Desk report
Donald Trump will be sworn in as US President on January 20. With just over a month left before he takes office for his second term, the global economy is already scrambling to adapt to the Trump administration. The policies he has already announced to protect businesses in his own country are already having an impact in other countries.
A Canadian minister resigned this week, and the government looks set to collapse. The US central bank has said it will cut interest rates fewer times than planned. Cryptocurrencies are booming. And countries that are living in fear of additional tariffs on US exports are starting to consider alternatives.
From Ottawa to Frankfurt and Tokyo, central banks are busy setting the tone for the Trump era at their year-end meetings. The US Federal Reserve cut interest rates as expected on Wednesday. But uncertainty is only growing about what will happen when Donald Trump takes office as the 47th president in the new year.
Federal Reserve officials have not only stepped back from their plan to cut interest rates to curb rising inflation, but are now thinking a step further. Fed Chairman Jerome Powell said some bankers are considering how Trump’s planned tariffs, tax cuts and immigration controls will affect their policies.
Reuters reported that the good news is that US central bank officials believe that growth will be higher than expected next year. However, they also believe that inflation will also increase. As a result, Jerome Powell has asked to be “cautious” about further interest rate cuts. However, because of this, stock prices have started to fall again.
Jerome Powell has also asked to keep an eye on the market when it comes to interest rate cuts. As a result, the Fed is expected to cut interest rates only once in 2025
Among Asian countries, Japan maintained its ultra-low policy interest rate on Thursday. The Bank of Japan has been considering Trump’s policy in this regard. It is believed that Trump’s policy may pose a threat to Japan’s export-dependent economy. A statement from the Bank of Japan said, “There is considerable uncertainty about the Japanese economy and price situation.”
A Reuters survey of Japanese businessmen conducted last week showed that about three-quarters of respondents believe that Trump’s policies will have a negative impact on their business activities. The Bank of Japan is likely to take this into account. Japan is the only country in the developed world that is still taking contractionary measures.
The US Fed has cut interest rates recently. Before that, the European Central Bank and the Bank of Canada cut interest rates. Both central banks were expected to cut interest rates several times in 2025, as economic activity in Europe and Canada weakened.
But European Central Bank President Christine Lagarde has not said whether she will cut interest rates again. But she has stressed the risk of a slowdown in growth, particularly if trade tensions escalate under Trump.
Disaster
Donald Trump may still be on the sidelines of the Fed, but the Republican was at the heart of what happened in Ottawa. Finance Minister Chrystia Freeland resigned after falling out with Prime Minister Justin Trudeau over how to deal with potential tariffs on Canadian exports by the next administration in neighboring America.
Trump said last month that he would impose a 25 percent tariff on goods from Canada and Mexico if they did not take steps to limit the flow of immigrants and the painkiller fentanyl into the United States. Chrystia Freeland believes the threat of new U.S. tariffs could be a major threat to her country.
On the other hand, Fed Chairman Jerome Powell has played down the excitement surrounding the cryptocurrency Bitcoin. Trump has called for a strategic reserve of Bitcoin. But Powell said that they have no legal authority to build a reserve of Bitcoin. He also said that the Fed has no plans to change the law to build such a reserve.
Jerome Powell said, “This is something that Congress can work on. But we are not thinking about changing the law at the Fed.” After his comments, the price of crypto-related assets, including Bitcoin, fell significantly.
