Trump Trade Upheaval Leaves Foreign Central Banks Guessing

• Slowing economic growth mixed with a bout of renewed inflation risks moving the U.S. from a global overachiever to a drag on the rest of the world as foreign central banks and others confront the spillovers from President Donald Trump's fast-moving effort to rewire international trade.
• With analysts in the U.S. noting the stagflationary direction of the U.S. outlook - weaker output and higher prices - central banks globally are parsing what the fallout may mean for them.
• When the Bank of England held its policy rate steady on Thursday it pointed specifically to Trump's tariff moves as clouding the global outlook. Similar warnings came from the Bank of Japan, which held its policy rate steady and signalled future moves could be shaped by how Trump's plan to blanket the world with new tariffs plays out in practice.
• European Central Bank President Christine Lagarde said on Thursday that U.S. tariff measures and likely European Union retaliation would be a blow to growth and tack perhaps half a percentage point onto inflation in the short-run at least. Swiss National Bank governing board member Petra Tschudin said as the SNB cut its policy rate that "developments abroad continue to represent the main risk" in an economic climate that "has become considerably more uncertain."
• Economists see a likely recession in Canada and Mexico, which depend mightily on exports to the U.S. and have been particularly targeted by Trump, while shifts in global currency and capital flows and U.S. foreign spending are already creating sets of winners and losers.
• Trump has said he will follow through next month on twice-delayed plans to impose 25% levies on goods from Mexico and Canada despite a regional trade agreement negotiated in his first term and announce a tariff "number" for other countries based on taxes they impose on U.S. goods.

(Source: Reuters)