Economy
Brazil joins Argentina, Uruguay in ratifying EU-Mercosur deal
Brazil’s parliament has ratified the free trade agreement between the European Union and the Mercosur states including Argentina, Brazil, Paraguay and Uruguay.
Senate President Davi Alcolumbre said on Wednesday lawmakers had acted in the interest of society after the treaty cleared its final parliamentary hurdle in the Senate. Uruguay and Argentina have already ratified the deal.
The agreement was signed earlier this year in Paraguay after more than 25 years of negotiations. It is expected to create a new free trade area covering more than 700 million people.
By reducing tariffs and other trade barriers, the pact aims to boost the exchange of goods and services between the two regions.
The European Commission has said it plans to apply the agreement provisionally, despite a pending review by the European Court of Justice.
Türkiye has activated a special “sliding scale” system that adjusts the special consumption tax (ÖTV) on fuel products in line with changes in oil prices to prevent excessive price increases, according to a decision published in the country’s Official Gazette on Thursday.
According to the decision, in the case of a surge in refinery exit prices of fuel products, the ÖTV amount can be reduced by up to 75% of the increase, and in the case of decreases in prices, it will be increased by the same rate.
The decision comes amid concerns over rising global energy prices following the U.S.-Israeli war on Iran and its aerial response targeting key infrastructure across the Gulf nations, major producers of crude and natural gas. It also aims to limit the impact of rising oil prices on inflation and to reduce their effects on citizens.
The regulation will be based on the domestic refinery exit prices used as the basis for fuel dealer sales prices announced by the Energy Market Regulatory Authority (EPDK) as of March 2.
Increases in the ÖTV rates cannot exceed the ÖTV rate applied on March 2.
“To limit the impact of geopolitical developments on the economy, we have taken an important step by prioritizing disinflation in public finances. To mitigate the impact of the oil price shock, which we consider temporary, we are temporarily activating the sliding scale system and covering up to 75% of fuel price increases through taxes,” Treasury and Finance Minister Mehmet Şimşek said in a post on X.
“We will continue to support disinflation without compromising fiscal discipline,” he added.
Annual inflation rate in Türkiye ticked up slightly in February to 31.5% while monthly inflation cooled to 2.96%, compared to the higher-than-expected 4.84% increase in January, official data showed earlier this week.
Brent was up 3.2% at $84.01 per barrel early Thursday, while West Texas Intermediate rose 3.6% at $77.38 per barrel, extending gains over the past week.
China on Thursday set out a five-year roadmap to turbocharge scientific breakthroughs and embed AI across its industrial economic machine, framing technological dominance as a core national security goal in its sharpening rivalry with the U.S.
In its 15th strategic plan since adopting Soviet-style quinquennial policy cycles in the 1950s, Beijing has outlined a bet that technology – not consumption – will drive its next phase of development despite growing structural pressures.
The objectives reflect President Xi Jinping’s vision of developing “new productive forces” to escape the middle-income trap, counter the demographic downturn, and enhance self-sufficiency to insulate China from U.S. export controls.
At the opening of the annual parliament meeting, Premier Li Qiang praised China’s ability to withstand U.S. President Donald Trump’s tariff hikes, but said “multilateralism and free trade are under severe threat,” announcing 7% increases in the defense budget, as well as in research and development.
Li acknowledged an “acute” imbalance between strong supply and weak demand and risks from a worsening property sector crisis and high local government debt.
These challenges have pushed Beijing to set a slightly lower growth target of 4.5%-5% for 2026, down from last year’s 5%, which was met largely through a one-fifth surge in its trade surplus to a record $1.2 trillion.
As widely expected, the five-year plan also pledged a “notable” increase in household consumption, without specifying figures, dampening expectations for demand-side reforms.
Last year’s trade punches with the Trump administration, which briefly escalated to embargo-like conditions of triple-digit tariffs, showed the importance of its supply chain dominance as leverage.
China vowed to maintain its competitive edge in rare earths.
The U.S. and its allies are still years away from breaking their reliance on China for these materials vital to everything from AI chips to defense systems.
“China’s government remains laser-focused on spurring technological breakthroughs and high-tech investment,” said Fred Neumann, chief Asia economist at HSBC. “In part, this is motivated by competition with the United States for control over the technologies of the future.”
“Many international observers may be left disappointed, therefore, by slower progress in rebalancing the economy away from investment towards consumption.”
China invests 20 percentage points of GDP more than the global average, while its households spend roughly 20 points less – a state-controlled, debt-driven development model that analysts say creates industrial overcapacity and fuels trade tensions abroad and deflationary pressures at home.
“The rebalancing challenge that China faces, and that will take years to achieve, is implicitly acknowledged by a weaker growth target for the coming year,” Neumann added.
The five-year plan aims to raise the value-added of “core digital economy industries” to 12.5% of GDP and roll out new policies for an integrated national data market, AI adoption across the full supply chain, and an AI security system.
Ambitions span biomedicine, quantum tech, atomic-scale manufacturing, hyper-scale computing clusters, nuclear fusion, brain-computer interfaces and even commercializing AI-powered humanoid robots.
“Beijing is trying to manage a ‘controlled glide’ in growth while building a new economy based on technology rather than property,” said Andy Ji, Asian FX & rates analyst at ITC Markets.
“It is a high-stakes rebalancing where the government is betting the house on AI and advanced manufacturing.”
State-owned enterprises were enrolled to create demand for made-in-China semiconductors and drones.
The 141-page plan name-checks AI over 50 times, envisioning robots plugging labor shortages and factories operating with little human oversight. It builds on a breakout year for Chinese developers – led by DeepSeek – who rapidly closed the gap with U.S. leaders such as OpenAI and Gemini.
But the five-year plan also lists bigger ambitions in areas China already dominates: it accounts for 85% of the world’s electric vehicle charging stations, but still aims to double their number within three years.
Economists say a lower growth target allows Beijing to experiment with cutting overcapacity in low-value added industries, but cautioned that this did not mean a departure from its production-focused growth model.
The U.S. Supreme Court’s decision to strike down some of Trump’s tariffs and expectations that a meeting between the two countries’ presidents later in March could stabilize relations in the short-term bode well for such adjustments.
Dan Wang, China director at Eurasia Group, said Beijing appeared to take advantage of “the trade truce” to absorb the job market pressure created by any production curbs.
Stimulus-wise, China plans a budget deficit of 4.0% of GDP and has set special debt issuance quotas at 1.3 trillion yuan ($188.5 billion) for the central government and 4.4 trillion yuan for local authorities – all unchanged from last year.
China pledged to raise minimum monthly pensions by 20 yuan per person and basic medical insurance subsidies for rural, non-working people by 24 yuan – marginal, rather than structural, moves. It said it wants to increase education spending, subsidize childcare and reform public hospitals, acknowledging the demographic downturn.
Yuan Yuwei, fund manager at Trinity Synergy Investment, warned that China’s growth and policy aims for this year – prepared at the end of 2025 – do not take into account the U.S.-Israeli attacks in Iran.
“That’s very negative for China, which counts the Strait of Hormuz as a crucial trade route,” said Yuan.
Global economic resilience was being tested yet again by the latest war in the Middle East, Kristalina Georgieva, the head of the International Monetary Fund (IMF), warned Thursday.
“This conflict, if proven to be more prolonged, has obvious potential to affect global energy prices, market sentiment, growth and inflation, and place new demands on the shoulders of policymakers everywhere,” Georgieva said during a livestream of the “Asia in 2050” conference in Bangkok.
The U.S. and Israel began launching strikes against Iran on Saturday, killing its supreme leader and sparking a wave of retaliatory attacks across the Gulf.
The conflict in the resource-rich region has sent global oil prices soaring, and markets have been thrown into turmoil.
“We are in a world of more frequent, more unexpected shocks and we have been warning our membership for quite some time that uncertainty is now the new normal,” Georgieva said on Thursday.
“We are potentially in a prolonged period of flux.”
Energy security was “at stake” for most of Asia, she told the conference in Thailand’s capital, noting the markets have fluctuated “like a roller coaster over the last couple of days”.
“So the sooner we see the end of calamity, the better for the whole world.”
A draft law currently at the Turkish Parliament is expected to generate at least TL 4.2 billion (nearly $96 million) tax income from a levy on crypto assets, according to its impact analysis.
The law will generate more tax income from crypto assets but this amount cannot currently be calculated exactly as it will be applied for the first time, the analysis said.
Under the draft law proposed by the ruling Justice and Development Party (AK Party), on top of a 0.03% crypto asset transaction tax, a 10% withholding tax will be collected from profits made from crypto asset transactions made on approved platforms.
The analysis report said it was not possible to calculate possible budget revenues from the tax that will be imposed on crypto asset profits.
Separately, a 20% special consumption tax set to be applied to some precious stones as part of the draft law is expected to generate some TL 1.9 billion annual income to the government budget, according to the impact analysis.
The ongoing air war with Iran could cost the country’s economy over 9 billion shekels (about $2.93 billion) per week, the Finance Ministry said on Wednesday.
Under current “red” restrictions by Israel’s Home Front Command that limit traveling to work, order school closings, and mobilization of reserve forces, economic loss is estimated at 9.4 billion shekels a week, largely starting from next week, it said.
The ministry has asked the Home Front to move to “orange” – or limited activity that is less restrictive to workplaces than “red.” In this scenario, the loss to the economy would be 4.3 billion shekels a week.
Israel and the U.S. began bombing Iran on Saturday, triggering a wave of retaliatory strikes across Israel and the Middle East and disrupting energy exports from the Gulf.
U.S. and Israeli officials said the campaign could last weeks.
Schools in Israel are closed this week. Gatherings are banned, while workforce activities are prohibited except for essential services, with most employees working from home.
Hurt somewhat by the genocidal war on Gaza, Israel’s economy grew 3.1% in 2025. In the wake of a cease-fire in October, growth was projected at more than 5% in 2026.
The European Union unveiled new “Made in Europe” regulations on Wednesday sought to strengthen the bloc’s industries amid fierce competition from China, following months of delays caused by disputes over proposals critics call too protectionist.
Concerning strategic sectors including cars, green tech and steel, the law, called the “Industrial Accelerator Act”, is part of broader EU efforts to help local industries compete with producers abroad who do not face Europe’s strict regulations and higher energy prices.
“What I am presenting to you today is more than just a change in operating procedures; it is a change in doctrine – one that was unthinkable just a few months ago,” said EU industry chief Stephane Sejourne.
Broadly, the rules aim to ensure that public and foreign investments support manufacturing inside the 27-nation bloc, explained an EU official.
To that end, they say companies that want public money must meet minimum thresholds for EU-made parts and subject large investments from dominant foreign firms to conditions including employing EU workers.
The European Commission said the package aims to bring manufacturing’s share of EU GDP to 20% by 2035, up from about 14% in 2024.
At stake are about 600,000 jobs that Brussels predicts could be lost over the next decade if the bloc’s industrial decline continues on its current path.
What ‘Europe’?
Initially expected last year, the measures strongly backed by France were pushed back several times due to disagreements, with some arguing they run counter the EU’s pro-free-trade spirit.
Much of the discord revolved around the geographical scope of “Made in Europe.”
Skeptics, including the EU’s largest economy Germany, argued trade partners should be included in the definition under a “Made with Europe” approach.
Brussels settled for a compromise based around the principle of reciprocity.
Countries that have deals with the EU allowing for European companies to access public money on par with local firms in the sectors concerned would be brought into the fold.
Others – like Canada – that give preference to local producers will be left out unless they change tack, the official said, noting the rules would be used as a trade tool to negotiate better access for EU companies.
Ahead of publication, the plans had raised concerns among foreign partners, including Türkiye, Britain and Japan.
A full list of who was in and who was out was not yet available.
The “Made in Europe” requirements, which also seek to boost industrial decarbonization, would apply to “strategic sectors”, namely: steel, cement, aluminum, cars, and net-zero technologies.
Governments putting money behind infrastructure projects will have to ensure they include a minimum share of European low-carbon steel, cement and aluminum, among other provisions.
Electric-vehicle (EV) manufacturers will have to make sure at least 70% of their cars’ components are made in the EU to access public money.
Similar rules will apply to batteries, solar, wind, and nuclear.
Investment screening
The proposal, formally known as the “Industrial Accelerator Act”, also aims to ensure foreign companies partner with European firms if they want to set up shop in the bloc.
To do so it imposes conditions on foreign investments of over 100 million euros ($116 million) in “emerging strategic sectors” such as batteries and EVs.
These kick in when they involve an investor from a country that holds more than 40% of the related global manufacturing capacity – an implicit reference to China’s dominance in those sectors.
For such projects to go ahead, foreign investors need to meet four of six conditions including employing at least 50% EU workers, holding no more than 49% of the related EU company, and passing on technological know-how.
That was to counter instances where Chinese firms set up a European plant employing mainly Chinese workers with “very little local added value,” said the EU official speaking on condition of anonymity.
For many, the plans are necessary to boost the development of EU green tech and shield manufacturers from unfair competition from heavily subsidized Chinese rivals.
The goal is to make sure EU taxpayers’ money is “used strategically to strengthen Europe’s industrial base – rather than subsidizing Chinese overcapacity”, said Neil Makaroff of the Strategic Perspectives climate think tank.
But some experts question the EU push.
“If the policy goal is to make sure that your industry is not being destroyed by China, I think we have better instruments,” said Niclas Poitiers, an international trade specialist at the Bruegel think tank, pointing to rules giving the EU power to investigate and counteract unfair foreign subsidies.
The proposal will be subject to approval by EU states and parliament.
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