falling manufacturing facility output, diminishing enterprise confidence and rising import costs threaten to take the shine off “US exceptionalism”.
That is necessary as a result of for the final 80 years, it’s this so-called “exceptionalism” that has fuelled the expansion of quite a few economies around the globe. Extra than simply US army dominance, it’s US “financial exceptionalism” and dominance that has supported economies from Peru to Poland, Jamaica to Japan, and Austria to Australia. Even China lifted itself on the again of US shopper demand.
For now, projections of an outright US recession appear considerably exaggerated, given the intrinsic energy of that financial system. That stated, economists had as early as mid-2024 projected a US financial slowdown someday later this yr. Mr Trump’s muscular commerce insurance policies may merely speed up and intensify the method.
On Mar 13, the Organisation for Financial Co-operation and Growth (OECD) printed its interim report Steering By means of Uncertainty, the place it warned of a softening of world development prospects.
Whereas the organisation nonetheless expects the US financial system to develop by 2.2 per cent this yr, this development may sluggish to 1.6 per cent in 2026 as uncertainty and tariffs play out its full results.
Canada and Mexico, the topic of US tariffs, will see higher affect, OECD reckons. OECD took down Canada’s development to 0.7 per cent this yr and subsequent, whereas Mexico is predicted to slip right into a recession. China, dealing with 20 per cent tariffs whereas dealing with an ailing financial system, will battle.
However Europe, regardless of dealing with the specter of greater sanctions, may see a revitalisation, if authorities stimulus (Germany, Europe’s largest financial system, simply introduced an enormous €500 billion (US$540 billion) stimulus package deal) and elevated defence spending have their meant impact.
