How Trumponomics Has Shaken Global Markets
US President Donald Trump has taken just a few months since his election to upend global financial markets with his economic policies.
Many investors are pulling money out of the United States, the mighty dollar has lost its lustre and Wall Street is being outpaced by European stock markets.
Here is a look at the financial roller-coaster ride.
After years of global dominance, US stocks are feeling the heat -- and Europe is the main beneficiary.
Wall Street's S&P 500 index has gained just two percent since the start of the year, compared with 16 percent for Frankfurt's main index.
Growth at the exchanges in London (eight percent) and Paris (three percent) is also outstripping Wall Street.
Kevin Thozet from the investment firm Carmignac pinned the blame firmly on Trump.
The president's flip-flopping on tariffs had created a "high level of uncertainty" about their potential impact on growth, Thozet told AFP.
The dollar has lost 10 percent of its value against the euro in the past six months, "its worst performance in 30 years", according to Robert Farago, an analyst at the British investment firm Hargreaves Lansdown.
Trump's tariffs are the main culprit but the global reserve currency is also suffering from concerns about the size of the US debt -- exacerbated by a budget proposal from the president that many analysts say will be hugely expensive.
While some have suggested the Chinese yuan could become a dollar alternative, ECB chief Christine Lagarde has touted the euro, discussing in May its potentially greater "international role".
But any currency attempting to topple the dollar faces plenty of challenges.
"The yuan is not convertible, and the euro is too fragmented," said Jean Lemierre, chairman of the board of directors of BNP Paribas.
American debt is a cornerstone of the financial system, as the rest of the world lends to the United States in search of a safe investment.
But Jamie Dimon, head of JPMorgan Chase, said in early June that the level of US debt was a "real problem" and that bond markets were facing a "tough time".
In a sign of the loss of confidence, interest rates on 30-year US Treasury bonds surpassed the symbolic five percent mark at the end of May.
"I've always told clients they need US debt if they want an asset that remains intact even in a disaster, but I think that's no longer the case," said Alexandre Hezez, a strategist at Banque Richelieu.
Steve Sosnick, chief strategist at US-based Interactive Brokers, told AFP the fact the dollar was falling while rates were rising was "a sign there's money moving out of the US".
Investors have long regarded gold as the ultimate safe harbour in a crisis, and the clamour for the metal has seen its value jump by almost 30 percent since the start of the year.
Major central banks have also had a hand in pushing up the price, as they look to gold as a more sure bet than dollars to hold in their reserves.
Meanwhile, Trump has leant heavily into cryptocurrencies with investments of his own and official measures to bring the assets into the mainstream.
Bitcoin passed $100,000 for the first time just after the US election, increasing almost 60 percent in a year.
Trump made it a priority to bring down oil prices so that US inflation would come down.
Crude oil fell below $60 per barrel in April, its lowest price since 2021.
But that was because investors spooked by Trump's tariffs were anticipating weaker demand worldwide if economies slowed.
The military escalation between Israel and Iran has seen prices climb again to around $75 a barrel.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Int'l Business Times
2 hours ago
- Int'l Business Times
Crude Sinks As Trump Delays Decision On Iran Strike
Oil prices tumbled Friday and equity traders fought to end a volatile week on a positive note after Donald Trump said he would consider over the next two weeks whether to join Israel's attacks on Iran. Speculation had been swirling that Trump would throw his lot in with Israel, but on Thursday he said he would decide "within the next two weeks" whether to involve the United States, giving diplomacy a shot to end the hostilities. While tensions are sky high amid fears of an escalation, the US president's remarks suggested the crisis could be prevented from spiralling into all-out war between the Middle East foes. Since Israel first hit Iran last Friday, the two have exchanged deadly strikes and apocalyptic warnings, though observers said the conflict has not seen a critical escalation. European foreign ministers were due to meet their Iranian counterpart on Friday in Geneva. In a statement read out by White House Press Secretary Karoline Leavitt, the president said: "Based on the fact that there's a substantial chance of negotiations that may or may not take place with Iran in the near future, I will make my decision whether or not to go within the next two weeks." Leavitt added: "If there's a chance for diplomacy the president's always going to grab it, but he's not afraid to use strength as well." Both main oil contracts were down around two percent Friday but uncertainty prevailed and traders remained nervous. "Crude still calls the shots, and volatility's the devil in the room -- and every trader on the street knows we're two headlines away from chaos," said Stephen Innes at SPI Asset Management. "Make no mistake: we're trading a geopolitical powder keg with a lit fuse. "President Trump's two-week 'thinking window' on whether to join Israel's war against Iran is no cooling-off period -- it's a ticking volatility clock." Stocks were mixed following a public holiday in New York, with Hong Kong, Taipei, Mumbai and Bangkok all up with London, Paris and Frankfurt. Seoul's Kospi led the gains, rising more than one percent to break 3,000 points for the first time in nearly three and a half years. The index has risen every day except one since the June 4 election of a new president, which ended months of political crisis and fuelled hopes for an economic rebound. Tokyo fell as Japanese core inflation accelerated, stoked by a doubling in the cost of rice, a hot topic issue that poses a threat to Prime Minister Shigeru Ishiba ahead of elections next month. There were also losses in Shanghai, Sydney, Singapore, Manila and Jakarta. The Middle East crisis continues to absorb most of the news but Trump's trade war remains a major obstacle for investors as the end of a 90-day pause on his April 2 tariff blitz approaches with few governments reaching deals to avert them being imposed. "While the worst of the tariffs have been paused, we suspect it won't be until those deadlines approach that new agreements may be finalised," said David Sekera, chief US market strategist at Morningstar. "Until then, as news emerges regarding the progress and substance of trade negotiations, these headlines could have an outsize positive or negative impact on markets." Brent North Sea Crude: DOWN 2.6 percent at $76.85 per barrel West Texas Intermediate: DOWN 1.9 percent at $73.62 per barrel Tokyo - Nikkei 225: DOWN 0.2 percent at 38,403.23 (close) Hong Kong - Hang Seng Index: UP 0.8 percent at 23,421.80 Shanghai - Composite: DOWN 0.1 percent at 3,359.90 (close) London - FTSE 100: UP 0.3 percent at 8,819.26 Euro/dollar: UP at $1.1517 from $1.1463 on Thursday
Int'l Business Times
2 hours ago
- Int'l Business Times
EU Bars Chinese Firms From Major State Medical Equipment Contracts
The European Union on Friday banned Chinese firms from government medical device purchases worth more than five million euros ($5.8 million) in retaliation for limits Beijing places on access to its own market. The latest salvo in trade tensions between the 27-nation bloc and China covers a wide range of healthcare supplies, from surgical masks to X-ray machines, that represent a market worth 150 billion euros in the EU. "Our aim with these measures is to level the playing field for EU businesses," the bloc's trade commissioner Maros Sefcovic said. "We remain committed to dialogue with China to resolve these issues." In response, China accused the EU of "double standards". "The EU has always boasted that it is the most open market in the world, but in reality, it has gradually moved towards protectionism", foreign ministry spokesman Guo Jiakun said at a regular press briefing. "Under the guise of fair competition (the EU) actually carries out unfair competition, which is a typical case of double standards." The European Commission said in a statement the move was in "response to China's longstanding exclusion of EU-made medical devices from Chinese government contracts." Brussels said just under 90 percent of public procurement contracts for medical devices in China "were subject to exclusionary and discriminatory measures" against EU firms. In addition to barring Chinese firms from major state purchases, "inputs from China for successful bids" would also be limited to 50 percent, it said. Over the last three years, Brussels and Beijing have come into conflict in a number of economic sectors, including electric cars, the rail industry, solar panels and wind turbines. The decision on medical devices comes at a time of heightened trade tensions with President Donald Trump's United States, which has imposed customs surcharges on imports from all over the world, including Europe. The EU has decided to take a tougher stance on trade in recent years, adopting a vast arsenal of legislation to better defend its businesses against unfair competition. In April 2024, the commission opened an investigation into Chinese public contracts for medical devices, the first under a new mechanism introduced by the EU in 2022 to obtain better access to overseas state purchases. China, on the other hand, accuses Europe of protectionism. After a year of negotiations, the commission, which manages trade policy on behalf of the 27 member states, said it had failed to make any progress with China. "The measure seeks to incentivise China to cease its discrimination against EU firms and EU-made medical devices and treat EU companies with the same openness as the EU does with Chinese companies and products," Brussels said.
Int'l Business Times
5 hours ago
- Int'l Business Times
Europe's Lithium Quest Hampered By China And Lack Of Cash
Europe's ambition to be a world player in decarbonised transportation arguably depends on sourcing lithium abroad, especially in South America. Even the bloc's broader energy security and climate goals could depend on securing a steady supply of the key mineral, used in batteries and other clean energy supply chains. But Europe has run into a trio of obstacles: lack of money, double-edged regulations and competition from China, analysts told AFP. China has a major head start. It currently produces more than three-quarters of batteries sold worldwide, refines 70 percent of raw lithium and is the world's third-largest extractor behind Australia and Chile, according to 2024 data from the United States Geological Survey. To gain a foothold, Europe has developed a regulatory framework that emphasises environmental preservation, quality job creation and cooperation with local communities. It has also signed bilateral agreements with about 15 countries, including Chile and Argentina, the world's fifth-largest lithium producer. But too often it fails to deliver when it comes to investment, say experts. "I see a lot of memoranda of understanding, but there is a lack of action," Julia Poliscanova, director of electric vehicles at the Transport and Environment (T&E) think tank, told AFP. "More than once, on the day that we signed another MoU, the Chinese were buying an entire mine in the same country." The investment gap is huge: China spent $6 billion on lithium projects abroad from 2020 to 2023, while Europe barely coughed up a billion dollars over the same period, according to data compiled by T&E. At the same time, the bottleneck in supply has tightened: last year saw a 30 percent increase in global demand for lithium, according to a recent report from the International Energy Agency (IEA). "To secure the supply of raw materials, China is actively investing in mines abroad through state-owned companies with political support from the government," the IEA noted. China's Belt and Road Initiative funnelled $21.4 billion into mining beyond its shores in 2024, according to the report. Europe, meanwhile, is "lagging behind in investment levels in these areas", said Sebastian Galarza, founder of the Centre for Sustainable Mobility in Santiago, Chile. "The lack of a clear path for developing Europe's battery and mining industries means that gap will be filled by other actors." In Africa, for example, Chinese demand has propelled Zimbabwe to become the fourth-largest lithium producer in the world. "The Chinese let their money do the talking," said Theo Acheampong, an analyst at the European Council on Foreign Relations. By 2035, all new cars and vans sold in the European Union must produce zero carbon emissions, and EU leaders and industry would like as much as possible of that market share to be sourced locally. Last year, just over 20 percent of new vehicles sold in the bloc were electric. "Currently, only four percent of Chile's lithium goes to Europe," noted Stefan Debruyne, director of external affairs at Chilean private mining company SQM. "The EU has every opportunity to increase its share of the battery industry." But Europe's plans to build dozens of battery factories have been hampered by fluctuating consumer demand and competition from Japan (Panasonic), South Korea (LG Energy Solution, Samsung) and, above all, China (CATL, BYD). The key to locking down long-term lithium supply is closer ties in the so-called "lithium triangle" formed by Chile, Argentina and Bolivia, which account for nearly half of the world's reserves, analysts say. To encourage cooperation with these countries, European actors have proposed development pathways that would help establish electric battery production in Latin America. Draft EU regulations would allow Latin America to "reconcile local development with the export of these raw materials, and not fall into a purely extractive cycle", said Juan Vazquez, deputy head for Latin America and the Caribbean at the OECD Development Centre. But it is still unclear whether helping exporting countries develop complete supply chains makes economic sense, or will ultimately tilt in Europe's favour. "What interest do you have as a company in setting up in Chile to produce cathodes, batteries or more sophisticated materials if you don't have a local or regional market to supply?" said Galarza. "Why not just take the lithium, refine it and do everything in China and send the battery back to us?" Pointing to the automotive tradition in Mexico, Brazil and Argentina, Galarza suggested an answer. "We must push quickly towards the electrification of transport in the region so we can share in the benefits of the energy transition," he argued. But the road ahead looks long. Electric vehicles were only two percent of new car sales in Mexico and Chile last year, six percent in Brazil and seven percent in Colombia, according to the IEA. The small nation of Costa Rica stood out as the only nation in the region where EVs hit double digits, at 15 percent of new car sales. Lithium is a key ingredient in the production of electric batteries AFP A geothermal power plant for lithium extraction in eastern France AFP
