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Argentina's President Javier Milei gestures during the Atreju political meeting organized by the young militants of Italian right-wing party Brothers of Italy (Fratelli d'Italia) at Circo Massimo in Rome.
Big milestone for Argentina’s radical president: Economy escapes recession
A year ago, Argentina’s eccentric, wolverine-haired, “anarcho-libertarian” president Javier MIlei took office with a chainsaw and a plan: to tackle the country’s triple-digit inflation and chronic debt problems, he would hack government spending to pieces — and it seems to be working.
Latin America’s third largest economy has emerged from recession for the first time since the third quarter of 2023, with GDP growing nearly 4% since then. Month-on-month inflation has plunged from 25% last December to just 2.4% a month ago.
How’d he do it? Since coming to office, Milei has scrapped more than half of the government ministries, slashed spending on public salaries, devalued the currency, and put pension growth in a chokehold.
The subsequent return to growth is a vindication for Milei, whose state-chopping has won him plaudits from financial markets and the International Monetary Fund. It’s also earned glowing admiration from Donald Trump who envisions a similar gutting of the US Federal government (though his protectionist impulses contrast with Milei’s purer market fundamentalism).
Milei’s approach has been painful for many. The percentage of Argentines living in poverty has surged by 13 percentage points to 53% since he took office. Milei’s bet is that this is merely short term pain. He could yet be right: experts see the economy expanding by 5% next year after contracting 3% in 2024. With mid-term elections approaching in 2025, we’ll soon learn how most ordinary Argentines feel about Milei’s methodical massacres.A man rides a scooter past a giant screen showing news footage of Chinese President Xi Jinping attending a Chinese Communist Party politburo meeting, in Beijing, China December 9, 2024.
China’s vows to pump up its economy — with one eye on Trump’s tariffs
China’s Politburo — the top leadership cabinet — said Monday it would take “more proactive” fiscal measures and loosen up its monetary policy in 2025 as it aims to boost domestic consumption. The body met ahead of the annual Central Economic Work Conference, reportedly scheduled for Wednesday and Thursday, at which the country’s economic policy priorities for the coming year are laid out — and one of those priorities is gearing up for Donald Trump.
The background: China has experienced over three years of economic turmoil that originated in the all-important property market, where most Chinese households keep their long-term savings. Defaults and halted constructions from major developers dovetailed with a local government debt crunch to place tremendous headwinds against economic growth, leading to stock market turbulence and high youth unemployment.
Beijing has attempted to goose growth with monetary easing (aka lowering central bank interest rates) since September and unveiled a $1.4 trillion debt package aimed at stabilizing growth in November. But kickstarting the economic engine is proving difficult.
Watch out for Trump: The incoming US president is promising to hike tariffs on Chinese goods, having mentioned figures as high as 60% on the campaign trail. While tariffs are a laborious way to cut off one’s nose to spite one’s face and are likely to hurt the US economy, Beijing’s exports are one of the few sectors doing well right now. Getting to a stable footing before the trade barriers go up must be a high priority.
China isn’t just playing defense though: US chip-making giant NVIDIA saw its stock slide 3% on Monday after news broke that Beijing was opening an antitrust investigation. NVIDIA has been a darling of investors during the AI boom, with shares nearly tripling in value this year — but this shot across the bows is a sign of what could come.Mexican President Claudia Sheinbaum speaks after reading a letter to be sent to U.S. President-elect Donald Trump, warning that tariffs would cause inflation and job losses in both countries, at National Palace in Mexico City, Mexico, November 26, 2024.
The economic fallout of Trump’s tariff threats
Last night, Donald Trump made clear that no country will be immune to his tariff agenda. In a post on Truth Social, he accused Canada and Mexico – America’s top two trading partners – of not doing enough to curb the flow of fentanyl and illegal immigration and threatened them each with 25% tariff hikes. He also vowed to impose an additional 10% tariff on China for its role in producing the precursor chemicals for fentanyl.
The announcement caused Mexico’s peso to slide, suffering a 1.7% drop against the US dollar, and for Canada’s dollar to hit a four-year low, dropping 0.7%.
In a press conference on Tuesday, President Claudia Sheinbaum responded to Trump’s threat by arguing that tariffs would not solve the migration or drug crisis and would come at the cost of the auto industry – noting that cars from America’s biggest auto manufacturers are some of Mexico’s principal exports to the US. Auto stocks fell in response to the post – with General Motors down as much as 7% on Tuesday. Canadian Prime Minister Justin Trudeau hopped on the phone with Trump, seizing the moment to show voters he knows how to handle the incoming US president.
Meanwhile, Chinese stocks remained relatively solid – dropping just 0.2% – likely because the 10% tariff was lower than many investors’ worst expectations.
The US economy was also unphased by the news, with the Nasdaq and S&P 500 both making gains in response to Trump appointing hedge fund manager Scott Bessent as treasury secretary. Bessent is expected to be a steward of the stock market and a moderator of Trump’s wildest economic ambitions.
How likely is Trump to follow through? Eurasia Group US analyst Noah Daponte-Smith says it’s hard to predict. “What we do know,” he says, “is that Trump is serious about the tariffs and has the legal means to implement them if he wants.” Even if Trump doesn’t implement them on day one, “the threat of implementation will hang over the USMCA relationship for the entire Trump term if these underlying grievances are not addressed in the manner Trump desires.”
The gap between Americans' perception of the economy and reality
As the candidates make their final arguments in the 2024 US Presidential Election, the economy is front and center on the minds of voters. Despite all signs indicating stable and above-trend growth in the US, many Americans feel uncertain about how well the economy is doing, said Robert Kahn, Managing Director of Global Macro-Geoeconomics at Eurasia Group. He discussed the gap in US economic perception versus reality with GZERO’s Tony Maciulis at the IMF and World Bank Annual Meetings in Washington, DC, in a Global Stage interview. Kahn noted that heightened political polarization has skewed views of economic performance while lingering geopolitical shocks and high prices add to concerns. Kahn emphasized that there is an element of worry around the “legacy of the pandemic…that Vice President Harris is just really struggling to overcome” even though underlying data proves otherwise. The two also discussed former President Trump's accusations that the Federal Reserve is "playing politics" with interest rates and what the impact would be globally if Trump were, as president, to assert a heavier hand in decision-making at the central bank.
Global economy at risk if Middle East conflict expands, says World Bank's Ayhan Kose
While the global economy shows signs of growth and decreasing inflation, the near future involves risks, including the escalation in the Middle East impacting oil prices, strained China-US relations, and an increasingly challenging tariff and trade environment, said Ayhan Kose, World Bank Deputy Chief Economist. He discussed the geopolitical tensions influencing the global economy with GZERO's Tony Maciulis at the IMF and World Bank Annual Meetings in Washington, DC, in a GZERO Global Stage interview. Kose also addressed the other major economic gathering happening this week: Russia’s 16th annual BRICS Summit in Kazan, Russia, largely seen as a counterweight to Western-led order. While acknowledging the widening economic and geopolitical divide, Kose emphasized the need for international cooperation. He expressed concern about “the increase in the number of protectionist measures and consequences of that for global trade.” Kose also emphasized the "urgent and important" need for World Bank member nations to continue to support development in poorer countries, a more difficult conversation today as many face their own economic headwinds and the world awaits the results of the 2024 US presidential election.
Can Europe become a global superpower?
It’s a critical time for Europe. In the recent European Union elections, voters unhappy with the establishment status quo delivered historic gains for far-right, nationalist parties in countries like France and Germany. But a fractured EU Parliament makes it harder for the ruling centrist coalition to deliver on key priorities like immigration reform and the Green deal. Can the 27 member states come together to address big challenges?
On GZERO World with Ian Bremmer, European Parliament President Roberta Metsola discusses Europe’s future amid an ongoing migrant crisis, the war in Ukraine, and an economic slowdown. The EU is the world’s largest trading bloc and a regulatory superpower, but Metsola says Europe needs to strengthen its strategic autonomy to avoid getting squeezed by the US and China. Part of that vision includes Ukraine joining the European Union, which Metsola tells Bremmer is unequivocably “win-win” for both sides. But finding consensus among so many countries, cultures, and political parties in the EU government can be a major challenge.
“We’re not yet coherent, I think we've weakened ourselves by being a cacophony of what we think we want,” Metsola says, "We still have not, as a European Union, become better as a whole than individual countries.“
GZERO World with Ian Bremmer, the award-winning weekly global affairs series, airs nationwide on US public television stations (check local listings).
New digital episodes of GZERO World are released every Monday on YouTube. Don't miss an episode: subscribe to GZERO's YouTube channel and turn on notifications (🔔).
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Envisioning Europe's path forward with European Parliament President Roberta Metsola
The European Union is at a crossroads. Big issues, like Russia’s Ukraine invasion, a migrant crisis, and an economic slowdown coming out of the Covid pandemic have been major tests of the bloc’s resilience and unity. There’s a lot at stake. Can the EU’s 27 member states hold it all together? On this week’s episode of the GZERO World Podcast, Ian Bremmer sits down with the woman at the heart of Europe’s government: European Parliament President Roberta Metsola. They discuss Europe’s path forward, its role on the world stage, and how a fragmented EU avoids being squeezed by the US and China. Metsola admits that, on China policy in particular, the bloc’s “biggest problem is we have not been coherent" and says a unified EU strategy toward China has (so far) been “absent” from policy discussions. So where does Europe go from here? In a wide-ranging discussion, Bremmer and Metsola dig into the EU’s push for strategic autonomy, rising far-right nationalism in recent EU elections, and whether Ukraine will be able to join the bloc anytime soon, even as Russia’s war rages on.
Subscribe to the GZERO World Podcast on Apple Podcasts, Spotify, Stitcher, or your preferred podcast platform, to receive new episodes as soon as they're published.FILE PHOTO: Federal Reserve Chair Jerome Powell holds a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, U.S., September 18, 2024.
Interest rate cuts are doing their thing. Will more come soon?
Recent rate cuts by the Federal Reserve and the Bank of Canada, along with lower inflation rates in both countries, are spurring … talk of more cuts. This includes a potential “jumbo” cut this month in Canada.
A former deputy governor of Canada’s central bank is arguing for a half-point cut when the bank meets in late October, and he’s betting on it. Paul Beaudry argues that the economic stimulus would spur the Canadian economy – by boosting consumer and business spending.
Statistics Canada reports that the country’s inflation rate was 2% in August while the US Bureau of Labor Statistics pegged the rate south of the border at 2.5%.
In September, the Fed cut rates by 50 basis points, its first trim in four years. That had effects on both sides of the border, given how close the US and Canadian economies are linked. Some Canadian mortgage rates on offer ticked down after the cut, dipping below 4%. So too did their US counterparts, triggering an immediate jump in real estate hunting and refinancing.
Experts believe the Fed will embrace more cuts in the coming months, aiming for a target of 4-4.25%, with even lower rates on the docket for 2025. The Fed and Bank of Canada will drive borrowing costs down and offer some relief to consumers and borrowers as both economies continue to level out.