Will Trump’s trade war finally start affecting US inflation? • FRANCE 24 English

Will Trump’s trade war finally start affecting US inflation? • FRANCE 24 English

Well, it’s time for our business segment now with Charles Pelagan. Charles, you’re focusing on the US economy. That’s right, Caris. Later this Tuesday, the US Department of Labor Statistics is expected to release its June inflation data, the Consumer Price Index. This is a gauge that is followed extremely closely, especially in the current context of Donald Trump’s global trade war. Uh the consensus thinking on tariffs is that they eventually fuel a rise in prices as importers tend to reflect the higher costs of bringing in goods from abroad onto their consumers. But inflation data has been cooler than expected since Donald Trump took office in January. As you can see there, hovering around the 2.3 or 2.4% mark since March, just above the Federal Reserve’s target of 2%. But forecasts for the month of June in yellow there are signaling a slight uptick to 2.6% 6% as tariffs start having an impact on a range of consumer goods like electronics or appliances. So, what’s at stake here? Well, the US president’s word. Donald Trump’s ran a campaign promising he’d put an end to inflation for US consumers. Earlier, I spoke to Nella Richardson and asked her for her take on inflation in the US. Well, inflation has been very sticky in the United States. there’s been a tremendous progress in declining the pace of higher prices, but the but it has been sticky for several months mainly because of services. So here’s the question when it comes to new tariff policy at least in the short term. Will we start to see a rise not only in the service inflation that we’ve become accustomed to in the United States but also in goods inflation? And remember that imported goods, it’s not just about the final consumer goods that you’ll see in the CPI. It’s also the intermediate goods that show up in the production process. So, we won’t get a read on that right away. That’s probably a longer term uh trend and impact in inflation over time. Why haven’t hasn’t that uh tariff policy showed up yet on the readings so far? What have importing companies done to delay that impact? Well, we saw uh early on both for consumers and producers some pull forward spending. So, uh inventories swelled at the beginning of the year. Even consumers uh went ahead and bought goods that they thought would be subject to tariffs. So, you know, the the question here for economists is whether uh tariffs, which is a tax on imported goods, is a one-time hit to inflation or if it triggers escalating inflation. And you can see that even in within the profession, there’s a split um association of whether tariffs will have a short-term impact or a longer term impact over time. I think as the trade and global trade system adjusts to new policies that frankly haven’t yet been set, we’ll have more information on the direction of travel. But for right now, in the short term, it’s likely that inflation increases a bit. All right, Charles, take us through what’s happening on the markets then. Well, equities in the Asia-Pacific mostly rising this Tuesday after China’s GDP grew higher than expected in the second quarter at 5.2% 2% though weaker than in the first quarter 5.4%. Good news with regards to concerns over the trade war with the US and the country’s issues with low consumer demand and a real estate uh crisis. You can see the Hansen and Hong Kong up 3/4 of a percent. And in Europe at the open uh we’re seeing positive trading in equities as well boosted by those China GDP numbers and also shrugging off Trump’s new tariff threat of 30% uh against the EU. That’s a deadline for August 1st, obviously. And here in France, Charles, we’re about to know more about France’s French government plans to cut its deficit. Prime Minister Fran, who we expected to outline his plans in a speech this afternoon. The goal here to find 40 billion euros in savings in order to slash the deficit and cat tackle the country’s growing debt. He’ll also have to contend with a fractured parliament. One of the solutions being considered is that of an anlounge or a spending freeze. So keeping spending at the same level as this year in 2026. So not taking into account inflation. This could have an outsized impact on pensioners. As Simon Muritz and our colleagues at France do explain. Who will lose out if the French government chooses a spending freeze that would match 2026 public spending to 2025. The measure, which could save money by budgeting without taking inflation into account, would see pensioners lose an average of €350 a year, according to a study, an unacceptable amount for this retired restaurant worker whose pension is €1,600 a month. After a 44-year career, which is long in a difficult profession, we’re told that at the end of the day, you will earn less and receive less. This is annoying, and above all, it means a loss of purchasing power. bill and housing benefits. According to the French Economic Observatory or OFCE, if one partner in a couple receives housing benefits and the other is employed, the household income would reduce by €15 on average. Amelia Kger has just found a job near Strawburg and is still receiving benefits for lowincome workers. They’re playing with the money of people who need benefits, the people who need it most. Why freeze benefits for those who truly need it. Taking the current income tax scale into account, the savings made during the freeze for the next budget would come to 6.2 billion in total. But this could also have a negative impact on the economy. If you go through with a year-long spending freeze with 6 billion in savings, that’s 6 billion less for households. It means higher taxes, fewer benefits, and less income and therefore less consumer spending. Overall, the proposal has received harsh criticism in the assembly national from across the political spectrum from national rally to Republicans and also France unbounded. Prime Minister France BU will unveil his proposal on July 15th and we will have more on Frana’s announcements later in the day. Thank you, Charles.

The US Bureau of Labor of Statistics will be releasing its June inflation data this Tuesday, with economists forecasting a slight uptick in consumer prices because of the impact of tariffs. FRANCE 24 spoke to Nela Richardson, Chief Economist at ADP, about the impact of import duties on US inflation. Also in this edition: the French government considers a spending freeze in a bid to find €40 billion in savings and cut the deficit.
##inflation ##tariffs ##USA

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