Stock markets rose for the fourth consecutive day as tech companies saw gains and investors interpreted President Donald Trump’s Friday comments on tariff negotiations.
Stock markets rose slightly Friday on the back of gains in tech stocks like Alphabet and Nvidia as well as conflicting messages from President Donald Trump on tariffs. The S&P 500 was up 0.75%, the Dow Jones was flat, and the tech-heavy Nasdaq jumped 1.25%. The rise caps off a positive week for markets. The S&P 500 is up 5.6% from Monday morning.
On Thursday, Alphabet, the parent company of search giant Google, beat analysts’ predictions for its first quarter and grew its top line year over year in Q1 by 12% to $90.2 billion. From market close Thursday to Friday afternoon, its stock rose 1.5%. AI chipmaker Nvidia saw an even bigger jump of 4.3% after an executive said Thursday that the tech giant hasn’t seen a pullback in demand for its chips.
Meanwhile, in a wide-ranging interview with Time published on Friday, Trump promised potential relief to investors when he said he’s made “200 deals” on tariffs. He declined to say which countries and promised that initial negotiations would end in three to four weeks.
Conversely, in what could be a bearish signal for global markets, he stated that he would consider it a “total victory” if tariffs on foreign imports were anywhere between 20% and 50% in one year.
The small Friday surge in the stock market follows three days of positive jumps as markets look to regain their losses after Trump’s “Liberation Day.” On April 2, the president unveiled a base 10% tax on all countries’ exports and targeted China through a crescendo of tariffs, which culminated in a 145% tax on Chinese exports. Trump’s tariff plan prompted markets to tank amid investor fears of an all-out trade war.
Xi Jinping, the president of China, retaliated against the U.S. with reciprocal tariffs, and Trump has since broadcast that taxes against China will “come down substantially.” In his interview with Time, Trump said that he’s been in touch with Xi. Chinese officials, however, have repeatedly denied that they’ve been in negotiations with the Trump administration, though they have recently exempted some U.S. imports from their own retaliatory tariffs.
Markets have also closely tracked Trump’s comments on the Federal Reserve, the U.S. central bank. The president has repeatedly criticized Jerome Powell, chair of the Fed, for not cutting interest rates quickly enough. Trump’s criticisms reached a boiling point when he suggested last week that he had considered firing Powell, undercutting the Fed’s long-standing independence from the executive branch. The 47th president has since walked back his rhetoric and said he had “no intention” of firing the Fed chair.
Uber CEO Dara Khosrowshahi says Uber could get cheaper if a recession comes.
REUTERS/Anushree Fadnavis
Rides and deliveries through Uber could get cheaper in a recession, CEO Dara Khosrowshahi said.
More people could sign up to work for the app, making Uber's labor costs lower, he said.
Uber is "recession-resistant," Khosrowshahi said.
Your ride to the airport or Friday-night dinner delivery through Uber might cost less if an economic downturn arrives, according to its CEO.
If the economy enters a recession, more people could sign up to drive and deliver for Uber, Dara Khosrowshahi said on Friday.
"If there is more unemployment, the cost of Uber will come down, because, to some extent, the cost of labor comes down," Khosrowshahi said at the Semafor World Economy Summit in Washington, D.C.
Khosrowshahi said that Uber tends to be "recession-resistant" since many people still want groceries, restaurant delivery, rides around town, and other "everyday use cases" — even if they cut back spending in other areas.
"You may put off going on vacation in Europe this summer, but you're still going to treat your family to a nice dinner," he said. "We specialize in small treats, not big treats."
Consumers have turned to said small treats when the economy — and their income — have deteriorated in the past.
Lipstick sales, for instance, rose during the 2001 recession as some shoppers looked to makeup as an affordable luxury even as they avoided larger purchases.
Economists, executives, and others worry that a recession could be sparked this year by President Donald Trump's tariffs.
Many retailers and consumer brands have said that they will pass the costs of the tariffs to shoppers, leading to higher prices on store shelves and online after years of post-pandemic inflation.
While shoppers pulled back spending in many areas last year, many did keep paying to have what they bought delivered through services including DoorDash, Instacart, and Uber Eats, earnings reports at the time showed.
Getting work on Uber and other gig apps might not be so easy for laid-off workers and others in a recession, though.
Current gig workers have told Business Insider that many apps are already saturated with people looking to claim work, and that some even have wait lists for prospective independent contractors.
Do you have a story to share about Uber or other gig work apps? Contact this reporter at [email protected] or 808-854-4501.
Uber CEO Dara Khosrowshahi said he owns a Tesla and loves it.
AP Photo/Markus Schreiber
Uber CEO Dara Khosrowshahi revealed that he drives a Tesla.
"Great car," Khosrowshahi said while praising the vehicle's self-driving capabilities.
As for his company, Khosrowshahi isn't worried about Tesla robotaxis.
Uber CEO Dara Khosrowshahi said on Friday that he isn't sweating Elon Musk's robotaxis.
"I don't think that there will be a winner-take-all," Khosrowshahi told Semafor editor-in-chief Ben Smith during the publication's World Economic Summit in Washington.
"The drama is winner-take-all, but I think that the transportation industry is a trillion-plus-dollar industry," he said. "You could argue that rideshare is going to finally beat personal car ownership in a world where you've got robots driving all over the place, so I think there will be plenty of room in the industry."
Khosrowshahi said Uber would "love to work with" Musk's company. He also revealed that he owns a Tesla.
"Great car," Khosrowshahi said.
Asked if he has tried full self-driving, Khosrowshahi responded, "It is delightful, but I have to take over every once in a while. It is an absolutely great product. Again, the car is a terrific car."
Musk isn't playing as nicely with his competitors in the autonomous taxi space. Earlier this week, Musk took a shot at Waymo during Tesla's Q1 earnings call.
Musk said the problem with Alphabet's robotaxis is that they cost "way mo' money."
"Tesla has never competed with Waymo — they've never sold a robotaxi ride to a public rider, but they've sold a lot of cars," John Krafcik said in an email to Business Insider.
Uber and Waymo are partnering on autonomous ride-hailing in Austin and Atlanta. Tesla is aiming to roll out a "pilot" robotaxi service in Austin in June.
Jerome Powell’s determination to ensure any jump in prices stemming from Donald Trump’s tariffs don’t spread through the economy has earned him the moniker “Mr. Too Late” from the president. For the Federal Reserve chair, that’s better than being Mr. Wrong.
Only a few months ago, Powell was steering his colleagues and the economy toward a so-called soft landing, a scenario where inflation and interest rates glide lower while unemployment remains low. Trump’s sweeping tariffs have upended the outlook, raising expectations for weaker economic growth and higher inflation this year.
That has prompted Fed officials to shift their strategy to one that might best be described as plotting a late rescue for the economy — hold rates steady for long enough to keep inflation contained, but be ready to lower them just in time to keep the labor market from crashing.
“They prefer to be late than wrong,” said Aditya Bhave, senior U.S. economist at BofA Securities. “They’re going to wait and see how things play out on both mandates.”
Fed officials are expected to leave rates unchanged when they next meet for their two-day policy meeting May 6-7 in Washington.
In recent weeks, Powell and his colleagues have warned that the inflationary impact of the president’s import duties could be more persistent than expected, and emphasized the Fed’s job is to make sure that any pickup in prices is limited. That means maintaining a tight posture on interest rates to keep expectations about prices under control, and holding rates steady absent a substantial rise in unemployment.
“Our obligation is to keep longer-term inflation expectations well anchored and to make certain that a one-time increase in the price level does not become an ongoing inflation problem,” Powell said at the Economic Club of Chicago on April 16.
Those remarks prompted swift criticism from the White House, with Trump urging Powell to lower interest rates now to head off an economic slowdown.
Waiting comes with risks: Once the jobless rate starts to rise, it typically moves up quickly and the economy tips into recession. But lowering interest rates too soon could allow price pressures to build again, something officials are unwilling to do after the post-pandemic inflation surge.
Pulling off a late rescue, say some Fed watchers, could be the ultimate test of Powell’s policy leadership, economic insight and timing.
“This is a new test for him,” said Claudia Sahm, chief economist at New Century Advisors. “You have both sides of the mandate going off track in a way where they will have to make a choice.”
Personal Mission
Securing a soft landing after a burst of post-pandemic inflation became a personal mission for Powell. He called the peak of the Fed’s rate-hiking cycle in December 2023, having cooled but not crashed the expansion. Inflation at that time was less than a percentage point above the Fed’s 2% goal, down from a four-decade high of 7.2% in 2022.
When it came time to lower rates in September, Powell persuaded his colleagues on the Federal Open Market Committee to join him in an aggressive half-point cut to keep the labor market strong. They ended up cutting rates by a percentage point over three meetings before holding this year as inflation seemed to settle above their target.
Trump had reclaimed the White House by then, and at the Fed’s March meeting, it was clear that the threat of tariffs would keep prices elevated — leading officials to signal expectations for higher inflation and slower growth.
Trump’s tariff plans arrived at a sensitive time, with the previous five readings on core inflation coming in surprisingly hot. The Fed’s preferred gauge of underlying inflation stood at 2.8% in February, and economists expect it eased to 2.6% in March — still well above the central bank’s target.
“They did not reinstate price stability,” and may have eased too aggressively, said Lindsey Piegza, chief economist at Stifel Financial Corp. “I am concerned about inflation stability with or without the tariffs. We are at risk.”
Those fears extend beyond Fed watchers. Consumer inflation expectations surged in April, according to a report earlier Friday from the University of Michigan, and economists surveyed by Bloomberg this month contend that the trade war makes the odds of a U.S. recession a coin flip.
A downturn would undoubtedly provoke even greater hostility from the White House. Trump has already hinted at firing Powell, though subsequently backed away from the threat when it roiled financial markets.
But a central bank that fails again to control inflation after being above target for four years could, indeed, lose credibility.
“We were so close to nailing the soft landing,” said Diane Swonk, chief economist at KPMG. “The biggest mistake the Fed could make would be to instill additional inflation as the economy weakens.”
Jerome Powell’s determination to ensure any jump in prices stemming from Donald Trump’s tariffs don’t spread through the economy has earned him the moniker “Mr. Too Late” from the president.
During my tenure in Congress, I observed a fundamental truth about American democracy—when Americans vote for change, they vote because of their wallets. It's that simple.
The pattern of anti-incumbency across three consecutive presidential cycles underscores this reality. Americans have repeatedly rejected sitting administrations not so much because of ideology or partisan loyalty, but because of their lived economic experience. Forget the Dow; when voters feel the pinch at the grocery store or the gas pump, they demand change.
The public has now given a second chance to a Trump-led Republican administration, whose campaign messaging of building a stronger and more thriving economy resonated with voters.
Trump will need to substantively boost the economy if he and Republicans want to maintain power. The upcoming showdown over renewing the 2017 Trump tax cuts provides an opportunity for stimulus provisions to supercharge two key pillars of the economy: small businesses and housing.
Retroactive R&D expenses fix—a stimulus boost for jobs and GDP
Over the past three years, the Tax Cuts and Jobs Act, or TCJA, has increased taxes on many small businesses by substantial margins, specifically the businesses that are making improvements to their products or experimenting with ways to be more efficient.
That’s because under Section 174 of the act, businesses are forced to amortize certain technical expenses over multiple years instead of deducting them all at once. For example, if you designed an update to a product, you normally could take a 100% deduction of all the costs associated with that update. Under the TCJA, you would pay tax on 90% of those costs in the first year instead.
While it may seem like an esoteric tax issue, the reality is that there are tens of thousands of businesses across the country seeing anywhere from 300% increases in tax to outright bankruptcy. Smaller businesses are feeling the pain the most, as they do not have the capital reserves to survive massive tax hikes.
A small steel fabrication company I know went from paying $35,000 in tax to owing $1.3 million, only because they employed engineers. This was not the intended policy. To add insult to injury, China offers a deduction 20 times that of the U.S. for the same expenses.
Retroactively fixing Section 174 would be a massive stimulus package for small businesses. The fix has widespread bipartisan support (the previous solution, H.R. 7024, passed the House 357 votes to 70), but the current legislation only fixes it on a go-forward basis, meaning only starting January 2025. If businesses can recoup their older tax overpayments, even just for 2024, it would immediately infuse the economy with tens of billions of dollars.
More importantly for Trump, it’s money that would be available to U.S. businesses in 2025 well before the midterms and would further endear him to a crucial segment of voters who are praying this gets fixed.
Fighting inflation with low-income housing
I learned in Congress that a high-flying economy is no match for a sagging housing market. Since the pandemic, we’ve seen the largest increases in rents since we’ve been keeping records. Mortgage rates have leveled off but are still locking millions out of the American dream of homeownership. Skyrocketing inflation across insurance, labor, and supply costs are putting intense pressure on homeowners, landlords, and working American families in nearly every state.
When we say we have an inflation problem, what we really mean is that we have a housing cost problem. The relative importance of housing costs within the Consumer Price Index (CPI), which measures the change in prices for consumer goods and services, represents a 35% share of all items. The cost of shelter, including rent and mortgage payments, has increased for 57 consecutive months. To put it another way, if shelter were excluded from the CPI, overall inflation would have been at or below the Fed’s 2% target level in 16 of the last 20 months.
Here, again, changes to tax policy can power a transformation in housing costs, lowering bills for millions of families. Since 1986, the Low-Income Housing Tax Credit (LIHTC) has been a trusted mechanism for stimulating economic growth while building and preserving attainable, affordable homes. The LIHTC works by subsidizing development costs of low-income housing by allowing those that invest in qualified projects to take up to a 9% tax credit against the cost of construction. It gives decision-making to the states, incentivizes private capital and management, and does not rely on big bureaucracy. The enormity of this incentive has resulted in 4 million affordable homes for 9,280,000 families over the last 30 years.
Republicans and Democrats have put forward legislation to expand and strengthen the tax credit, which would boost housing supply at a critical moment. Again, this is overwhelmingly supported by both parties. A 12.5% increase to the allocation to each state’s Housing Credit ceiling, alongside a bevy of other enhancements, was also included in the aforementioned H.R. 7024. If Trump champions this change, it would result in approximately 200,000 additional affordable homes over the next decade than what would have otherwise been possible.
Realizing Trump’s economic promise
Looking ahead, the administration's success will be measured by its ability to translate policy into pocketbook results for everyday Americans. The window of opportunity is clear but finite; while the proposed employment initiatives and tax reforms provide a framework, their success depends entirely on execution that impacts kitchen-table economics.
With a clear mandate for change and a comprehensive economic playbook, the Trump administration now faces its defining challenge: creating an economy that delivers tangible benefits across all segments of American society. Championing these two provisions would tell the American people that Congress and President Trump care about the real economy and the Americans who make it hum.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
Michael Pettis, a distinguished economist and professor at Peking University in Beijing, recently argued that “the U.S. would be better off without the global dollar.” His thesis is highly relevant because it agrees with that of Stephen Miran, the chairman of President Trump’s Council of Economic Advisers, whose work has turned into what is termed the “Mar-a-Lago Accord.”
While his conclusion was likely exaggerated by a headline writer, Pettis does attempt to make the case that the U.S. would be better off if its currency and financial markets were not the dominant global financial suppliers. This is akin to arguing that sliced bread was a destructive innovation.
The notion that dollar dominance is contributing to the structural, trade, or financial imbalances in the world is at the heart of the Mar-a-Lago Accord. Its proponents claim that the accord will lower the value of the dollar, eliminate the U.S. trade deficit, and shift global production back to the U.S.
U.S. dollar dominance—no downside
As it turns out, there is a longstanding consensus in economics and finance that a country whose currency is the dominant international reserve currency enjoys unambiguous benefits in terms of seigniorage (read: profits) from its ability to maintain outsized money stocks and greater credit supplies because of foreign demand for domestic currency (reserves) and financial assets. Full stop. There is no downside to having a currency that foreigners want to hold in their portfolios or assets denominated in that currency that foreigners also desire for relative liquidity and return considerations and because it improves access to credit denominated in the same liquid currency. This is the so-called “exorbitant privilege” associated with the U.S. dollar, and why the U.S. can easily finance its systemic trade deficit.
But Pettis, and like-minded advocates of the accord, drag up an old canard that the dominant currency will also have an inflated value that makes it difficult for manufacturers and farmers to compete globally. These goods tend to be quite standardized and readily available in a multitude of national markets. For that reason, the relative price of these goods is also set in global markets and is independent of the relative currency value. A domestic potato does not become more expensive in dollars or in terms of other commodities when the exchange rate, or the value of the dollar in terms of other currencies, rises, unless that potato is only available as an import. Exchange rates matter to the extent that resources or outputs are influenced by them. In the U.S. case, most products are largely sold domestically or exported, and it is the domestic demand market that largely sets prices. One important exception, especially in agriculture, is the availability of domestic credit. The dominant currency country tends to have the greatest access to credit at relatively unchanged prices, providing a reinforcing factor to the U.S. comparative advantage in food products and in the case of domestic agriculture.
Proponents of a Mar-a-Lago Accord tend to think of the U.S. available supply of assets as infinitely available at relatively unchanged liquidity and relative returns. This is false. When supplies of government securities become threatened by political intervention, foreigners can substitute toward private sector securities, reducing any perceived political risk. Similarly, they can substitute across currency denominations or political risk as relative liquidities or risks change. There is no question that managing a portfolio of U.S. dollar or foreign currency denominated U.S. assets can be difficult and cannot assume infinite supplies of particular assets across suppliers. But standard risk-return considerations make this easier in the domestic market of the dominant currency. On the other hand, some proponents of the accord advocate a tax or charge on foreign purchases of U.S. assets. Due to the heterogeneity of such assets, it would be very difficult to design a comparable charge across assets that adjusts for differences in various risk and return expectations.
A different situation
A third fallacy in proposals for a Mar-a-Lago Accord is that the supposed historical parallels are, in fact, nonexistent. Proponents focus on the 1985 Plaza Accord, when major European countries, Japan, and the U.S. decided to lower the value of the dollar through coordinated intervention in economic policies. The prospective success of this precedent cannot be assumed to apply as a general matter. From 1980 to 1985, the value of the dollar rose 46.3%. This was no accident or random event. Instead, it was due to Reaganomics; namely, cuts in U.S. tax rates and policies designed to reduce inflation. The return to investment in the U.S. rose for both domestic and foreign investors. This boosted domestic investment and productivity. The Plaza Accord involved a set of U.S. and foreign policies to depreciate the dollar. By 1990, it was clear that these policies were largely successful in reversing the earlier appreciation.
The current situation is quite different than the 1980s. While an extension of the 2017 Trump tax cuts (read: the avoidance of a tax increase) is on the table, the recent rise in the value of the dollar is far smaller than it was in the 1980s. Moreover, some of the recent appreciation of the dollar has already evaporated.
There was never a reason for a Plaza-like Accord before the recent tariff brouhaha, and there is none now. America should count its blessings as the world’s dominant-currency country.
Steve Hanke is a professor of applied economics at Johns Hopkins University. John A. Tatom is a fellow at the Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
The Swiss president says Switzerland is among 15 countries with which the United States plans to conduct “privileged” negotiations to help reach a deal in the wake of sweeping U.S. tariffs on dozens of countries that have shaken global markets.
Karin Keller-Sutter, in an interview with broadcaster SRF published Friday, said she was “satisfied” with talks in Washington this week that included an International Monetary Fund conference and her one-on-one meeting with U.S. Treasury Secretary Scott Bessent. Keller-Sutter also serves as Switzerland’s finance minister.
“The United States has defined a group of 15 countries with which it wants to find ... a quick solution in this tariff question. Switzerland is part of this group of these 15 countries,” she told reporters separately late Thursday in Washington.
It was not immediately clear which 14 other countries were included, but she told SRF that “the U.S. envisages conducting — I would say somewhat privileged — negotiations and finding solutions” with that group.
Before the Trump administration paused some of its most stringent tariff plans, products imported from Switzerland had been set to face tariffs of 31% — more than the 20% tariffs on goods from the European Union. Switzerland is not a member of the 27-country bloc.
According to figures published by the Swiss Embassy in Washington, the U.S. has been Switzerland’s most important goods export market worldwide since 2021, while Switzerland is the fourth most important export market for U.S. services. The bilateral trade volume in goods and services between Switzerland and the U.S. reached a total of $185.9 billion in 2023, the embassy says on its website.
Keller-Sutter said a memorandum of understanding was to be drawn up after which negotiations can begin. A document would also lay out the most important topics, and “we have also been assigned a specific contact person. This is not easy in the U.S. administration,” she was quoted as saying.
“The U.S. authorities have clearly expressed their desire to find a solution with Switzerland,” Keller-Sutter told SRF. She said no timetable had been set, but the two sides agreed to move forward quickly “because uncertainty is poison for the economy.”
Trump’s sweeping “Liberation Day” tariffs on April 2 set off turmoil in world stock markets. A week later, Trump spoke by phone with Keller-Sutter in a conversation that her office said focused on tariffs. She emphasized the “important role of Swiss companies and investments" in the U.S.
Hours later, Trump announced the U-turn that paused the steep new tariffs on about 60 countries for 90 days, fanning speculation — which was not confirmed — in some Swiss media that her chat with Trump might have played a role in the change of course.
On Thursday, Swiss Foreign Minister Ignazio Cassis, during a trip to Beijing, said the U.S. tariffs have thrust the affected countries into “a sort of coalition” to try to reach a deal with the United States. And on Monday, Swiss pharmaceuticals giant Roche announced plans to invest $50 billion in the U.S. over the next five years — an unspecified amount of which has already been under way.
“The U.S. authorities have clearly expressed their desire to find a solution with Switzerland,” Karin Keller-Sutter, Switzerland’s finance minister said.
Nobel laureate Paul Krugman warns that President Trump’s unpredictable and often reversed tariff policies are creating deep uncertainty, discouraging business investment and thus increasing the risk of recession. While concerns over inflation exist, Krugman emphasizes that the greater threat lies in declining investment in trade-sensitive sectors owing to the lack of stability in U.S. foreign policy.
If there’s one thing investors don’t like it’s uncertainty, and President Trump’s ever-evolving stance on tariffs is not helping matters.
Investors have no way to shield themselves from the impact of the White House’s foreign policy decisions, said economist and Nobel laureate Paul Krugman, adding that the political system offers no safety net to prevent extreme proposals.
“The secret sauce of the Trump tariffs is that they are extremely uncertain,” Krugman told the Goldman Sachs Exchanges podcast earlier this week. “Nobody knows what they will be. Nobody knows what comes next. Now, if you’re a business trying to make plans, would you want to invest under those conditions?”
He added: “An unpredictable tariff rate that can change the next day is really a depressing effect on demand. And that’s clear for business investment, but it also affects consumers. It affects homebuilders. So the uncertainty is the reason why a recession seems likely.”
11th-hour U-turns
President Trump has developed a habit for 11th-hour reprieves when it comes to foreign policy.
The precedent was set with Mexico and Canada, when early in his term he announced economic sanctions on the neighboring nations in a bid to stem the flow of drugs into the U.S. and tighten immigration.
These tariffs were then paused before going into effect a month later.
The story was similar with the tariffs announced on “Liberation Day,” which included hikes for specific, major trading partners, including a 20% increase on the European Union, 24% on Japan, and 26% on India.
A week later the Oval Office announced a 90-day pause on the sweeping policy—which included a 10% blanket duty raise on all other nations—for every country except China, which had responded with retaliatory action and as such now faces a 145% duty on exports to America.
It could be argued that by announcing the pause, President Trump acted on the appeals of analysts begging him not to spark a global trade war and potentially implode the stock market.
Conversely, a flip-flopping routine on major foreign policy doesn’t do much to bolster confidence in Trump’s administration—putting the Oval Office in something of a lose-lose situation.
Krugman said: “In some ways I almost think that the policy reversals, to the extent they happen … make it worse, because the reversal may be reversed a day or a week or a month later, so it doesn’t make investing any easier, because you still have no idea what the world will look like by the time your investment matures.”
Krugman argues that, unfortunately, American law presents no barriers to this continuing indefinitely.
“It’s hard, because the thing about trade policy in particular is that, under the way it’s set up in the United States, the law gives the president enormous discretion,” he added. “No legislation has to be passed. No commitments need to be made. Which means that he can change his mind overnight.
“We set up that system to create some flexibility around tariffs that were negotiated with other countries. We needed something that would let the United States respond if the political pressures became too great, but it was never intended to be used to make massive changes in trade policy. But that’s what’s happening now.
“And so even if they said, ‘No, this is going to be our tariff policy, and it will remain unchanged for the next three years,’ a week later they could say, ‘Actually, we’ve decided to change it.’ And who can guard against that?”
Outlook is down to investments, not inflation
One of the major questions about Trump’s tariff plan is how inflationary it would prove to be: Would businesses push the price increases in their supply chain through to consumers?
The general consensus is that yes, the increases will be passed on, with members of the Federal Open Market Committee (FOMC) saying they’re aware this may pose a threat to their 2% inflation target.
It’s worth reiterating that this is a potential future outcome, but if markets and the public begin acting as though they are already in that inflationary environment it may become a self-fulfilling prophecy—and that’s before the tariffs have even come into effect.
Krugman warns a slowdown will likely occur because of slowing business investments as opposed to a drop-off in consumer demand.
“I’d say it’s mostly business investment in tradable goods, in sectors that are either competing with imports or exports, or things that are more strongly affected by the tariff regime,” Krugman added. “It’s not clear to me why investments in health care, say, should be particularly affected by this. And our economy is probably about 75% non-tradable, so it’s a limited set of stuff.”
Wary of the risk of an economic downturn after Trump’s so-called Liberation Day tariffs, 20% of Americans say they are “doom-spending” as a way to cope with fear, anxiety, or pessimism about the future, according to a new report. While delinquencies are already on the rise, consumers are also stockpiling goods and making substantial purchases.
Amid the fallout of President Donald Trump’s so-called Liberation Day tariffs that sent the stock market spiraling, some Americans are doom-spending out of fear of higher prices, a report shows.
As JPMorgan holds the risk of a recession at 60%, a condition that makes consumer buying stagnate, one in five Americans is “doom-spending” to cope with fear, anxiety, or pessimism about the future, according to a report from CreditCards.com.
John Egan, a personal finance expert for CreditCards.com, said that these habits “can lead to piling up credit card debt.”
As delinquencies have already started to rise to their highest level in nearly five years, 37% of Americans surveyed report they are likely to go into or add to their credit card debt this year, while 19% say they are “somewhat likely” to do so.
While Trump temporarily walked back some of his hefty tariffs by implementing a 90-day reprieve, consumers are looking to get ahead of price hikes in case of an economic downturn by spending more now, and lenders are noticing.
“We’ve seen a shift towards essentials and away from travel and entertainment,” Citigroup’s chief financial officer Mark Mason said during the company’s quarterly earnings call last week.
Some 27% of Americans say they’ve stockpiled goods, and 14% say they plan to hoard goods soon. Among the most commonly hoarded items include food (74%), personal care items (60%), toilet paper (48%), water (47%), and home goods (43%).
“While it makes sense to stockpile certain items to avoid tariffs, only buy what you actually need and will actually use. Otherwise, you might wind up overspending,” Egan said.
Roughly 50% of Americans purchased something with a price tag of more than $500 since last November and half of them said fear of higher prices influenced their decision.
China, home to tech manufacturing, still bears a 145% tariff on exports to the U.S., and 22% of Americans who made purchases more than $500 say they spent it on electronics. Other common purchases have been home improvement materials (18%), home appliances (14%), cars (12%), furniture (12%), and homes (4%).
Logistics experts are warning that cargo volumes at U.S. ports are undergoing a precipitous drop. This trend is most apparent in Los Angeles, home to the nation’s busiest port, and one that is first to feel any drop-off from Asian shipping. The drop in container shipping is the latest sign the White House’s trade war is having a real effect on the U.S. economy, and one sizable group of workers is poised to feel the impact first: long-haul truckers.
On Thursday, the founder of a media firm that tracks shipping trends reported that daily volumes this week are equivalent to Thanksgiving and Christmas Day—the two slowest shipping days of the year. The founder, Craig Fuller, also warned truckers to avoid hauling shipments to Los Angeles since they would likely have to “deadhead” back home—the industry term for driving an empty load.
Trucking volumes out of Los Angeles are equivalent to Thanksgiving and close to Christmas.
Thanksgiving and Christmas are typically the lowest volume days of the year.
Truckers should avoid taking freight to Southern Cal, else risk having to deadhead back to Dallas to get… pic.twitter.com/fdF0JCozWO
The drop-off coincides with the ongoing fallout from the global trade war launched by President Donald Trump, which imposed tariffs on countries around the world, and singled out China for a dramatic 145% levy. This has led to a resulting drop-off in orders for Chinese goods, though the effect on shipping is only hitting U.S. shores now.
This week, though, the effect is beginning to be felt at West Coast ports—and is soon going to become far more pronounced. Here is a chart from Port Optimizer, hosted by the Port of Los Angeles, that shows what is poised to happen to import volumes:
Import-Volumes-graphic
Those declining volumes will translate directly to even fewer loads for truckers at the Port of Los Angeles, but that is only the beginning of the ripple effects. In addition to a coinciding drop-off at other West Coast ports like Long Beach and Seattle, truckers in other cities—where vessels take longer to arrive from Asia—will see deliveries dry up.
On X, entrepreneur Molson Hart posted shipping route data to show that in the next two weeks, containers will stop arriving in Houston and Chicago, and that the same will happen in New York a week later:
The White House has put itself and the country in a bad situation but doesn’t realize it yet.
Around April 10th China to USA trade shut down.
It takes ~30 days for containers to go from China to LA.
Earlier this week, President Trump indicated that he was ready to scale back some of his tariffs. That may not be enough, however, to reassure skittish trading partners wary that the President’s tariff policy could shift again. Meanwhile, a near-term drop-off in container traffic is now a certainty, meaning that U.S. truckers may have to get used to driving fewer miles for the foreseeable future.
Germany's economy is expected to post zero growth this year, outgoing Economy Minister Robert Habeck said Thursday, blaming US President Donald Trump's sweeping tariffs.
"The US trade policy of threatening and imposing tariffs has a direct impact on the German economy, which is very export-oriented," he said, presenting the forecast.
The German government had previously expected slight GDP growth of 0.3 percent for this year for Europe's top economy, which shrank for the past two years.
It also cut its growth forecast for 2026 to one percent from 1.1 percent.
The United States is Germany's largest trading partner and last year took about 10 percent of its exports, from cars to chemicals.
Under Trump, it now levies a 10 percent tariff on European Union exports into the country, having earlier announced a 20 percent rate which was then paused.
"Tariffs and trade policy turbulence are hitting the German economy harder than other nations," Habeck said.
"We depend on open markets, functioning markets, and a globalised world," he told a Berlin press conference. "That's what has made this country rich."
German GDP shrank by 0.3 percent in 2023 and by 0.2 percent in 2024, as it was battered by higher energy prices following Russia's full-scale invasion of Ukraine.
It has also been hit by increasingly fierce Chinese competition in key industries such as automobiles and machinery.
"I would say that we are going through a paradigm shift when it comes to the basic earners for the German economy," Habeck said.
"Our big trade partners, China and the USA, and our neighbour, Russia, are causing us problems."
'Made in Germany is over'
Habeck also said the government had taken few steps to stimulate the economy since the coalition of outgoing Chancellor Olaf Scholz collapsed in November, paving the way for elections in February.
"For half a year now, hardly any initiative has been taken to counteract the stagnation through legislation or measures," he said.
Looking ahead, Habeck voiced hope a new spending package worth many hundreds of billions of euros could help revive the economy under conservative Friedrich Merz, who is expected to take power in early May.
"It's good that investments are finally being made," Habeck said, adding that they "can offset the slump or the pressure on foreign trade to some extent".
The growth forecast took into account the "positive impetus" from the debt-financed investments and also assumed there would be no further escalation of the tariff "madness", he said.
Habeck also called on his successors to strengthen European unity and independence so that Germany could hold its own against economic giants.
"Made in Germany is over," he said. "We are a single market and it is through that market that we will bring investment back into Europe."
"We must support the EU in taking a clear position, in negotiating confidently with the USA and at the same helping it be prepared to impose effective counter-measures."
"The situation of the German economy is serious," said Helena Melnikov, head of the German Chamber of Industry and Commerce.
She called for "the future federal government to move forward and, above all, find solutions to the tariff dispute with the US at the EU level", stressing that time is of the essence.
"The U.S. trade policy of threatening and imposing tariffs has a direct impact on the German economy, which is very export-oriented," outgoing Economy Minister Robert Habeck said.
Stock markets rose for the third consecutive day as companies reported solid earnings amid rising investor hopes for a detente in the U.S. trade standoff with China.
Stock markets closed higher Thursday, buoyed by hopes of a cooling-off in the U.S.-China trade wars after Trump administration officials earlier this week painted a picture of progress.
The S&P 500 gained 2%. The Dow rose 1.2%, or 486 points, while the tech-heavy Nasdaq closed 2.7% higher.
The rally began earlier this week after President Donald Trump softened his stance toward Federal Reserve Chair Jerome Powell, whom he had clashed with over the central banker's stark assessment of tariffs. Treasury Secretary Scott Bessent reportedly suggested a "de-escalation" with China and offered a rosy picture of potential trade deals. More than 100 countries have come to the table to negotiate deals, Bessent said in a public speech at the Institute for International Finance.
American Airlines and Southwest reported strong profits on Thursday, sending their stocks higher even as American pulled its guidance for the rest of the year due to the uncertain outlook. Toy company Hasbro was a winner rose 15% after reporting outsize growth for its Wizards of the Coast segment.
Treasury yields fell, with the yield on the 10-year Treasury dropping to 4.30% from 4.40%.
Southwest Airlines Co.’s chief executive officer isn’t waiting for economists to declare a technical downturn in the US economy: As far as he’s concerned, a recession already has started.
Noting demand for domestic leisure travel has dropped more than he’s ever seen outside of the pandemic, Bob Jordan said Thursday that an economic contraction is in full swing, at least in the US airline industry. The CEO said his company expects second-quarter revenue to fall by six percentage points, following a three-point decline in the first three months.
“I don’t care if you call it a recession or not, in this industry that’s a recession,” Jordan said in an interview.
Southwest is among a growing number of airlines pulling financial guidance for the full year as a lack of economic clarity feeds uncertainty among consumers, making it impossible to accurately forecast what will happen with travel demand and pricing for the rest of 2025.
The Dallas-based carrier is more dependent on domestic leisure travelers for revenue than US peers with more extensive international operations and corporate business clients. That leaves its bookings vulnerable to sudden shifts in American consumers’ sentiment.
“When consumers are uncertain, they pull back,” Jordan said. “Consumers can immediately stop spending.”
Americans’ trust in President Donald Trump to bolster the U.S. economy appears to be faltering, with a new poll showing that many people fear the country is being steered into a recession and that the president’s broad and haphazardly enforced tariffs will cause prices to rise.
About half of Americans are “extremely” or “very” concerned about the possibility of the U.S. economy going into a recession in the next few months.
While skepticism about tariffs is increasing modestly, that doesn’t mean the public is automatically rejecting Trump or his approach to trade. However, the wariness could cause problems for a president who promised voters he could quickly fix inflation.
Trump shows vulnerability on the economy
Three months into his second term, Trump’s handling of the economy and tariffs is showing up as a potential weakness. About 4 in 10 Americans approve of the way the Republican president is handling the economy and trade negotiations. That’s roughly in line with an AP-NORC poll conducted in March.
Matthew Wood, 41, said he’s waiting to see how the tariffs play out, but he’s feeling anxious.
“I’m not a huge fan of it, especially considering China and going back and forth with adjustments on both ends,” said Wood, who lives in West Liberty, Kentucky, and is unemployed. “Personally, it hasn’t affected me as of yet. But, generally, I don’t know how this is going to come to an end, especially with the big countries involved.”
Still, Wood said he changed his registration from Republican to independent, having been turned off by Trump’s attitude and deference to billionaire adviser Elon Musk. Wood voted for Trump last year and said he’s willing to give the president until the end of the year to deliver positive results on tariffs.
About half of U.S. adults, 52%, are against imposing tariffs on all goods brought into the U.S. from other countries. That’s up slightly from January, when a poll found that 46% were against tariffs. Driving that small shift largely appears to be adults under age 30 who didn’t previously have an opinion on tariffs.
Trump supporter Janice Manis, 63, said her only criticism of Trump on tariffs is that he put in a partial 90-day pause for trade negotiations with other countries.
“Actually, I think he shouldn’t have suspended it,” said Manis, a retired sheriff’s deputy from Del Rio, Texas. “Because now China is trying to manipulate all of these other countries to go against us, whereas if he would have left all the tariffs in play then these countries would be hit hard. But, oh, well, things happen.”
Skepticism remains about Trump’s tariff approach
Not quite 100 days into Trump’s second term in the White House, people around the country are bracing for possible disruptions in how they spend, work and live. The U.S. economy remains solid for the moment with moderating inflation and a healthy 4.2% unemployment rate, yet measures such as consumer confidence have dropped sharply.
Trump has used executive actions to remold the global economy. He’s imposed hundreds of billions of dollars a year in new import taxes — albeit partially suspending some of them — launching a full-scale trade war against China and pledging to wrap up deals with dozen of other countries that are temporarily facing tariffs of 10%. Financial markets are swinging with every twist and turn from Trump’s tariff pronouncements.
Many Americans are not convinced this is the right approach. About 6 in 10 say Trump has “gone too far” when it comes to imposing new tariffs, according to the poll.
Stocks are down this year, while interest charges on U.S. government bonds have climbed in ways that could make it more costly to repay mortgages, auto loans and student debt. CEOs are scrapping their earnings guidance for investors and seeking exemptions from Trump’s tariffs, which hit allies such as Canada and even penguin-inhabited islands.
Trump seemed to recognize the drag from tariffs as he highlighted this week the possibility of a deal with China. Treasury Secretary Scott Bessent had also said in a closed-door speech that the situation with China is not “sustainable.”
Widespread concern about rising grocery prices
About 6 in 10 U.S. adults are “extremely” or “very” concerned about the cost of groceries in the next few months, while about half are highly concerned about the cost of big purchases, such as a car, cellphone or appliance. Less than half are highly concerned about their ability to purchase the goods they want — a sign of the economy’s resilience so far.
Retirement savings are a source of anxiety — about 4 in 10 Americans say their retirement savings are a “major source” of stress in their lives. But fewer — only about 2 in 10 — identify the stock market as a major source of anxiety.
“This whole tariff war is just a losing situation not only for the American people but everybody worldwide,” said Nicole Jones, 32. “It’s revenge — and everybody’s losing on it.”
The Englewood, Florida, resident voted last year for then-Vice President Kamala Harris, who replaced the incumbent president, Joe Biden, as the Democratic nominee. Jones hadn’t given much thought to tariffs until recently, and now, as an occupational therapy student, she also worries about losing her financial aid and facing high amounts of educational debt.
“Things are more expensive for us,” she said.
And most Americans still think the national economy is in a weak state.
The difference is that Republicans — who largely thought the economy was in bad shape when Biden was president — now feel more optimistic. But Democrats have become much more bleak about the country’s financial future.
“It wasn’t all sunshine and rainbows, but we were doing fine,” Jones, a Democratic voter, said about the economy before Trump’s policies went into effect.
Americans’ trust in President Donald Trump to bolster the U.S. economy appears to be faltering, with a new poll showing that many people fear the country is being steered into a recession.
CBRE beat earnings estimates but executives took a more cautious tone, maintaining guidance for the year rather than raising it, because of economic uncertainty and recession fears stemming from the president’s tariff agenda.
The world’s largest commercial real estate services company posted an earnings beat but sees choppy waters ahead. Blame the president’s tariffs.
Because of “uncertainty created by the tariff situation, our outlook has become less clear,” CBRE chairman and chief executive Bob Sulentic said in an earnings call Thursday morning.
Despite reporting an increase in revenues and earnings per share, the company chose to maintain its guidance for the year, absent a recession, rather than increasing it, chief financial officer Emma Giamartino said.
“Things went from really good to not as good,” said Sulentic, whose total compensation last year was valued at $22 million. “We ended the quarter with strong pipelines…but we have seen some implications of what’s going on with the tariffs.”
Sulentic shared that some of the capital in the investment management division, which invests and operates real assets, as well as business activity in the project management business, which consults and assesses operations, has slowed down. “We went from a really enthusiastic picture to one where there’s some choppiness out there,” he said.
Offices, however, might be immune. The near-apocalypse offices faced in the pandemic might finally be ending—something CBRE signaled when it last reported earnings. The choppiness CBRE sees isn’t affecting office leases thus far. In fact, offices are benefiting from the fact that not many were developed over the last few years and companies are now calling their workers back to their desks. CBRE reported a 38% increase in office leasing revenue, the highest for any first quarter ever, according to Giamartino.
While the two executives maintained a cautious tone, they underlined CBRE’s resilience throughout the call, stressing that it was better positioned to weather a recession than when coming out of the Great Financial Crisis. “If you were to put our business through the same type of a recession that we saw in the GFC, our declines would be materially lower,” Giamartino said. “So GFC, our declines were 85% peak to trough. Now it would be less than half that.”
CBRE declined to comment further.
The company reported $5.1 billion in net revenues, a 15% increase from the same period last year, and core earnings per share of $0.86. It still predicts core earnings per share between $5.80 to $6.10 for the year. Shares rose after earnings by 1.7% as of 11 a.m. ET.
Still, the president putting parts of his tariff regimen on ice hasn’t subdued uncertainty. After Donald Trump announced a 90-day grace period, placing a 10% blanket tax on other countries, and taxing China even more, chief executives continue to stress caution.
“We’ve adjusted our view of things to take into account considerable uncertainty, which causes us to have a view of higher risk of recession than we had before,” Sulentic said. That leads to a “higher risk of people being on the sidelines because they just don’t want to act in uncertain times,” he added.
He continued, “We just don’t have insight beyond that. It all assumes a lot of uncertainty, a lot of choppiness and the risk of recession that we didn’t have before.”
Sulentic's nearly $22 million compensation last year was more than he earned in 2023, but less than 2022, when he received a one-time equity boost, the latest proxy statement revealed. Giamartino’s total compensation was valued at almost $7 million last year, an increase from the two years prior.
Two of Britain’s richest real estate investors have ditched the UK as their home territory, the latest departures among the country’s elite as the nation hits wealthy residents with tax hikes.
UK natives Ian and Richard Livingstone now list Monaco as their place of usual residency after previously citing the UK, according to registry filings. The move boosts the billionaire siblings’ ties to the French Riviera city-state where they have held major investments for more than a decade.
The switch for the founders of property firm London & Regional took effect between late March and early April, the filings show. Around the same time, Keir Starmer’s Labour government brought in sweeping tax changes announced at the UK’s Autumn Budget in October, including curbs to relief on inherited assets as well as higher levies on capital gains and private equity investments.
A representative for Ian, 62, and Richard, 60, declined to comment. The siblings have a combined fortune of about $8.5 billion, according to the Bloomberg Billionaires Index.
The Livingstones’ actions underscore how even billionaire British nationals are joining ultra-rich foreigners including Egypt’s Nassef Sawiris and Belgium’s Frederic de Mevius in curbing ties to the UK as they grapple with a raft of changes affecting their finances.
Long a bastion of legal and political stability, the UK has traditionally punched above its weight as a global wealth hub — but its reputation has taken a hit following Brexit and the flux of prime ministers since 2016.
It’s also repeatedly curbed incentives for wealthy individuals who live in the country, including scrapping inheritance tax breaks for overseas trusts as part of Chancellor Rachel Reeves’s efforts to plug what she described as a £40 billion ($53 billion) economic hole.
Monaco is often a favorite destination for those looking to exit the UK, where the top 1% typically contribute more than a quarter of total income taxes.
Smaller than New York’s Central Park, Monaco doesn’t impose taxes on capital gains or income and has generous exemptions for inherited assets. It also offers high levels of safety compared with other European territories.
Other UK billionaires who have relocated to the Mediterranean principality include Jim Ratcliffe, the founder of chemicals giant Ineos, who moved there around 2018 partly due to the threat of the Labour’s then-left wing leader Jeremy Corbyn.
The sons of a dentist, the Livingstone brothers grew up in London and began building their real estate empire in the 1990s, acquiring distressed assets in the UK following a slump in prices. Ian, who studied optometry in college, also set up an eye-wear company, which eventually expanded to more than 200 stores. He sold his stake to Leonardo Del Vecchio’s Luxottica Group in 2010.
London & Regional’s real estate portfolio now includes London cinemas, Madrid offices and the Fairmont Monte Carlo, a four-star Monaco hotel that the Livingstones’ firm bought in 2007.
Outside real estate, the brothers made a lucrative investment in Evolution AB, one of the world’s biggest online casino platforms. Their charitable foundations have also supported programs for UK children, British fashion and London colleges through their charities.
Smaller than New York’s Central Park, Monaco doesn’t impose taxes on capital gains or income and has generous exemptions for inherited assets. It also offers high levels of safety compared with other European territories.
As the stock market remains volatile amid the aftermath of President Donald Trump’s so-called “Liberation Day” tariffs, consumer spending has not been significantly impacted, at least not yet. During quarterly earnings calls, credit card companies offered strong outlooks in regard to consumer spending, but many have taken measures to mitigate losses amid a potential economic downturn.
As President Donald Trump’s trade policies have contributed to stock market unrest, the fallout from his so-called “Liberation Day” tariffs has yet to hit the quarterly financial reports of the country’s largest lenders where consumer spending patterns are often first to emerge
Earnings reports for credit card companies remained strong as consumers borrowed, spent, and opened credit cards more so than the year prior.
“The consumer continues to be resilient and discerning in their spend,” Citigroup’s chief financial officer Mark Mason said during the company’s quarterly earnings call last week. Mason also emphasized a revised consumer sentiment.
“We’ve seen a shift towards essentials and away from travel and entertainment,” Mason said.
JPMorgan Chase reported a 7% increase in credit- and debit-card spending year-over-year, but noted people were carrying elevated credit-card balances. Additionally, Bank of America outlined a 4% bump in credit- and debit-card spending from a year earlier coupled by a decline in late payments from loan holders over the previous quarter.
Despite positive growth, major credit card companies are preparing for an economic downturn and delinquencies are already rising to their highest level in five years.
“The focus right now is on the future, which is obviously unusually uncertain,” JPMorgan Chase finance chief Jeremy Barnum said during the bank's most recent earnings call on April 11.
As JPMorgan holds the risk of a recession at 60%, the bank added to its rainy day funds in case of any future losses by increasing its allowance for credit losses (ACL) by $973 million, bringing its net reserve total to $27.6 billion.The ACL acts as a buffer to cover those losses if customers don’t pay their credit card bills.
Additionally, the company allocated $3.3 billion into its loan loss provisions— a 73% increase from the $1.9 billion issued to combat unpaid loans from a year prior. JPMorgan also maintains $1.5 trillion in cash and marketable securities.
JPMorgan did not immediately respond to Fortune’s request for comment.
In addition to JPMorgan, Citi is maintaining security if an economic downturn happens. The bank increased its cost of credit by more than 15% from the year before to $2.7 billion.
Additionally, Citi boosted its total reserves by $1 billion in the first quarter, from $21.8 billion to $22.8 billion, seeking security if the U.S. economy goes south. The bank also maintains a strong liquidity and capital position with cash levels reaching $960 billion.
Citi did not immediately return Fortune’s request for comment.
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The precious metal's value has risen 28% this year, climbing as high as $3,506 per ounce on Tuesday. That's nearly double what it was worth in August 2021 when data-analytics firm Palantir Technologies first purchased a whopping $50.7 million worth of 100-ounce gold bars.
Palantir sold all that gold in 2023 for a profit of less than half a million dollars — measly in comparison to the major financial boost such a sale would be today.
At the time of its initial gold purchase in 2021, Palantir did not provide much rationale for its unusual investment strategy, but investing in the precious metal is generally seen as a safe-haven hedge against inflation. In addition to its newly acquired gold stockpile, Palantir said it would also be accepting gold as payment, just months after adding bitcoin to its payment options.
Palantir's chief operating officer Shyam Sankar told Bloomberg at the time that accepting less traditional currencies "reflects more of a worldview."
"You have to be prepared for a future with more black swan events," he said.
Two years later, Palantir was ready to dump its gold investment, announcing in a quarterly filing released May 2023 that it had sold all of its gold bars for $51.1 million — or about $400,000 more than its initial purchase.
The value of gold has risen so much since 2023 that had Palantir waited and sold its stockpile at Tuesday's peak of $3,506 per ounce, it would have made over $99 million — nearly double its initial investment.
Missed opportunity with gold investments aside, Palantir is doing very well financially. It reported a 29% year-over-year revenue growth for 2024, its stock is up over 37% so far this year and more than 365% over the past 12 months. It also just signed a $30 million contract with Immigration and Customs Enforcement.
Palantir cofounder and CEO Alex Karp recently told Fortune that one of the reasons behind his company's meteoric rise is because he stuck to his guns.
"When all the idiots hate you and you ignore them, and you build the single set of software products you would need to actually transform your company or your government, you get breakout growth," Karp told the outlet. "That's what's happening."
Palantir did not immediately respond to a request for comment from Business Insider.
In a recent interview on Meet the Press, financier Ray Dalio, warned of "something worse than a recession" if current financial, economic, and trade issues are not "handled well." Later in the interview, he warned that if current problems worsen, we could experience a "world order in which there is great conflict." I agree on both counts—with the caveat that this might be an understatement. Others have issued similar warnings.
For me, Dalio's comments triggered troubling thoughts on how the world would handle a future financial crisis. During my long career on the international stage—as economic advisor to Henry Kissinger in the National Security Council in the 1970s, vice chairman of Goldman Sachs (international) in the 1980s and 1990s, and then Undersecretary of State in charge of U.S. geo-economic relations in the early part of this century—I was at the epicenter of a number of such crises and of negotiations to help resolve them. The key to success in such efforts was not just the financial skills of the major players but also their willingness to engage in trustful collaboration.
That ingredient does not exist today. Never have I seen the world so deeply riddled with mistrust on so many economic and political issues. And that mistrust can be the Achilles’ heel of any future negotiation in the event of a new financial crisis—unless we recognize it and figure out how to overcome it before a crisis hits.
Those in high-level positions and around the world must consider how they would manage a new crisis—which is a growing risk with so many countries facing slowing growth, growing debt, inflationary pressures, tariff wars, and currency volatility—and operating under fraught and confrontational political circumstances.
This will be an enormous challenge, and failure will affect all Americans and nearly every person on this planet.
During the last crisis, there was impressive, trustful cooperation between the U.S. and China. But with the intensifying trade war and various other confrontations between the two, attaining that again is likely to be far more problematic—if not impossible.
And tariff-related frictions between the U.S. and its key allies—among the world's largest market economies—have undermined and in some cases virtually destroyed the mutual trust that has been so critical in resolving issues in the past. Intense trade disputes will make cooperation among them to deal with a new financial crisis far more difficult.
On top of this, a study is underway in Washington as to whether the U.S. should withdraw from the International Monetary Fund (IMF)—the critical global institution in such matters. And questions are being raised at high levels in the U.S. administration as to whether the president should fire Jerome Powell, chairman of the Federal Reserve. Powell enjoys very high credibility in markets and among policymakers around the world and would be an essential player in finding solutions to any new crisis. Both factors add to already high uncertainty and the risks of deepening instability.
Given this rancor, friction, and uncertainty, central bankers and finance ministries of countries who were instrumental in dealing with crises in the past—who are now meeting in Washington for what are known at the IMF Spring Meetings—need to figure out how to avoid, or cope with, the increasingly dangerous threat of a major financial crisis.
In the past, there was usually one major nation that led the process, or served as the designated convenor of the key players. That was mainly the United States, in cooperation with the IMF. If the U.S. won't be willing to do so this time, or won't be trusted by others to do so, who will it be?
It hasn't always been the U.S. France, under its president Valerie Giscard d'Estiang, for example, pulled the G7 together during a series of crises in the 1970s, and its current president Emmanuel Macron has a formidable financial background, as does Canada's new prime minister Mark Carney. Or, we might rightly ask, will any country be in a position, or be given broad international support, to play this role? If not, the global economy is condemned to major disruption. (China, now a formidable and experienced player in global finance, might look at this moment as an opportunity to step up to play a leadership role, but it is difficult to see the U.S., or some other market economies, agreeing to that.)
The financial community, already rattled by uncertainty, economic nationalism, deepening tariff wars, massive debt increases, and market-debilitating currency instability, should put this on their high-concern list as well, and press political and financial leaders in their countries and around the world to organize a contingency plan grounded in a collaborative effort. With statesmanship, will, and trust this can be done—as in the past. But without a lot of advanced planning, and a willingness to engage in trustful collaboration, a major global financial disaster could be on the horizon.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
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