Pre-World War Mentalities Resurface with Rising Political Extremism

Political

Summary:

Today’s world is increasingly grappling with a mentality reminiscent of the Cold War and even that predating the two World Wars. The recent attempt to impose martial law in South Korea, one of the most advanced democracies and economies in Northeast Asia, exemplifies this mentality.

Is it class or geopolitics?

Commentators often point to economic and social factors to shed light on this phenomenon. For example, many believe that the increase in radical sentiments in eastern Germany is largely due to limited job opportunities, lower wages and a decline in the quality of social services compared to western Germany. Furthermore, residents in western Germany have had more exposure to multicultural environments. In contrast, this socioeconomic divide has caused many in the east of the country to gravitate toward the anti-immigration rhetoric espoused by extremist groups.

In the United States, it is often explained that Donald Trump and his supporters have taken control of the Republican Party due to the frustrations of disenfranchised and disaffected white males, as well as those without a college education. These groups have experienced diminishing social mobility and falling incomes. Similarly, rising inequality and the declining fortunes of the working class fuel the growing influence of Bernie Sanders-style leftism within the Democratic Party. The November elections further intensified awareness of the educational gap, which is increasingly perceived as a social and class divide marked by cultural, gender and even culinary differences.

Similarly, recent election outcomes in the United Kingdom, France and other democracies are rationalized by a shifting political landscape driven by economic discontent.

Another significant factor in the current climate is the increasingly hostile global geopolitical landscape, which resembles the pre-war situation of the 1930s. As the world becomes increasingly polarized into conflicting camps, domestic politics mirrors these global tensions. Radical far-right and far-left movements are gaining traction in countries that are major powers, putting centrists on the defensive.

In France today, much like in the 1930s, the left and the center have united to prevent the far right from coming to power. Similarly, in several federal lands of Germany, the left and center are coalescing to build a wall against the rise of the far-right parties. The upcoming federal elections are likely to reflect this trend. Reports of connections between radical parties and geopolitical rivals, such as Russia, echo past ideological battles, and the ongoing war in Ukraine underscores historical parallels in our geopolitically divided world.

Or is it irrationality?

Scientific evidence indicates that the world is on the brink of environmental collapse, with global warming evidenced by severe floods, scorching heat and extreme weather patterns. Global action is urgently needed but is sorely lacking. Even as environmental crises escalate, the green parties remain on the fringes of political influence in most countries.

Green policies are inherently neither right nor left. They often clash with center-right perspectives because they prioritize environmental outcomes over economic efficiency. Due to its nature, the green ideology is in perennial conflict with major industries like oil and mining. Green policies should not align with center-left ideologies either, as they may threaten jobs and worker welfare in existing industries. Retraining programs for displaced workers often fall short, compelling many who face structural changes to seek employment in lower-paying, less “respectable” jobs.

Given the magnitude of the global environmental crisis, it is only rational that green parties should have the potential to rally voters around collective action to save our planet. However, national agendas prioritizing identity – be it class, national, religious or gender-based – continue to overshadow environmental concerns at the political forefront. To put it mildly, irrationality empowered by the radicalizing bullhorns of social platforms dominates the political agenda over the rationality of environmental action, which, some will argue, is simply too complex for a TikTok reel or a tweet.

The final resurgence of a bygone era

Class, geopolitical and religious discourses powerfully dominate domestic and global politics today. This realm of geopolitical competition and identity division has its roots in the rationality of an era predating the World Wars. It has resurfaced with renewed vigor and serves as a backdrop for contemporary politics. Today’s ruling class primarily consists of the generation molded by the conflicts of the past, who shape the world in their image.

The worldview of these political elites was formed during the Cold War when the world was divided into “us” and “them.” Conflict was commonplace, there were two genders, religion or ideology served as the source of truth, class was the main form of identification and patriotism was seen as a call to duty.

For this reason, current world leaders have strongholds among this generation and their younger followers. The ruling class comprises leaders and the entire generation that has amassed the greatest wealth and power during the peaceful era since World War II. The electorates of these leaders increasingly reflect these established worldviews, seeking comfort in a nostalgic return to the societal norms of their youth. It is paradoxical yet somewhat rational that the younger followers, who have never experienced that past society, view it as a reference for a better future.

The past three decades have marked significant changes that this older generation has not fully internalized or accepted. Skepticism toward the U.S. remains a common sentiment among older generations in the former communist bloc, who attribute many life challenges to what they perceive as decaying U.S. capitalist culture. While explicit critiques of capitalism may have diminished over time, grievances associated with “decaying U.S. culture” resonate strongly with them and are experiencing a resurgence in popularity.

Conversely, attributing the blame to “liberals in big cities and leftists on university campuses” who allegedly conspire with “communists” and various radicals abroad for most problems, both real and imagined, may resonate well with older voters across much of the West. The rationalization for the attempted martial law in South Korea is a surprising yet telling example.

Similarly, colonialism, which is allegedly still perpetrated by wealthier nations, serves as an easy explanation for many social ills in the developing world in the eyes of the older generation.

Echoes of past wars and ideological conflicts quickly revive latent distrust. Old habits run deeper than new realities, and trigger words such as “the U.S. imperialists,” “communists” and “colonizers” still have a potent impact on this generation.

Source: GIS

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Samantha Luan

Commodity

Economic

JPMorgan Chase & Co will deliver gold bullion valued at more than US$4 billion (RM17.83 billion) against futures contracts in New York in February, at a time when surging prices and the threat of import tariffs are fuelling a worldwide dash to ship metal to the US.

The bank, which is by far the world’s biggest bullion dealer, was one of several institutions to declare plans on Thursday to deliver bullion against contracts traded on CME Group’s Comex that will expire in February. The delivery notices — which total 30 million troy ounces of gold — were the second largest ever in bourse data going back to 1994.

Fears of imminent tariffs on imports following the election of US President Donald Trump have caused prices for gold futures on Comex to surge over spot prices in London. Spot prices shot to record highs this week, but the additional premium on Comex has created a lucrative arbitrage opportunity for the handful of banks that can quickly fly bullion between key trading hubs.

Similar pricing dynamics have emerged in other Comex contracts too, and the disparity has become so large that traders have started flying silver into the country. The precious metal is usually too cheap and bulky to justify the cost of airfreight, and one industry veteran says it is the first time they have seen it happen.

JPMorgan Plans US$4b US Gold Delivery Amid Tariff Fears_1

While millions of ounces of gold trade on Comex every day, typically only a small fraction of that goes to physical delivery, with most long positions being rolled over or closed out before they expire.

The exchange is often used to hedge positions in London, the largest trading hub, with banks offsetting longs with paper short positions in New York. Since the day of the US election though, physical inventories in the exchange’s depositories have swelled by 13 million ounces, around US$38 billion of gold.

It is unclear whether JPMorgan or the other banks were delivering bullion physically to take advantage of an arbitrage opportunity, or were simply using the deliveries to exit existing short positions. JPMorgan and exchange owner CME Group Inc declined to comment.

JPMorgan Plans US$4b US Gold Delivery Amid Tariff Fears_2

JPMorgan issued delivery notices for 1.485 million ounces of gold to meet physical delivery for the February gold 100-ounce contract, with deliveries on Monday, Feb 3. That accounted for roughly half the total to be delivered, with Deutsche Bank AG, Morgan Stanley and Goldman Sachs Group Inc making up the bulk of the rest.

Deutsche Bank, Morgan Stanley and Goldman declined to comment.

Source: Theedgemarkets

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Glendon

Economic

Forex

Market exuberance about the US growth outlook has pushed up interest rates and the US dollar, as has the stance of US fiscal policy. But can high interest rates and a seemingly overvalued exchange rate be compatible with ‘US exceptionalism’?

If one ever needed confirmation that financial markets price things primarily based on beliefs about the future, this week gave it. Once it became clear that, no, President Trump was not going to enact sweeping tariffs by executive order on Day 1, the ‘Trump trade’ and ‘American exceptionalism’ drivers of pricing reversed somewhat. The US dollar depreciated, bond yields declined and US share prices slipped. The Australian dollar bounced about three-quarters of a cent against the US dollar in the space of a few hours. These moves did not entirely undo the shifts seen since the US election, but they highlighted just how overbought the Trump trade was. People trade the belief, and then reverse course when reality turns out differently. (And then reverse course again on some actual announcements, but that’s another story.)

The deeper question of the future path of US interest rates remains.

Contrary to last year’s recession worries, US economic growth remains well above past assessments of trend. Unemployment remains low and employment growth robust. Inflation has declined but remains sticky above the Federal Reserve’s 2% target. Compared with other major advanced economies, the United States has been remarkably resilient to tight monetary policy. The US economy has powered along almost as if the fed funds rate had not been so high.

This resilience has been a bit of a puzzle. Low fixed-rate mortgages have long been a factor there, so they cannot fully explain this divergence. Macroeconomic statistics being what they are, one can never completely rule out ‘it was all a mirage and will be revised away eventually’ as an explanation. Stronger balance sheets in the wake of the policy support during the pandemic may be contributing. Also relevant, though, is the role of fiscal policy working in the opposite direction to monetary policy. This is a theme we have highlighted previously.

Conventional macro analysis tells you that it’s the change in the fiscal deficit – sometimes called the ‘fiscal impulse’ – that contributes to economic growth. That said, the level of the deficit surely matters for the level of output, and thus any assessment of how demand and supply compare. And at more than 5% of GDP, the US federal deficit is helping to supercharge demand in an already fully employed US economy. By contrast, because burgeoning public spending in Australia is being more or less matched by rising taxation, the boost to the level of overall demand is smaller.

At this scale, differences in fiscal stance can influence the paths of monetary policy interest rates. In broad terms, the narrative for the last couple of years has been that central banks needed to set monetary policy to be restrictive to get inflation back down to target. Once they were reasonably sure that the disinflation was on track, central banks would start cutting interest rates back towards neutral, wherever that was. Because monetary policy works with a lag, this process needs to start before inflation has returned all the way back to target.

The idea that monetary policy needs to become less restrictive as inflation approaches target remains intact. Less clear, though, is whether interest rates need to converge to ‘neutral’ (r* in the economics jargon) in the short term, or to some other rate.

Where policy rates end up troughing in different economies over the next year or so therefore rests on the answer to two questions.

First, how does the (long-run) neutral rate relate to the central bank’s estimates of it?

It has long been our house view that, wherever neutral is, it is higher than it used to be. The Federal Reserve and other central banks have seen the same developments and revised up their estimates of neutral over the past year or so. Based on the ‘dot plot’ of FOMC members’ views on the ‘long-run’ level of rates, the Fed’s estimates of neutral are centred on 3% or a touch below. This is still a little below our own view that this longer-run concept of neutral is likely to be somewhere in the low to mid 3s.

Depending on how quickly central banks pivot their thinking, it is therefore possible that some central banks will need to backtrack as they discover that the neutral rate they were aiming for is actually higher than they thought. This evolution, and the likely policy actions of the Trump administration, underpin our current forecast that the Fed will start raising rates again in 2026. Policymakers never forecast that they will end up backtracking, so the ‘dot plot’ shows a smoother convergence without a turning point. But it’s also plausible that the smoother path implied by the ‘dot plot’ occurs because policymakers revise up their estimate of neutral further.

(We don’t think the RBA is subject to the same risk of upward revision to their estimates of neutral in the near term. Their models already imply that the neutral nominal cash rate is in the mid 3s, and the recently adopted checklist approach to assessing broader monetary conditions will reduce the risk that statistical inertia in those models leads to underestimates of neutral.)

Second, is long-run ‘neutral’ where monetary policy needs to converge to, or is there something (like fiscal policy) that monetary policy will end up needing to lean against to keep inflation at target?

One could argue that this is making a distinction without a difference: those forces are just the things that cause ‘true r*’ to move around. The issue is that the standard models used by central banks to estimate the neutral rate do not include the impetus from fiscal policy or other factors over which monetary policy has no direct influence. The researchers in this field acknowledge that persistent changes in fiscal policy could affect the level of neutral. But because their models omit any fiscal variables, they cannot quantify the effect.

Despite these shortcomings in the models, FOMC members clearly recognise the issue. The ‘dot plot’ shows that they do not expect the fed funds rate to reach ‘neutral’ until after 2027. So even if their view on neutral is still too low, their recognition that other factors lean against a swift return to neutral will help counterbalance this.

Because other major economies have different fiscal (and growth) outlooks, the shifting market view on US rates has implied shifts in views on interest rate differentials, and so exchange rates. But this puts the US dollar even further above levels at which purchasing powers are at parity, an anchor point that exchange rates tend to gravitate towards over a run of years. Most published measures of the real effective US dollar exchange rate show it at levels surpassed only by the mid-1980s era that ended in the Plaza Accord.

Higher interest rates and a seemingly overvalued exchange rate. One can’t help thinking that reality will bite the US exceptionalism narrative sooner or later.

Source: ACTIONFOREX

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Winkelmann

Economic

US President Donald Trump has again demonstrated his confusion on currency issues with his ‘America first’ executive order on trade policy.

Section 2a of the order shows this clearly: ‘The Secretary of Commerce, in consultation with the Secretary of the Treasury and the United States Trade Representative, shall investigate the causes of our country’s large and persistent annual trade deficits in goods, as well as the economic and national security implications and risks resulting from such deficits, and recommend appropriate measures, such as a global supplemental tariff or other policies, to remedy such deficits.’

The US current account deficit is predominantly a macroeconomic phenomenon, reflecting the country’s savings and investment gap. America’s huge and unwise fiscal deficits, which Trump’s plans threaten to exacerbate, will add to that gap.

The dollar is super strong. The US economy is stronger and the Federal Reserve’s interest rate cut path is far shallower than Europe’s, sucking in capital. Threatened tariffs are further pushing the dollar up, aggravating the current account deficit.

Of course, given Europe’s weak growth and China’s massive headwinds, there clearly is a foreign dimension to the deficits. But first and foremost, American deficits are made in America. Foreigners can’t fix that.

Trump assigns the investigation of persistent US deficits to the Commerce Department in consultation with the Treasury and US Trade Representative. But Commerce doesn’t have responsibility for macroeconomic policy. Nor does USTR. In contrast, the Secretary of the Treasury is the chief economic spokesperson for the administration. This order is therefore a slap in the face of the Treasury and Secretary Scott Bessent.

Treasury and foreign exchange

Section 2e of the order is more conventional, assigning responsibility solely to the Secretary of the Treasury: ‘The Secretary of the Treasury shall recommend appropriate measures to counter currency manipulation or misalignment that prevents effective balance of payments adjustments or that provides trading partners with an unfair competitive advantage in international trade, and shall identify any countries that he believes should be designated as currency manipulators.’

But what should one watch out for?

The standard currency playbook under Presidents Bill Clinton, George W Bush, Barack Obama and Joe Biden ran through the Treasury semi-annual foreign exchange report. Under a 2015-16 revision to the report’s authorisation, in assessing whether a country ‘manipulated’ its currency or pursued harmful currency practices, the Treasury was to analyse more quantitatively if the country: 1) was a major trading partner and had a large bilateral surplus with the US, 2) a material current account surplus and 3) was adding significantly to reserves in a sign it was artificially holding its currency down.

Trump heavily focuses on the first point, though most economists largely dismiss the importance of bilateral balances. In 2019, Trump ordered the Treasury to designate China as a currency manipulator, even though China only ran afoul of one of the three criteria. Later it designated Vietnam and Switzerland for manipulation when they ran afoul of the three criteria.

The designations in and of themselves were greeted by a yawn from markets and barely caused a ripple. Aside from China, which has only triggered the bilateral balance criterion in recent years, other countries running afoul of two criteria are placed on a monitoring list.

What options are available to Treasury and the administration?

The threat of being designated a manipulator and being on the monitoring list can prod smaller countries to hold bilateral discussions with the Treasury and make accommodations. But the kinds of remedies proposed in the legislation for manipulators are not that impactful. Cutting off Export-Import Bank financing may not be meaningful to China, for example. International Monetary Fund exchange rate analytics may offer interesting insights but, when it comes to ruthless truth-telling, the IMF is a toothless tiger.

There is no reason a Trump Treasury needs to stick with its ‘three strikes’ practice from the first term, plus the criteria can be fiddled. For example, the material current account surplus criterion was defined as 3% under the Obama administration, 2% under Trump 1.0 and 3% under Biden.

China’s current account surplus – regardless of what the IMF tells us – is probably back up to 3% or higher and the bilateral balance criterion is met. Two out of three might do the trick for a Bessent Treasury under a newly aggressive Trump administration. According to the November 2024 Treasury FX Report, Vietnam, Canada and Mexico are poor candidates for designation.

Of course, Trump may impose tariffs against many countries for whatever reason, currency-related or not.

For countries posing currency issues, it is worth recalling that countervailing duties for currency undervaluation were put forward towards the end of Trump 1.0 and imposed on Vietnamese tire production. The clock ran out before they could be imposed on Chinese products. Currency undervaluation CVDs could offer a targeted vehicle for Trump 2.0 to address currency concerns.

They are, however, fundamentally misguided. There is no scientific way to estimate equilibrium exchange rates or deviations from equilibrium. Deriving a bilateral equilibrium exchange rate from a multilateral one is highly problematic. Currencies are impacted by capital flows, swamping current account flows — the dollar is especially affected by capital account transactions. These considerations involve macroeconomic policy. If the dollar is now overvalued, it is more a ‘Made in the USA’ story and the flip side of that is other currencies being undervalued, through little fault of their own.

What are the possible outs?

Under the Trans-Pacific Partnership during the Obama administration, tackling currency manipulation was a principal negotiating objective set by Congress for approval of Trade Promotion (fast track) Authority. Finance ministers reached a joint declaration that was not part of TPP or part of its dispute resolution, setting up possible finance minister discussions on macroeconomic and financial developments in the TPP.

The United States-Mexico-Canada Agreement included a currency chapter. It required the countries to affirm their commitment to market exchange rates and adhere to IMF prohibitions against manipulation.

In both cases, though, the US push to tie currency understandings to trade deals met resistance from others. The provisions agreed were weak and often just recognised existing practice.

Transparency on currency policy understandings featured prominently in Trump 1.0. The China Phase One deal had a currency chapter, which committed the parties to do what they were already doing. The trade deal with Korea included a side agreement. Vietnam was pushed to give such information to the US. Chinese currency practices in particular are highly opaque and there is still room for far greater improvements on this front. The progress on transparency was welcome.

Any Trump 2.0 push on currency policy is likely to stir up a hornet’s nest within the administration, let alone internationally. But it will not change the underlying US macroeconomic dynamics driving imbalances. Foreign countries have engaged in harmful currency practices, but today’s woes are mainly made in the US. The Treasury’s immediate tools for tackling harmful currency practices are weak. If Trump 2.0 is to deploy currency sticks, countermeasures in the trade realm are the likeliest tool of choice.

Blaming the foreigners will create some ugly recriminations and big US trade deficits aren’t going away.

Sources:OMFIF

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ING

Forex

Economic

As widely expected, the BoJ raised its target rate to 0.5% . The surprise came from its latest inflation outlook, which was revised sharply higher throughout 2026. If the spring wage negotiations bring another solid wage increase, we expect the BoJ to deliver a 25 hike in May.

The BoJ upgraded its inflation outlook to above 2% throughout the forecast period

The BoJ's rate hike itself was already fully priced into the market, so it came as no surprise. But the Bank's latest quarterly outlook report sent a clearer message that further rate hikes would come sooner than the market had expected. The BoJ expects inflation to remain above 2% until FY2026. Governor Kazuo Ueda's communication at the press conference was rather ambiguous about the timing of the next rate hike and the terminal rate, but this was somewhat expected. Governor Ueda reiterated that the real interest rate remains negative, and monetary conditions therefore remain accommodative. Thus the market appears to be more closely following the projection of the sustainable inflation outlook.

The BoJ upgraded its inflation outlook quite sharply

Source: CEIC

Solid wage growth underpins broad-based inflation gains

The December inflation results are mostly in line with market consensus. Inflation jumped to 3.6% year-on-year in December (vs 2.9% in November, market consensus 3.4%) mainly due to a pick up in utilities (11.4%) and fresh food prices (17.3%). Higher utilities are mainly due to the end of the government subsidy programme. Rice prices continued to rise sharply which will lead to service prices (eating out) rising with a time lag, thus the BoJ should be watching the price trend carefully.

Core inflation excluding fresh food also rose to 3.0% (vs 2.7% in November, 3.0% market consensus) while core-core inflation excluding fresh food and energy stayed at 2.4% (vs 2.4% in November, market consensus). In the monthly comparison, inflation growth accelerated to 0.6% month-on-month seasonally-adjusted (vs 0.4% in November) with goods and services up by 1.1% and 0.1% each. Apart from the end of energy subsidies and rising fresh food prices, service prices are rising steadily, which in our view is more important than the rise in headline inflation.

Service prices rose steadily

Source: CEIC

BoJ watch

Governor Ueda's comments made clear that the Bank is not in a hurry to raise rates again. But we noted that his optimistic view on the outlook for spring wage negotiations is a signal that a May hike option is on the table. For the May hike to materialise, Shunto's results would need to be as strong as last year's, which is our base case scenario.

We expect inflation to cool down from January as the government renews its energy subsidy programme, but rising rice prices are likely to have a second-round effect in pushing up broader services prices.

If another solid wage negotiation and steady rise in service prices are confirmed, we expect another 25bp hike in May.

One of the major risk factors is President Trump's trade policy. So far Trump's trade policy has been mostly in line with market consensus and there has been no particular negative news for Japan. But, this may change in the future, and the BoJ's rate hike may be delayed.

JPY: Positive news, but US yields remain the key driver

As markets perceived the upward revision in inflation forecasts as a hawkish signal, there seems to be a bit more tailwind for the yen. Remember USD/JPY still has room to unwind extensive long positioning and the dollar has continued to lose momentum since Trump’s inauguration as the threat of imminent tariffs is decreasing.

Two-year JPY swap rates have risen by only 3bp to 0.74% after the BoJ announcement, which signals there is more room for a hawkish repricing in the curve in the coming months if we are correct with our expectations for two more hikes in 2025. That bodes well for the yen, which however remains heavily dependent on the impact of Trump policies on US Treasury yields.

Our rates team retains a bearish call UST which makes us reluctant to switch to a downward-sloping profile for USD/JPY just yet. That said, should upside room for US yields end up proving limited, the case for USD/JPY to move to the 155-150 range this year becomes quite compelling given the relatively hawkish BoJ and still significant medium-term overvaluation of the pair.

Source: ING

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Adam

Economic

Exporters Accelerate Shipments Amid Growing Trade Uncertainty

International exporters are scrambling to move their goods into the U.S. in anticipation of potential tariff hikes under the new administration. With former President Donald Trump reaffirming his intent to impose sweeping tariffs on all imported goods, businesses across industries are taking preemptive action to mitigate the risks of rising trade barriers.

Instead of adopting a wait-and-see approach, many multinational companies have expedited shipments to the U.S., ensuring they can secure current tariff rates before any new policies take effect. Key players in the automotive, food, and beverage industries—including General Motors, Mercedes, French cognac producers, Italian parmesan cheese manufacturers, and sparkling wine exporters—have all intensified their export activities. Additionally, U.S. importers have been stockpiling essential commodities such as steel, aluminum, and soybeans in response to potential supply disruptions.

Strategic Stockpiling as Businesses Brace for Higher Costs

Supply chain consultants note that companies are increasing inventory levels to shield themselves from future tariff shocks. According to Patrick Lepperhoff, CEO of supply chain consultancy firm Inverto, businesses have been aggressively stockpiling goods in the U.S. to maintain stable operations should higher tariffs disrupt trade. This strategy reflects concerns that a stricter trade policy could upend global supply chains and push companies to shift production into the U.S. rather than continuing to rely on international manufacturing hubs.

A recent survey by Reuters found that corporate executives are acutely aware of the volatility in trade policy and its impact on business operations. The uncertainty surrounding future tariff measures has fueled fears that a prolonged trade war could severely alter global commerce, forcing companies to reconsider long-term sourcing and investment strategies.

U.S. Trade Deficit Hits Record High Amid Import Surge

The rush to import goods into the U.S. has contributed to a sharp increase in the country's trade deficit. In December 2024, the U.S. recorded a historic trade gap of $122 billion, driven by a 4% surge in imports and a 4.5% decline in exports. This imbalance highlights how businesses are frontloading shipments to bypass potential tariff hikes, leading to a short-term spike in inbound trade volumes.

Retailers such as PacSun have taken proactive steps to navigate this volatile landscape. Brieane Olson, CEO of PacSun, revealed that the company has reallocated part of its projected Q1 2025 sales to emergency inventory reserves. Additionally, PacSun has established a "tariff task force" that meets twice a week to coordinate with suppliers and develop contingency plans.

U.S. Prepares for Sweeping Tariff Increases on Key Trade Partners

The Biden administration has reaffirmed its commitment to implementing tariffs of up to 25% on imports from Mexico and Canada, set to take effect on February 1. Trump has also signaled that additional tariff increases on Chinese goods are under consideration, with potential hikes being rolled out concurrently.

Even more concerning for the automotive sector, Trump has threatened to impose tariffs ranging from 100% to 200% on vehicles imported from Mexico. Such a move could severely disrupt global automakers with manufacturing operations in Mexico, forcing them to reassess their supply chain strategies and potentially relocate production to the U.S.

Implications for Global Trade and Supply Chain Resilience

The escalating trade tensions underscore the fragility of international commerce and the far-reaching consequences of protectionist policies. In 2024, the U.S. imported approximately $844 billion worth of goods from Canada and Mexico, accounting for nearly 28% of total imports. A significant portion of this trade now faces the risk of higher duties, which could lead to increased consumer prices, supply chain disruptions, and shifting investment patterns.

As global businesses brace for a new era of trade policy uncertainty, companies must navigate an increasingly complex landscape by diversifying sourcing strategies, securing alternative supply chains, and reevaluating long-term investment plans. While stockpiling may offer short-term relief, the broader implications of these policy shifts will likely shape global trade patterns for years to come.

Source: Manufacturing Today

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Glendon

Economic

Forex

The Korean economy posted weaker-than-expected growth last year amid slowing export growth, sagging domestic demand and a political crisis.

The economic expansion in the fourth quarter also came far below the earlier forecast by the Bank of Korea (BOK) as political turmoil sparked by President Yoon Suk Yeol's shocking martial law declaration dented private spending and investment, according to the central bank.

The country's real gross domestic product — a key measure of economic growth — increased 2 percent in 2024, according to preliminary data from the BOK.

The 2024 figure was lower than the central bank's forecast of a 2.2 percent expansion, though the growth accelerated from a 1.4 percent advance in 2023.

Last year's growth was led by exports, which surged 6.9 percent from a year earlier, compared with a 3.5 percent on-year increase in 2023.

Private spending rose 1.1 percent in 2024, slower than a 1.8 percent growth the previous year.

Facility investment gained 1.8 percent, while construction investment fell 2.7 percent.

In the fourth quarter alone, Asia's fourth-largest economy advanced 0.1 percent on-quarter, far lower than the BOK's forecast of a 0.4 percent growth.

On a yearly basis, the economy grew 1.2 percent in the fourth quarter, slowing from the previous quarter's 1.5 percent gain.

Exports inched up 0.3 percent from three months earlier in the fourth quarter, while imports shed 0.1 percent.

Private consumption added 0.2 percent on-quarter, and government spending rose 0.5 percent. Facility investment also climbed 1.6 percent.

But construction investment dropped 3.2 percent, the data showed.

"Heightened political uncertainties affected consumer sentiment and private spending. The situation of the construction industry was worse than expected," BOK official Shin Seung-cheol told a press briefing.

Yoon declared a shocking martial law on Dec. 3, and the National Assembly voted to impeach him.

Yoon was arrested earlier this month and has come under investigation on charges of leading an insurrection and committing abuse of power.

Korea had been on an economic recovery track at the beginning of 2024, but momentum has weakened as the growth of exports has slowed and domestic demand remained in the doldrums.

The economy expanded 1.3 percent from three months earlier in the first quarter but contracted 0.2 percent in the second quarter before barely growing 0.1 percent in the third quarter.

The BOK earlier presented a 1.9 percent growth outlook for the Korean economy in 2025, which is widely expected to be lowered further.

"Weak domestic demand and the construction industry slump are expected to continue through the first quarter of this year," Shin said, citing a potential extra budget and policy changes under the new Donald Trump administration as major factors that will affect the economy down the road. (Yonhap)