Hit by falling oil revenues and Western sanctions, growth in the country has slowed while the budget deficit has exploded.

By Marie Jégo and Benjamin Quénelle via Le Monde https://www.lemonde.fr/en/economy/article/2025/08/11/why-russia-s-economy-is-beginning-to-falter_6744266_19.html

The war in Ukraine is beginning to take its toll on the Russian economy, which is facing a sharp slowdown due to declining oil revenues and Western sanctions. The country is “on the verge of recession,” said Maxim Rechetnikov, the economy minister, during the St. Petersburg Forum – the so-called “Russian Davos” – in June.

President Vladimir Putin immediately rejected that assessment, eager to praise Russia’s resilience in the face of sanctions. But the numbers do not lie. In July, the International Monetary Fund lowered its growth forecast for the country from 1.5% to 0.9% for 2025. This is a far cry from the spectacular rates of 4% seen in 2023 and 2024, when the state devoted all its financial resources to the war.

Another troubling sign: The budget deficit has exploded, reaching, according to the Finance Ministry, 4.9 trillion rubles (about €56 billion) at the end of July – a surge of 30% compared to the annual target set by the government. The economic slowdown, the drop in oil and gas revenues, as well as the depletion of reserve funds – practically exhausted after three years of war – make up a new reality: Cuts are coming. The Finance Ministry will find it difficult to slash spending on defense and security, which account for just over 40% of expenditures. The government will therefore have to reduce social contributions as well as support for civilian industries.

Exports at rock-bottom prices

While overall budget spending has increased (20.8% in one year), revenues have dwindled. Oil and gas sales, which make up about one third of federal revenues, fell by 18.5% during the first seven months of the year. The main reason is the falling price of oil on the global market ($66.40 per barrel at the start of August, or about €51.80), with Russian crude falling even further due to its price cap at $47.60, imposed as part of the 18th package of sanctions recently adopted by the European Union. With the West refusing to buy its oil, Russia has redirected sales to China, India and Turkey, but it is exporting at rock-bottom prices. Circumventing sanctions is also costly for producers, who are forced to use multiple intermediaries.

For now, life in Moscow and other medium-sized cities in the Russian Federation still appears vibrant, with crowded restaurants, theaters and luxury shops. But the combination of several factors – declining revenues, high interest rates, persistent inflation – suggests the economy is in a tailspin. While the defense industry, well-fed by state orders, “runs like clockwork,” according to Sergei Aleksashenko, a former vice president of the Central Bank of Russia (1995-1998), the civilian sector is struggling.

During the first seven months of 2025, entire segments of the civilian economy – metallurgy, mining, construction and the automotive industry – saw production decline. In the steel sector, MMK, the plant of Magnitogorsk, one of the world’s largest steel producers and a leader in Russian ferrous metallurgy, reduced its output by 18% in the second quarter. For the period from January to June, its net profit plummeted by 88.8% compared to the same period in 2024.

The coal industry has been hit especially hard: Production is falling, export revenues are down and debts are rising. Even the largest companies are in the red. The sector’s net loss in 2025 could reach between 300 and 350 billion rubles (over €3 billion), warned Dmitri Lopatkine, deputy director of the coal industry department at the Energy Ministry. Directly impacted by the war and sanctions, this sector is struggling to compensate for the loss of European markets, where it was once a leading supplier. Shifting toward the Asian market, where competition is tougher – especially with Australia, Indonesia and South Africa – is no easy task.

Resorting to ‘cannibalization’

Moreover, China, Moscow’s main trade partner, increased its imports by 14% in 2024 but reduced its purchases from Russia by 7%. Finally, sanctions have made it difficult for Russian companies to access equipment and components from Europe, the United States and Japan, which they traditionally relied on. Having failed to overcome their dependence on Western equipment, companies have had to resort to “cannibalization” – dismantling several units in order to assemble a single working one.

The automotive industry has also been particularly hard-hit. In the first half of the year, car production fell by 28%, truck production by 40% and several factories will switch to a four-day work week. This is the case for the truck manufacturer KamAZ, the Avtovaz and GAZ car factories and the tractor factories in Chelyabinsk and Saint Petersburg. These reduced hours will lead to a 20% loss of income for workers and employees at the factories concerned, contributing to a further decline in consumption.

For months, industrialists and bankers have been demanding a cut in the key interest rate set by the Central Bank of Russia, which has been kept high to combat inflation, estimated at 10%. Both companies and households want to be able to borrow again and take out consumer loans. On July 25, the Central Bank lowered its key rate from 20% to 18%, which is insufficient to revive lending. With rates this high, it is difficult for businesses to borrow for investment. In July, Alexei Krapivin, CEO of construction giant Natsproektstroy, said that many companies could neither sustain their ongoing projects nor honor their debts. More than 55% of loans granted to companies carry variable rates, and since interest rates remain high, many companies find themselves on the verge of default.

Toxic mix

Banks have also grown concerned about the rapid rise in unpaid loans. Between the beginning of 2022 and May 2025, corporate debt to banks nearly doubled. At the end of June, Bloomberg, citing sources in the banking sector, warned of the growing risks of a systemic banking crisis. Banks granted loans at reduced rates to support the Kremlin’s war effort and are now threatened by “bad debts.” Nearly half – 48 out of the 100 largest Russian banks – saw their financial results worsen in the first half of the year compared to 2024. Fifteen of them posted losses.

“With full access to the data of the banking system, I can confidently state that fears of a banking crisis are unfounded,” said Elvira Nabioullina, governor of the Russian Central Bank, on July 3. But other officials are more worried. For example, Sberbank CEO German Gref sounded the alarm in June, warning that the toxic mix of soaring interest rates and an overvalued ruble was creating a “perfect storm” likely to stifle investment and drag the Russian economy into long-term decline.

A return to growth will not happen anytime soon. “Any future growth is only possible if labor productivity increases. But over the past 10 years, it has grown by just over 1% per year on average. Investment is needed, and that is difficult in wartime and with a key interest rate of 18%,” said Dmitri Nekrasov, an expert at the Center for Analysis and Strategies in Europe.

The EU’s pledge to buy $750 billion worth of American energy over three years to avert a trade war with Washington is “almost impossible” to honor, Politico reported Tuesday, citing analysts and officials.

The EU and the US finalized a wide-ranging trade pact on Sunday, narrowly avoiding a transatlantic trade war. Under the agreement, most EU exports to the US will face a baseline tariff of 15%. Brussels also pledged to buy $750 billion in US energy and invest $600 billion into the US economy over three years.

According to the outlet, limited US supply, technical obstacles, and the EU’s lack of control over import deals make hitting the targets extremely difficult.

The headline figure is “completely unrealistic,” Laura Page, senior analyst at commodities firm Kpler told the outlet. The EU spent €76 billion on US energy last year – tripling that would require sidelining cheaper suppliers and diverting nearly all US oil and gas exports to Europe. “It’s just never going to happen.”

Despite European Commission President Ursula von der Leyen’s claim that the plan would boost energy security and reduce reliance on Russia, the numbers remain unconvincing, the outlet noted. While pipeline flows plunged after sanctions and the Nord Stream sabotage, Russian LNG surged, making up 17.5% of EU supply last year, second only to the US at 45.3%.

In 2024, the EU imported €23 billion in oil, gas, and nuclear fuel from Russia—too little to close the gap.

EU refineries also have limited capacity to process American oil, capped around 14%, said Kpler’s Homayoun Falakshahi. “It really is a fantasy,” he said.

A senior Commission official told the outlet the deal depends on having sufficient LNG infrastructure and US shipping capacity, which is not in place.

The Commission also can’t make purchases itself – it relies on private companies. “This is not something the EU can guarantee,” one official said.

via ZeroHedge

SpaceX has secured a commanding lead in the global space launch industry for several years, propelled by its reusable Falcon 9 and Falcon Heavy rockets that have drastically lowered launch costs. Barring a major technological breakthrough by a government-backed or deep-pocketed private rival, Elon Musk’s rocket empire is poised to maintain dominance well into 2030—and possibly beyond.

New data from analytics and engineering firm BryceTech for 1Q25 illustrates the scale of SpaceX’s dominance in the global orbital space launch race, surpassing not only domestic rivals but also major spacefaring nations like China and Russia.

In Q1, SpaceX led all rocket launches with 36 missions, followed by China with 12, 5 with US-based Rocket Lab, and Russia with 4.

In terms of satellite deployments, SpaceX dominated the quarter with 900, followed by China with 58 and Rocket Lab with 20. The majority of SpaceX’s payloads were Starlink internet satellites.

SpaceX’s ability to drive down launch costs has led it to become the leader in all upmass carried to space for the quarter.

SpaceX powers much of America’s rocket program. Without Musk’s company in the equation, the data clearly shows that China would be leading the space race.

Credit where it’s due—SpaceX is keeping the U.S. ahead of Chinese Communist rivals in the space domain amid a military and AI race.

Where is Jeff Bezos’ rocket company?

via MOA

Last night one of President Donald Trump central policies was defeated in court:

Trump’s ‘Liberation Day’ tariffs halted by Court of International Trade (archived) – Washington Post
Most of President Trump’s tariffs were halted late Wednesday by a US trade court in a sharp rebuke of the president’s signature trade war policy.

A specialized federal court in New York on Wednesday ruled that most of President Donald Trump’s tariffs — including those on Chinese goods — are illegal, …
…
The trade court’s ruling that Trump exceeded his authority in imposing tariffs on all imported goods brought an immediate, albeit perhaps temporary, halt to his signature trade war policy.

“The challenged Tariff Orders will be vacated and their operation permanently enjoined,” a three-judge panel ruled.

This is the end to Trump’s tariffs.

His administration will do the utmost to fight the court ruling. But the legal reasoning against it is strong and higher courts are likely to follow it. As The Economist explains (archived):

[Trump’s] orders imposing the fentanyl tariffs and reciprocal levies had cited a 1977 law called the International Emergency Economic Powers Act (IEEPA). It has its roots in the Trading with the Enemy Act, passed after America joined the first world war in 1917, which gives the president leeway to interfere in international economic transactions during national emergencies.
…
In recent years courts have argued that the executive branch cannot rely on ambiguous delegations of power to take actions of great consequence, a principle known as the “major-questions doctrine”. IEEPA does not mention tariffs, but does give the president the power to “regulate” imports. Relying on it to “authorise anything as unbounded” as global tariffs, the court said, was inconsistent with both the major-questions doctrine and the established idea that Congress cannot delegate its powers to the president wholesale.
…
It seems likely that the disputes will find their way to the Supreme Court. At that point they would be presided over mostly by justices who have been strong proponents of the major-questions doctrine.

Yves Smith at Naked Capitalism cites a number of sources and is largely confirming that take.

Trump will have to rescind the tariffs he has imposed so far. He will be able to immediately reintroduce new tariffs under different legal provisions. But those tariffs will have to have time limits and are legally restricted in size.

The whole Trump ‘victory day’ strategy of using absurdly high tariffs to negotiate trade deals in favor of the U.S. is thus in shambles.

No foreign ‘partner’ will be willing to concede on major issues as Trump has lost the means to pressure them. Negotiations on further trade deals will slow down or come to a halt.

With vanishing tariffs the hoped for billions of additional government income through tariffs will also be lost. Trump’s domestic economic strategy around the ‘one big beautiful bill’ has thereby lost its economic basis. Without the additional income through tariffs the Senate will be unwilling to risk the high deficits needed to pass it.

But Trump will not be willing to concede defeat in the core project of his administration.

More tariffs, on less stable legal ground, are likely to be imposed by him.

For the economy all this will bring more uncertainty:

[A]nalysts at Goldman Sachs, a bank, warn that trade uncertainty has increased, rather than decreased, as a consequence of the court’s decision. Unless Mr Trump has a light-bulb moment of his own, America’s importers will be doing business in the dark.

Another major project of the Trump administration was the to seek spending cuts by eliminating government agencies. But DOGE has failed to deliver:

NewsWire @NewsWire_US – 21:04 UTC · May 28, 2025
White House to seek just $9B in spending cuts from Congress out of $175B in claimed savings found by Musk’s DOGE — Bloomberg

Elon Musk has left the administration and is already starting to criticize it.

Trump’s peace-in-24-hours project in Ukraine has also failed.

All these are major catastrophes for Trump.

My fear is that Trump will now seek a new ‘project’ to divert the attention from the rubble his previous ones have left behind him.

What is there, but war, that could give him an easy win? 

by Sergey Markov

Another political-corporate scandal in the USA

Trump threatened to impose 25% tariffs on Apple products unless Tim Cook moved production to the US, at least for the volume of sales in the US market. Tim Cook himself has mysteriously kept a low profile.

Is Tim Cook’s School Failing ? Did Trump’s Advisers Whisper That Tim Cook Is Fooling the President, or Did Trump Suddenly See the Light?

Tim Cook showed exceptional skill when he managed to sell Trump a fake deal for 500 billion, without changing the cost structure by one point, without paying one extra dollar as part of the expanded investment in the US, while receiving preferences on preferential duties on almost all of his imports to the US. A deal that will go down in history as how to quickly and effectively “cook the US president.”

But why is Tim Cook so resistant to moving production to the US?

It is not just a matter of cost or labour skills, a much more significant and fundamental obstacle is the connected and integrated manufacturing infrastructure and supplier clusters.

Apple relies on a huge, geographically concentrated network of hundreds of suppliers for specialized components (screens, chips, cameras, housings, small connectors, etc.). These suppliers are located in close proximity to each other and to assembly plants (e.g. Foxconn, Pegatron). This allows for incredible speed, flexibility, and efficiency in the supply chain.

Recreating such an ecosystem in the U.S. would require decades and astronomical (and initially unprofitable) investments not only from Apple, but from each of these suppliers. Many components simply aren’t made in the U.S., and convincing their suppliers to relocate and set up manufacturing from scratch is an impossible task.

The actual production core is China, Taiwan, Japan and South Korea, which account for over 85-90% of suppliers and almost all high-precision engineering. India and Vietnam are still “peripheral” assembly nodes without a full-scale ecosystem layer of components.

A manufacturing cluster is when about 80% of key components are concentrated within a 60-80 km radius around assembly lines, like Foxconn/Pegatron.

It takes an incomparable amount of time and money to create, optimize, and build logistics for the entire supply chain, and importing to the US is an additional cost, even if we assume that this part of the import will be excluded from the expanded duties, plus a decrease in speed and flexibility.

The second reason is the well-established production facilities and the ability to mobilize hundreds of thousands of skilled workers in the shortest possible time to launch new products. The US does not have a comparable workforce (experience, knowledge, discipline, hard work).

Moving manufacturing to the US means losing access to decades of experience and engineering expertise in mass-producing complex consumer electronics from Asian partners. They have a unique ability to quickly reconfigure production lines and implement complex manufacturing processes.

Regarding the difference in wages – this is trivial, I won’t even go into it.

In the US, a small number of sites (Flex Austin, Amkor, Broadcom, Corning) are responsible for R&D, packaging, and niche assembly of the Mac Pro, but not for mass electronics. It is impossible to deploy mass production at reasonable costs.

Relocating production is not just building a plant. It is a long-term, extremely complex process, associated with building supply chain logistics, optimizing production lines, including from the point of view of training relevant personnel.

The US has none of this and will not. It is expensive, inefficient and uncompetitive. There is no way to compete with Asia.

Without a doubt, Tim Cook will sabotage the process of transferring production. He understands all the modern specifics of production and the balance of costs.

I’m waiting for Tim Cook to promise to build “plantations of endless factories in the USA” without laying a single brick.

LolAuthored by Pepe Escobar, via ZeroHedge

Late next month, Huawei will be testing its new powerful AI processor, the Ascend 910 D, even as by early May the previous 910C will start to be mass-delivered to scores of Chinese tech companies.

These serious breakthroughs are the next chapter of Huawei’s drive to counter Nvidia’s global monopoly in GPUs. The Ascend 910D is supposed to be more powerful than Nvidia’s extremely popular H100.

Huawei is pulling no punches in its race to manufacture a new generation of processors. Huawei has collaborated with SMIC – China’s largest semiconductor foundry – to apply Deep Ultraviolet Lithography (DUV) on what was previously only possible on EUV (Extreme Ultra-Violet technology). Once again, Huawei and SMIC defied the proverbial American “experts” with creative engineering solutions.

Huawei arrived at fabricating 5nm chips with DUV even as the process is more expensive than with EUV. If Huawei had access to EUV they would be already manufacturing 2-3nm chips. That will come, in short time, as both China and Russia, under permanent US high-tech blockade, must by all means develop their own EUV technology.

Shanghai geeks are convinced that Huawei will switch on 6G networksbefore the end of the decade. Their current breathless drive is not just aimed at the smartphone front – where Huawei is peerless; the new Huawei Mate 70 Pro + is by far the absolute top smartphone in the world, running on Harmony OS. Huawei is looking at cloud computing, AI and enterprise servers – and to become no less than the core player in the AI infrastructure race.

Ditching Any Reliance on American Technology

Earlier this month, Huawei introduced the CloudMatrix 384, a system connecting 384 Ascend 910C chips. The tech word in Shanghai is that this configuration, under certain conditions, and of course consuming much more power, already outperforms Nvidia’s flagship rack system – which is powered by 72 Blackwell chips.

Meanwhile, Huawei’s Kirin X chip is targeting the PC market, offering stiff competition to Apple, AMD, Intel and Qualcom while Harmony OS plus removes the necessity of using US software such as Microsoft and Android.

Shanghai geeks swear that China essentially doesn’t need to beat Nvidia or other US chips developers. After all, China already has the largest consumer market in the world – by volume and by value. If a parallel tech universe is the likely result of the Trump Tariff Tizzy (TTT), so be it. China already controls over 60% of the global gadget consumer market.

Kirin X may not – yet – match the power of Nvidia’s H100 GPUs. But Huawei chips are already the real deal for every Chinese company which is following the new Beijing-defined direction to reduce any reliance on American technology.

All of the above naturally brings us to the enormous AI elephant in the (digital) room: Nvidia.

A recent book, The Thinking Machine: Jensen Huang, Nvidia, and The World’s Most Coveted Microchip, is quite helpful to track not only the personal story of CEO superstar Huang, a Taiwanese who played the American Dream to the hilt and became a tech multi-billionaire, but Nvidia’s enviable tech accomplishments.

Huang does not interpret AI as emergent machine superintelligence, and firmly dismisses any direct analogy to biology. For this all-round pragmatist, AI is merely software – running on hardware that his company sells for a fortune.

Still, Nvidia has ventured into virgin territory way beyond the American biz-tech Valhalla, complete with holding the most valuable stock on the planet: arguably, when it comes to AI, Nvidia unveiled a new phase of evolution.

It’s crucial to understand how Huang sees China. It is indeed a key market for his AI chips – and he wants to keep selling them in droves. Trump’s tariffs though make sure that won’t happen.

And that’s what moved Huang to ditch his proverbial leather jackets and don a crisp business suit for a strategic visit to Beijing, where he affirmed the sacred importance of the Chinese market, whatever the new Trump-dictated gimmicks.

By 2022, the China market represented 26% of Nvidia’s business; this year, it has fallen to 13%, because of euphemistic “technology export controls”.

The problem is the US government, already by 2022, under the previous automatic pen administration, had blocked sales to China of advanced A100 and H100 chips. Nvidia started selling modified versions – and even after the ban chips continued to arrive in China. By June 2023, it was easy to find A100s for double their price in the black market in Shenzhen.

Huang is convinced that “no AI should be able to learn without a human in the loop” – even as he admitted, two years ago, that “reasoning capability is two or three years out”. Translation: according to Huang AI will start thinking for itself within the next few months.

Even as Nvidia prepares to invest billions of dollars to build AI supercomputers in Texas, the Chinese essentially are not losing any sleep on “thinking AI”: their focus is extremely practical, to conquer not only the Chinese market but also the supply chains of most of Eurasia.

The US National Security Council has concluded that it’s too dangerous for China to buy Nvidia’s high-end chips, even the H20 – designed for the Chinese market. Huawei, anyway, already produces chips somewhat comparable to the H20.

Huang is losing his sleep because, essentially, Nvidia is losing the immense Chinese market to Huawei – with Trump’s direct input. Nvidia has tens of thousands of H20s specially designed for China which they simply cannot sell. Each chip cost between $12,000 to $20,000.

How China Is Opening a Digital “Pandora’s Box”

Huawei’s new drive is yet another example of Chinese will capable of staring down any challenge – based on indigenous talent, tech expertise and national pride. The record, even before Trump 1.0 sanctions, shows that Huawei does eat massive uphill battles for breakfast. In fact Ascend in many aspects was ahead of Nvidia as early as in 2019 – and that’s why two different US administrations banned it.

China is already light years ahead of the US on chip research. Chinese universities amass most places in the global Top Ten for published papers on semiconductors and on citations – a distinction shared, among others, by the Chinese Academy of Sciences (number one), Tsinghua University (one of China’s top two universities), the University of Electronic Science and Technology of China (number four), and Nanjing, Zhejiang and Pekin Universities.

Two weeks ago in Shanghai I first heard that Huawei would catch up with US semiconductor giants in maximum two years. Now, after the announcement of the Ascend 910D, the buzz shifted to only one year for China to overtake Nvidia and develop better lithography machines than the ones currently produced by ASML.

And the debate is fast switching to how far Huawei will be able to go within the next 2 to 3 years.

In several aspects we are already in the early stages of a US-China tech decoupling. For years Nvidia has dominated the AI hardware space. Their GPUS are the brains behind most contemporary advanced AI. The H100 chip is the gold/platinum standard for AI infrastructure worldwide. Nvidia’s chips had huge demand from Chinese tech giants – Alibaba, Tencent, Baidu, Bytedance.

Soon that may not be the case – and that goes way beyond Nvidia’s certified loss of market share in China. China is now all out focused on building a successful, self-sufficient AI hardware ecosystem. The coup de grace will be to restrict the export of all rare earth minerals to the US. Huaweii then will pull up in no time.

Everyone remembers how DeepSeek R1 wiped out over $1 trillion from Wall Street only three months ago. DeepSeek R2 will be released soon; training was a whopping 97% cheaper than OpenAI. And training happened on Huawei’s Ascend. No Nvidia.

Quantum Bird, a world-class physicist formerly with the CERN in Geneva, puts everything in much needed context. He stresses how indigenous chip development by China – and in a near future, Russia and probably India (Russia, India, that is just wishful thinking – n. ed.) – is “multi-faceted; what we are observing are the initial stages of a redefinition of the notion of recognizing patterns and machine learning, technologies that are popularly referred to as ‘AI’ by the media.”

Nvidia chips, Qantum Bird remarks, are indeed “computational beasts”, but they work better around “processing models and workloads typical of ‘AI’ models developed by Western scientists.” DeepSeek’s development, on the other hand, showed a transgression of established models: “The possibilities opened for performance leaps are huge, even using relatively modest hardware, with alternative approaches based on advanced math and different calculus flows.”

In a nutshell: “This is the Pandora’s box that Nvidia now fears the Chinese may have opened”. And that totally ties in with Huang’s red alert, prompting his visit to Beijing.

We may be heading indeed towards a serious tech decoupling. Or as Quantum Bird frames it: “A technological and scientific divergence medium and long-term. If the architectures that emerge from these developments are incompatible when it comes to their usage on specific ‘AI’ models, Nvidia will lose its global monopoly and will become just a company reduced to a corporate/scientific Western niche.”

Even as Huawei, from its privileged base in the Chinese market, will go on to win most markets across the Global Majority – from BRICS to BRI.

Sent from my iPad

From MarketWatch:

Excerpts:

Nearly five years ago, I warned that stagflation for the U.S. was only a broken supply chain away. A temporary outbreak resulted from the COVID-19 shock, as a surge in inflation coincided with an anemic recovery in global demand. But, like the pandemic, that economic disruption quickly subsided.

Today, a more worrisome form of stagflation is in the offing, threatening severe and lasting consequences for the global economy and world financial markets.

An important difference between these two strains of stagflation is the nature of the damage. During the pandemic, supply chains were stressed by significant demand shifts — during early lockdowns, people consumed more goods and fewer services, with a sharp reversal after reopening.

It took roughly two years for those supply-chain disruptions to begin to fade, and inflationary pressures begin to ease.

Such temporary disruptions now seem almost quaint compared with the fundamental reordering of global supply chains sparked by President Donald Trump’s “America First” protectionism.

The United States, for all intents and purposes, is disengaging, or decoupling, from global trade networks, especially from China-centric supply chains in Asia and potentially even from the supply chains that knit together North America through the U.S.-Mexico-Canada Agreement — the so-called “gold standard” of trade agreements.

Trump celebrated the imposition of so-called “reciprocal” tariffs on April 2 as “liberation day.” To me, it was more like an act of sabotage, triggering retaliation and a likely decline in the global trade cycle. If this continues, it will be exceedingly difficult for the world to sidestep recession.

The outcome of Trump’s agenda could be as destructive as that of the early 20th-century global trade war that followed the 1930 Smoot-Hawley Tariff Act, another protectionist policy blunder.

With U.S. tariffs now even higher than they were back then (and, in fact, higher than at any point since 1909), it is worth remembering the 65% contraction in global trade that occurred from 1929 to 1934.

Today’s world might be lucky to get away with stagflation.

https://www.marketwatch.com/story/trump-is-taking-us-back-to-the-slow-growth-high-inflation-1970s-or-worse-fc402303

Authored by Randy White via AmericanThinker.com,

The tariff doomsday machine is roaring again. This time, it’s over talk of a 50% tariff on certain imports.

Predictably, the panic-peddlers are out in force, warning that such a tariff means retail prices will skyrocket 50%.

It’s an easy line to chant, but it’s wrong — flat wrong — and anyone with a basic grasp of economics should know better.

Let’s make one thing clear: a tariff applies to the transaction value, not the final retail price. The transaction value is what the importer pays the exporter, plus freight and insurance. That cost is just the first step in a long supply chain. By the time a product reaches the consumer, it’s been marked up to cover domestic shipping, warehousing, employee wages, utilities, sales tax, and profit margins for every hand it passes through. The tariff is just one input among many.

Take a simple example.

A retailer imports a widget with a $100 transaction value. Add a 50% tariff, and the cost to the importer becomes $150. That importer then sells it wholesale — perhaps at $200 — to a retailer, who marks it up again to $300 for sale. That $50 tariff is now 16.7% of the retail price. Even if every penny of the tariff is passed along, you’re not looking at a 50% increase in retail price — you’re looking at something closer to 17%.

But here’s the kicker: tariffs are not always fully passed on to the consumer. Importers and retailers know they can’t raise prices beyond what the market will bear. Sometimes they absorb part of the cost, cut expenses, renegotiate contracts, or shift to different suppliers. The market reacts; it doesn’t just lie down and take it.

Still not convinced? Look at the real-world data.

The National Bureau of Economic Research analyzed the 2018–2019 U.S. tariffs on Chinese goods. They found that for every 10% tariff, retail prices rose 1–2%. So even a 50% tariff, if applied, might cause retail prices to edge up 5–10% — not 50%. That’s a far cry from the alarmist headlines.

So why do politicians and media outlets keep pushing the scare narrative? Easy: Fear sells.

“Fifty percent” is a lot more dramatic than “maybe 5 to 10%.” It’s easier to provoke outrage than to explain how pricing actually works. They’re banking on the average person not understanding the difference between wholesale cost and retail price — or not caring enough to dig into the numbers.

Yes, tariffs matter. They influence trade behavior. They can increase some costs. They can disrupt certain supply chains. But they’re not some magic multiplier that doubles the price of your groceries or gadgets overnight.

Anyone pushing that line is either economically illiterate or deliberately misleading you.

The next time you hear that a 50% tariff will mean a 50% price hike, don’t nod along. Push back. Ask for the math. Demand the details.

Because when it comes to tariffs and retail pricing, the facts just don’t support the hysteria.

by Pepe Escobar via https://strategic-culture.su/news/2025/04/03/how-trumps-tariff-tizzy-burning-down-house/

Global Majority, rejoice! And step on the high-speed rail de-dollarization train.

Circus ringmaster Trump’s Tariff Tizzy (TTT), christened by himself as “Liberation Day”, is being largely interpreted around the world – Global North and Global South alike – as Slaughterhouse Day.

This de facto uncontrolled economic demolition gambit starts with the warped fantasy that launching a customs war on China is a bright idea. As bright as collecting a few trillion extra dollars in tariffs assuming the rest of the planet will be somewhat “encouraged” to sell to the Hegemon, while pretending that these tariffs will lead to the re-industrialization of the U.S.

The tragicomic mask of a self-appointed circus ringmaster of turbo-capitalism may be as pathetic as the European chihuahua rage boosting their “revenge” via Rearmament – with funds that they plan to steal from the savings accounts of unsuspecting citizens.

The indispensable Michael Hudson has configured the key problem. Allow me a little tweak: “Sanctions and threats are the only thing that the United States has left. It no longer can offer other countries a win-win situation, and Trump has said that America has to be the net gainer in any international deal it’s made, whether it’s a financial deal or a trade deal. And if America is saying, any deal we make, you lose, I win”, that Mafia extorsion gambit does not exactly reflect the Art of the Deal.

Prof. Hudson neatly describes Trump’s negotiation tactics: “When you don’t have very much to offer economically, all you can do is offer not to hurt other countries, not to sanction them, not to do something that will be against their interest.” Now, with TTT, Trump is actually “offering” to hurt them all. And they will certainly invest in all sorts of counter-tactics to “get away” from that “strategy” of American “diplomacy”.

A trade war on Asia

TTT attacks everyone, especially the EU (“born to hurt us”, according to the circus ringmaster. Wrong, because the EU was invented by the Americans in 1957 to actually keep Europe under control). The EU exports roughly 503 billion euros to the U.S. a year, while importing around 347 billion. Trump is fuming non-stop about this surplus.

So a counter-measure vendetta will be inevitably in store, as already advertised by the toxic Medusa von der Lugen in Brussels – incidentally the sponsor of every weapons producer in Europe.

Yet TTT is above all a trade war on Asia. “Reciprocal” tariffs – not exactly reciprocal – were imposed on China (34%),Vietnam (46%), India (26%), Indonesia (32%), Cambodia (49%), Malaysia (24%), South Korea (25%), Thailand (36%), earthquake-hit Myanmar (44%), Taiwan (32%) and Japan (24%).

Well, even before TTT, a first has been achieved: the circus ringmaster generated a once-in-a-lifetime consensus among China, Japan and South Korea that their response will be coordinated.

Japan and South Korea will import semiconductor raw materials from China, while China will be purchasing chips from Japan and South Korea. Translation: TTT will solidify “supply chain cooperation” among this triad that so far was not exactly too cooperative.

What the circus ringmaster really wants is an iron-clad mechanism – already being developed by his team – that unilaterally imposes whatever level of tariffs Trump may come up with on whatever excuse: could be to circumvent “current manipulation”, to counter a value-added tax, on “security grounds”, whatever. And to hell with international law. For all practical purposes, Trump is burying the WTO.

Even tariffed penguins in Heard island in the South Pacific know that the certified effects of TTT will include rising inflation in the U.S., serious pain on its – delocalized – corporations and most of all the complete collapse of American “credibility” as a reliable and trustworthy trading partner, adding to its certified reputation as “non-agreement capable” – as the Global South knows so well. > Ант: A rentier FIRE Empire (financialization, insurance, real estate, as masterfully analyzed by Michael Hudson), which offshored its manufacturing industries and was gobbled up by a pile of overleveraged hedge funds, Wall Street derivatives and Silicon Valley totalitarian surveillance in the end decides to strike…itself.

Poetic justice applies. Burning Down the House – from inside the house. As for the emerging, sovereign Global Majority, rejoice: and step on the high-speed rail de-dollarization train.

by Moon of Alabama

Presidential Message on National Financial Literacy Month, 2025 – The White House, Apr 1 2025

The foundation of American economic prosperity is a society empowered with the knowledge and tools to make informed financial decisions to achieve the American Dream. …

I welcome that message.

Teaching financial literacy must start at the top. The members of the Trump administration obviously lack the knowledge and tools to make informed financial decisions.

It is the only possible explanation for how they came up with these numbers:

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China does not have a 67% tariff on U.S. goods (it’s 7.3%). The EU does not have a 39% tariff on U.S. goods (it’s 5.2%). The numbers are bollocks.

So where do they come from? The official explanation from the U.S. Trade Representative is here. Its baloney:

James Surowiecki @JamesSurowiecki – 0:22 UTC · Apr 3, 2025Just figured out where these fake tariff rates come from. They didn’t actually calculate tariff rates + non-tariff barriers, as they say they did. Instead, for every country, they just took our trade deficit with that country and divided it by the country’s exports to us.

So we have a $17.9 billion trade deficit with Indonesia. Its exports to us are $28 billion. $17.9/$28 = 64%, which Trump claims is the tariff rate Indonesia charges us. What extraordinary nonsense this is.
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Even given that it’s Trump, I cannot believe they said “We’ll just divide the trade deficit by imports and tell people that’s the tariff rate.” And then they decided to set our tariffs by just cutting that totally made-up rate in half! This is so dumb and deceptive.
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.. it’s actually worse than I thought: in calculating the tariff rate, Trump’s people only used the trade deficit in goods. So even though we run a trade surplus in services with the world, those exports don’t count as far as Trump is concerned.

The last point is a major one, for China, but especially for the EU :

EU-US trade in goods and services reached an impressive €1.6 trillion in 2023. This means that every day, €4.4 billion worth of goods and services cross the Atlantic between the EU and the US.
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The total bilateral trade in goods reached €851 billion in 2023. The EU exported €503 billion of goods to the US market, while importing €347 billion; this resulted in a goods trade surplus of €157 billion for the EU.Total bilateral trade in services between the EU and the US was worth €746 billion in 2023. The EU exported €319 billion of services to the US, while importing €427 billion from the US; this resulted in a services trade deficit of €109 billion for the EU.
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EU-US goods and services trade is balanced: the difference between EU exports to the US and US exports to the EU stood at €48 billion in 2023; the equivalent of just 3% of the total trade between the EU and the US.

Despite that Trump has decreed a 20% on all goods from the EU. The natural countermeasure from the EU will be to put a 20+% tariff on all import of U.S. services.

Trump also decreed a minimum 10% tariff on imports from every country. Products made by the penguins of the uninhabited Heard and McDonald Islands in the Antarctic will now come with a 10% surcharge.

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There is really no economic reasoning behind these numbers.

Arnaud Bertrand @RnaudBertrand – 4:16 AM · Apr 3, 2025To illustrate just how nonsensically these tariffs were calculated, take the example of Lesotho, one of the poorest countries in Africa with just $2.4 billion in annual GDP, which is being struck with a 50% tariff rate under the Trump plan, the highest rate among all countries on the list.
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As a matter of fact Lesotho, as a member of the Southern African Customs Union (SACU), applies the common external tariff structure established by this regional trade bloc.
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So since the tariffs charged by these 5 countries on U.S. products are exactly the same, they must all be struck with a 50% tariff rate by the U.S., right? Not at all: South Africa is getting 30%, Namibia 21%, Botswana 37% and Eswatini just 10%, the lowest rate possible among all countries.

Looking at Lesotho specifically, every year the U.S. imports approximately $236 million in goods from Lesotho (primarily diamonds, textiles and apparel) while exporting only about $7 million worth of goods to Lesotho (https://wits.worldbank.org/CountryProfile/en/Country/LSO/Year/2022/TradeFlow/EXPIMP/Partner/by-country).

Why do they export so little? Again this is an extremely poor country where 56.2% of the population lives with less than $3.65 a day (https://databankfiles.worldbank.org/public/…), i.e. $1,300 a year. They simply can’t afford U.S. products, no-one is going to buy an iPhone or a Tesla on that sort of income…

The way the tariffs are ACTUALLY calculated appears to be based on a simplistic and economically senseless formula: you take the trade deficit the U.S. has with a country, divide it by that country’s exports to the U.S and declare this – falsely – “the tariff they charge on the U.S.”

And then as Trump did in his speech last night, you magnanimously declare that you’ll only “reciprocate” by charging half that “tariff” on them.

As such, for Lesotho, the calculation goes like this: ($236M – $7M)/$235M = 97%. That’s the “tariff” Lesotho is deemed to charge this U.S. and half of that, i.e. roughly 50% is what the U.S. “reciprocates” with.

It’s extremely easy to see why this makes no sense at all.

Lesotho has a comparative advantage over the U.S. as it can dig up and sell diamonds. But it lacks the purchasing power to buy U.S. goods and services. The calculations by the Trump administration ignore those basic facts.

No tariffs were by the way introduced against Belarus, Russia and North Korea. This because of sanction, the U.S. has allegedly no trade relation with them. (Other than buying enriched Uranium for its nuclear power stations?)

Did the Trump administration anticipate how this nonsense will explode in its face?

It is Smoot-Hawley writ large.