Global Markets Sell Off as New Risks Emerge

Chile’s incoming Finance Minister, Jorge Quiroz, has unveiled an ambitious plan to double the country's economic growth rate to 4%, signaling that significant policy shifts are on the horizon. In his first public remarks since being nominated, Quiroz stated that achieving this goal will require more than minor adjustments.

"Chile has been growing at an average of 2% for 12 years," he explained. "Raising growth from 2% to 4% cannot be achieved through marginal changes."

To spearhead the fiscal strategy, Quiroz announced that José Pablo Gómez will serve as his government budget chief. Gómez currently holds the position of manager of administration and finance at the state-owned oil company ENAP and previously led the public finances division at the government's budget office.

A Three-Pronged Strategy for Revival

The incoming administration's economic blueprint rests on a clear set of priorities designed to jump-start the economy and restore investor confidence after years of sluggish performance. The core strategy for the next four years includes:

• Simplifying Regulations: Cutting red tape to encourage business activity.

• Fiscal Discipline: Putting the nation's public accounts in order.

• Lowering Taxes: Reducing the tax burden, with a specific focus on corporate levies.

Quiroz emphasized that the new government aims to win back trust by "telling it like it is" and restoring the "prestige" of the national budget office.

Corporate Tax Cuts and a 90-Day Action Plan

A key component of the plan is a reduction in corporate taxes from the current 27% to 23% over the administration's four-year term. Quiroz suggested that the initial cuts could begin within the first six months of taking office.

President-elect José Antonio Kast’s team has prepared over 40 economic measures for immediate implementation, underscoring its readiness to act swiftly. Quiroz noted that these actions are ready to be deployed within the administration's first 90 days. However, he also cautioned that the first year in office will be difficult, requiring significant government belt-tightening.

The new government is scheduled to take office on March 11.

Market Optimism Meets Economic Headwinds

Investors have reacted positively to the appointment of Quiroz, a long-time consultant and close adviser to the president-elect. The market is betting he can energize an economy hampered by low productivity. In January, the benchmark stock index climbed to a record high, and last month, the extra yield investors demand to hold Chilean debt over U.S. treasuries fell to an 18-year low.

Despite this optimism, the administration inherits a mixed economic picture. While a post-pandemic consumption boom has narrowed the current account gap and corporate investments are rising, significant challenges remain. Inflation is projected to slow to its 3% target early this year for the first time since 2021.

However, unemployment is running above 8%, and job creation remains weak. Public debt reached 43.4% of GDP by the end of the third quarter of 2025—its highest level since the 1980s—which limits government spending despite high prices for copper, Chile's top export.

Reflecting these challenges, economists surveyed by the central bank forecast that GDP will expand by a more modest 2.5% this year.

President Donald Trump has announced an aggressive tariff-based strategy aimed at completely eliminating the U.S. trade deficit by next year. The plan hinges on implementing a series of new tariffs designed to reshape global trade dynamics and generate substantial government revenue.

Key pillars of the new trade policy include:

• Broad Tariffs: New import tariffs are the central tool for closing the trade gap.

• Reciprocal Action: The policy emphasizes reciprocal tariffs, targeting countries that impose their own duties on U.S. goods.

• Revenue Generation: The tariffs are projected to add $133.5 billion to U.S. revenue in 2025 alone.

The Core Strategy: Reciprocal Tariffs

Under the new initiative, the U.S. will begin rolling out reciprocal tariffs on a range of countries, with new duties affecting nations like Pakistan and the Philippines scheduled to take effect on August 7, 2025. This move signals a direct challenge to existing trade imbalances.

The Office of the U.S. Trade Representative (USTR) is leading the implementation, guided by executive orders and proclamations from President Trump. To ensure compliance, the Department of Justice (DOJ) has also dedicated resources to combat any attempts at tariff evasion, reinforcing the seriousness of the policy.

Economic Impact on Industries and Trade Partners

The immediate effects of these tariffs are expected to ripple across multiple sectors. Industries reliant on imported goods will likely face elevated costs, which could lead to significant supply chain disruptions.

Financially, the policy is designed to be a windfall for the U.S. treasury, with projected revenue hitting $133.5 billion in 2025. These funds are slated to be directed toward achieving other policy objectives. However, the strategy is not without risks. Trade partners have reacted cautiously, and the possibility of legal challenges could complicate the administration's fiscal plans tied to the tariff revenue.

Market Ripple Effects and the Crypto Question

While the tariff announcements focus squarely on traditional trade, the broader economic consequences are being closely watched by investors. The policy does not contain any provisions that directly affect the cryptocurrency market.

However, any major shift in global trade can create market volatility that indirectly impacts all asset classes. Traders will be monitoring for any secondary effects as the tariff policies unfold. For now, the focus remains on compliance and the direct implications for international trade, with stakeholders awaiting more detailed financial disclosures to gauge the long-term outcomes.

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Source: ig

The European Parliament has suspended legislative work on a key trade agreement with the United States.

The European Parliament is putting its work on the EU-US trade deal on hold, a direct response to President Donald Trump's demands to acquire Greenland and his tariff threats against European allies who oppose the move.

Lawmakers in Brussels have been debating proposals central to the trade agreement struck in Turnberry, Scotland, at the end of July. The deal required the European Union to remove many of its import duties on American goods and to extend zero-duty arrangements first agreed upon with Trump in 2020. However, for the proposals to become law, they need the approval of both the parliament and EU governments.

A Controversial Agreement Under Scrutiny

Even before the latest dispute, the trade deal faced significant criticism within the EU. Many lawmakers viewed the agreement as lopsided, as it required the EU to cut most of its import duties while the United States would maintain a broad 15% tariff rate.

Despite these concerns, a consensus was forming to accept the deal, but with several key conditions attached. These included:

• An 18-month sunset clause to allow for review.

• Measures to counter potential surges of U.S. imports.

Greenland and Tariffs Trigger a Standoff

The situation shifted dramatically following President Trump's renewed push to acquire Greenland and his subsequent threats of new tariffs.

The European Parliament's trade committee was scheduled to vote on its final position on January 26-27, but this has now been postponed indefinitely.

Bernd Lange, the chair of the committee, announced on Wednesday that Trump's latest tariff threats have effectively broken the terms of the Turnberry agreement. He confirmed that the deal would be put on ice until further notice.

Freezing the deal is a risky move that could provoke the Trump administration, potentially leading to even higher U.S. tariffs. The White House has also made it clear that it will not offer any concessions, such as lowering tariffs on spirits or steel, until the current agreement is fully implemented.

The U.S. military has seized a seventh oil tanker connected to Venezuela, escalating a campaign to control the production and sale of the South American nation's significant oil resources.

U.S. Southern Command (SOUTHCOM), the military body overseeing operations in Latin America, confirmed on Tuesday that it captured the Motor Vessel Sagitta. The action is part of a broader U.S. blockade targeting oil vessels moving to and from the country.

Figure 1: An aerial image provided by the U.S. military shows the type of vessel targeted in its ongoing blockade of Venezuelan oil tankers.

Military Blockade in the Caribbean

In a formal statement, SOUTHCOM framed the seizure as a demonstration of American resolve. "The apprehension of another tanker operating in defiance of President Trump's established quarantine of sanctioned vessels in the Caribbean demonstrates our resolve to ensure that the only oil leaving Venezuela will be oil that is coordinated properly and lawfully," the command stated.

The operation occurred "without incident," according to the announcement, which was accompanied by a video showing U.S. forces approaching the vessel by air and landing on its deck. This latest seizure is part of a pressure campaign that began with the capture of the first sanctioned tanker on December 10.

A Strategy of Escalating Pressure

Tensions between Washington and Caracas reached a high point on January 3, when U.S. President Donald Trump authorized a military operation to abduct Venezuelan President Nicolas Maduro. In the period leading up to that event, President Trump and his allies, including Stephen Miller, had become more assertive in laying claim to Venezuela's oil.

The administration's argument is rooted in the history of U.S. prospecting for petroleum in Venezuela during the early 20th century. However, Venezuela nationalized its oil industry by 1971 and later moved to expropriate assets from foreign oil companies in 2007. These actions have drawn criticism from the Trump administration, which has described Venezuelan oil as being "stolen" from American owners.

This position is widely contested by legal experts, who largely consider the argument a violation of Venezuelan sovereignty.

Enforcing Sanctions with Military Power

Despite the legal debate, President Trump has maintained that the U.S. will control Venezuela's oil and has used the threat of military action to compel the Venezuelan government to comply. The administration has also imposed severe sanctions on Venezuela's economy.

The U.S. government has presented the tanker seizures as a method for enforcing these economic penalties, although the legality of using military force for this purpose is disputed. Administration officials have stated that the sale of Venezuelan oil on the global market will be dictated by the United States, with proceeds deposited into a U.S.-controlled bank account.

This control over oil sales also serves as a tool to increase pressure on Cuba, which depends on access to Venezuelan oil as an economic lifeline.

Conflicting Claims on Oil Revenue

Speaking to reporters at a White House briefing on Tuesday, President Trump claimed to have already taken 50 million barrels of oil from Venezuela.

"We've got millions of barrels of oil left," he said. "We're selling it on the open market. We're bringing down oil prices incredibly."

Meanwhile, Venezuela's Interim President, Delcy Rodriguez, reported that her country had received $300 million from recent oil sales. In her first state of the union address last week, she also announced that her administration plans to reform the nation's hydrocarbon law to attract more foreign investment in the future.

President Donald Trump upped the pressure on Europe to cede control of Greenland or face the consequences, saying that NATO owes it to the US to grant it full rights to the Arctic territory.

In a speech to the World Economic Forum in Davos on Wednesday after prompting days of elevated transatlantic tensions over his plans, Trump said that he was seeking "immediate negotiations" on acquiring the island — which is sovereign Danish territory — for national security reasons.

Trump cast the request as a "small ask" compared to the defense shield that the US has offered North Atlantic Treaty Organization countries for decades.

"What I'm asking for is a piece of ice, cold and poorly located, that can play a vital role in world peace and world protection," he said.

But while Trump seemingly ruled out the use of military force, he insinuated that he would weigh Europe's response to his demands when considering the US commitment to the alliance going forward.

"You can say yes, and we will be very appreciative, or you can say no, and we will remember," the president said.

Trump's speech was closely watched for any signs that he was backing off his demands to take the world's largest island, after triggering strong pushback from multiple allies from eastern Europe to the Nordic nations and heavyweights Germany, France and the UK.

Instead, he doubled down, deriding Europe's liberal democracies, government policies, NATO's effectiveness and singling out individual leaders including Canada's Mark Carney and Emmanuel Macron of France for criticism.

Faced with Washington's intransigence, Greenland's government is already putting in preparations for an invasion, though it's still seen as an unlikely scenario. Canada's military has meanwhile modeled how it would respond to an American invasion after Trump publicly talked about the country as a potential 51st state, according to a report in the Globe and Mail.

A request for comment on Trump's latest remarks was not immediately returned by the Danish prime minister's office or the foreign minister's office.

Trump's sales pitch occasionally veered off script. He claimed that the US had selflessly established military bases on Greenland in World War II, before acknowledging moments later it was in the country's own self interest. He also repeatedly referred to Greenland as Iceland.

But the crux of Trump's argument was that the US needed full control of the island because it was critical to the deployment of his "Golden Dome" missile defense system

"Greenland is a vast, almost entirely uninhabited and territory sitting undefended in a key strategic location between the United States, Russia and China. That's exactly where it is, right smack in the middle," he said.

Trump argued it would be impractical to defend territory not under US control.

"Who the hell wants to defend a license agreement or a lease?" Trump said, adding "you need the ownership to defend it."

Trump cast the American acquisition of Greenland as essential to collective security and downplayed the danger it would pose to NATO.

"We probably won't get anything unless I decide to use excessive strength and force where we would be, frankly, unstoppable," Trump said. "But I won't do that."

He also cited US support for Ukraine as an example of what he saw as the unequal trans-Atlantic relationship, saying the burden should fall onto Europe for supporting Kyiv.

"The United States is very far away. We have a big, beautiful ocean separating us. We have nothing to do with it," Trump said.

European leaders in recent days have been discussing how to respond to Trump's demands, including potential economic retaliation, but the US president has dismissed those threats, suggesting that allies have more to lose by opposing his agenda.

He also delivered a harsh warning to Europe, suggesting the continent's liberal governments were falling behind the US and that leaders needed to emulate his model to provide for their citizens.

"I love Europe, and I want to see Europe go good, but it's not heading in the right direction," he said.

Source: Bloomberg