Charting the global economy: Tariffs fuel US inflation concerns

(Bloomberg) --Anxiety is building quickly among US consumers about the likely impact from US tariffs on the economy and their pocketbooks.
A preliminary March survey of consumers showed sentiment sank by more than projected, while long-term inflation expectations jumped as the Trump administration pushes forward with higher duties on foreign goods just as price pressures showed signs of easing.

Meanwhile, the UK economy shrank unexpectedly at the start of the year on weaker manufacturing and construction. In China, the economy remains hamstrung by persistent deflation.


Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy, markets and geopolitics:

US

Consumer sentiment fell to a more than two-year low and long-term inflation expectations jumped by the most since 1993, illustrating growing apprehension about the economic impact from tariffs. Consumers’ expectations of their finances dropped to the lowest level on record, the University of Michigan survey showed.

US consumer prices rose at the slowest pace in four months in February, welcome news for American households who remain apprehensive about the potential for tariffs to drive costs higher. Economists anticipate that an escalating trade war will drive up prices on a variety of goods from food to clothing in the coming months, testing the resilience of consumers and the broader economy.

President Donald Trump dialed back his latest trade-war threat against Canada hours after making it, while downplaying the risk of a tariff-led recession that’s sent US markets into a nosedive.

Europe

Germany is experiencing its deepest identity crisis since World War II. Years of play-it-safe politics have allowed its roads and bridges to fall into disrepair, its digital transition to sputter and productivity to flag. With the political center shrinking, Germany may be condemned to a series of ineffectual governments that, like Olaf Scholz’s fractious coalition, lack the unity and will to tackle the country’s complex problems, from soaring state pension costs to declining student achievement. Unless Germany can find a way out soon, the result could destabilize all of Europe.

Chancellor of the Exchequer Rachel Reeves blamed the turbulence of global politics for a surprise contraction in the UK economy, as she prepares to reveal a belt-tightening fiscal update later this month. January’s fall in output was driven by declines in manufacturing and construction with the strongest UK storm for 10 years cited as a drag on certain sectors.

Asia

China’s intensifying deflationary pressure threatens to persist long after seasonal distortions fade away, unless the government drains excess capacity in the economy that’s putting pressure on prices. Consumer inflation in the year to date has turned negative through January-February for the first time since 2021.

India’s inflation eased to below the central bank’s target last month, giving policymakers reason to keep cutting interest rates as the economy faces new headwinds from global trade turmoil.

Japan’s workers saw their base pay rise at the fastest clip in 32 years, a result that sends a positive signal to the Bank of Japan as it weighs the prospects for demand-driven economic growth.

Emerging Markets

Brazil’s Luiz Inacio Lula da Silva has weathered financial crises, corruption scandals and even a coup attempt. But now it’s the soaring cost of food that’s posing the biggest hazard for his presidency.

World

An ocean freighter from India pulled into the bustling Port of Tampa Bay on Tuesday loaded with hundreds of tons of aluminum destined for multiple US stops. Abruptly, the entire shipment was ordered to be unloaded then and there with US tariffs set to commence the next day. This is the kind of disruption that has been replicated across the country as Trump’s steel and aluminum tariffs played out.

The Bank of Canada cut interest rates by a quarter percentage point and called the trade battle with the US a “new crisis,” but pushed back on expectations that policymakers were on a predetermined cutting path. Pakistan unexpectedly kept rates steady, while Poland, Georgia and Serbia, Peru also left rates unchanged.