Economy
‘Trump uncertainty brings risk of avoidable recession’
NEW YORK
The “disorderly” implementation of trade and government reform policies by the administration of President Donald Trump has raised the risk of a “largely avoidable” U.S. economic downturn, a top S&P economist has said.
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Uncertainty sparked by constant White House pivots on tariffs has potentially delayed business investments and prompted consumers to pull back on spending, said Paul Gruenwald, global chief economist at S&P Global Ratings.
Gruenwald said the drive to shrink government spending and reduce waste overseen by billionaire Trump advisor Elon Musk has also been more disruptive than needed.
He pointed to the “reinventing government” downsizing push in the 1990s under then president Bill Clinton, which he said was executed in a “predictable and orderly” manner.
“The objectives themselves, I think most of them have merit, but the way they’re being implemented is very disorderly,” Gruenwald told AFP.
“If this leads firms and consumers to hold back on their spending and demand pulls back, we could get a slowdown or even a recession that was largely avoidable,” Gruenwald said. “That is a downside risk.”
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Gruenwald pointed to a spike in the US economic policy uncertainty index, a benchmark that has gotten more attention since Trump returned to the White House.
The index is currently at one of its highest levels in its 40-year history, below its highest-ever reading at the start of the COVID-19 pandemic, but above the level seen during most of the first Trump administration.
Oil giant Saudi Aramco announced its 10th consecutive drop in quarterly profits on Tuesday as a slump in prices hit revenues, adding more pressure on the key driver of the Saudi economy.
Second quarter profits declined 22% year-over-year to 85 billion riyals ($22.67 billion), extending a decline that has been ongoing since late 2022.
“The decrease in revenue was mainly due to lower crude oil prices and lower refined and chemical products prices,” Aramco said in its quarterly report.
Aramco’s falling revenues come as Saudi Arabia pursues a costly revamp aimed at reducing its reliance on oil and pivoting toward tourism and business.
Crown Prince Mohammad bin Salman’s Vision 2030 project includes flashy resorts, sprawling entertainment complexes and NEOM, a futuristic $500 billion new city in the desert.
Aramco was trading at 23.97 riyals on Tuesday, 12% below the 27.35 riyals price of its secondary share offering last year.
Since a high point of nearly $2.4 trillion in 2022, when oil prices soared following Russia’s invasion of Ukraine, Aramco has lost more than $800 billion in market value.
Oil prices, currently around $70 a barrel, have remained low despite tensions roiling the Middle East, including the short-lived Israel-Iran war in June.
However, Aramco president and CEO Amin H. Nasser remained optimistic, predicting higher demand in the rest of the year.
“Market fundamentals remain strong and we anticipate oil demand in the second half of 2025 to be more than two million barrels per day (bpd) higher than the first half,” he said in the report.
On Sunday, Saudi Arabia, Russia and six other key members of the OPEC+ alliance announced a production hike of 547,000 barrels per day as they unwind cuts of 2.2 million bpd that were designed to prop up prices.
‘More downwards than upwards’
Last month, Saudi Arabia’s Jadwa Investment forecast a widening of the budget deficit to 4.3% of gross domestic product (GDP) this year. Oil revenues provided 62% of the budget last year.
Industry analysts widely expected Aramco’s latest drop in profits.
“Oil market forces are more downwards than upwards in the first half of 2025, due to OPEC+ policy shifts and economic uncertainty stemming from the U.S. trade war,” Abu Dhabi-based Ibrahim Abdul Mohsen told Agence France-Presse (AFP).
“This has impacted the profit margins of oil companies, including Aramco.”
But he added: “Saudi Arabia has strong reserves capable of defending financial stability and supporting development projects in the short term.”
Government-owned Aramco was listed on the Saudi exchange in the world’s biggest initial public offering (IPO) in 2019, selling 1.7% of its shares at $29.4 billion.
A secondary offering of 0.64% of its issued shares raised a further $11.2 billion in June last year.
Aramco has also transferred a 16% stake to the Public Investment Fund (PIF), the Saudi wealth vehicle that is driving much of Vision 2030.
The World Bank has approved $748 million in concessional financing for Türkiye to modernize and expand its electricity transmission infrastructure, bringing the country’s total external concessional funding for 2025 to nearly $7 billion, according to a report on Tuesday.
The Türkiye Electricity Transmission System Transformation Project was approved by the World Bank’s executive directors – and will be implemented by the Türkiye Electricity Transmission Corporation (TEIAŞ) – the report by Anadolu Agency (AA) said.
As part of the project, approximately $748 million in financing will be provided to TEIAŞ, backed by a repayment guarantee from the ministry.
The financing includes $708 million in loans from the World Bank, $38 million from the Clean Technology Fund (CTF) and $2 million in grant support under the CTF framework.
The funds are backed by a repayment guarantee from the Treasury and Finance Ministry.
The project aims to eliminate operational constraints in Türkiye’s electricity transmission system and expand the national transmission ring.
It will also enhance infrastructure to connect new power generation facilities, particularly those based on renewable energy sources, to the grid.
The initiative is part of Türkiye’s broader efforts to strengthen energy security and reduce reliance on imported fossil fuels by promoting domestic renewable energy production.
Treasury and Finance Minister Mehmet Şimşek welcomed the new agreement, highlighting the productive cooperation between Türkiye and the World Bank, especially in the energy sector.
“This successful partnership will continue in the upcoming period,” Şimşek said.
“We are maintaining our efforts within the framework of our economic program, which ultimately aims for sustainable prosperity. In this regard, we are increasing electricity generation from renewable sources and our support for public investments will continue decisively to reduce dependence on imported energy.”
Inflation in Türkiye dropped more than expected in July to reach the lowest level in almost four years, according to data on Monday that officials say reinforces official forecasts that price growth will slow further by year-end.
Consumer price inflation softened to 33.52% from 35.05% in June, the Turkish Statistical Institute (TurkStat) said. That was the lowest rate since November 2021, when prices had risen 21.31%. The rate was forecast to slow to 34.05%.
“Inflation is at the lowest level in 44 months,” Treasury and Finance Minister Mehmet Şimşek said, adding that the rate had dropped by 28.3 percentage points in the past 12 months.
Şimşek said that the disinflation is in line with targets and that year-end inflation will be within the central bank’s forecast range.
Month-over-month, inflation was 2.06%, driven by what Şimşek said were temporary and seasonal factors. In June, the monthly consumer price index was 1.37%.
The annual price growth in food and nonalcoholic beverages eased to 27.95% from 30.2%. Similarly, price growth in housing and utilities moderated to 62.01% from 65.54%.
Alongside housing, the yearly surge in prices was led by education, with 75.5%, and health, with 37.49%.
The lowest rates were posted in clothing and footwear with a 10.67% increase, communications at 19.62% and transport at 26.57%.
For the first time in over three years, service inflation fell below 50%, Şimşek said in a post on the social media platform X.
“The decline in inflation will enhance predictability, contributing to further improvement in domestic financial conditions and the investment climate,” he noted.
“We will continue to resolutely implement our program to achieve lasting price stability, our primary priority.”
More than a week ago, the Turkish central bank cut its key policy rate by 300 basis points and relaunched an easing cycle, while saying that leading indicators suggested a temporary rise in monthly inflation in July due to month-specific factors.
A midyear hike in fuel and tobacco prices, as well as a rise in natural gas prices, had been expected to drive monthly inflation.
Transport prices rose 2.89% month-over-month and alcoholic drinks and tobacco prices rose 5.69%, the data showed. Housing prices were up 5.78%.
Cevdet Yılmaz, the Turkish vice president, said the decline in annual inflation continues to be “significant.”
Inflation has dropped by approximately 42 percentage points since it peaked at more than 75% in May last year.
“This outlook demonstrates the effectiveness of our program and that our policies have restored balance to the economy,” Yılmaz wrote on X.
The central bank’s year-end inflation midpoint estimate currently stands at 24%, in a forecast range of 19% to 29%.
With strong coordination, structural transformation, determined implementation and continued predictability in the economy, Yılmaz said Türkiye aims to reduce inflation to the 20% range by the end of the year and permanently increase the well-being of the nation within price stability.
“We will continue to pursue balanced growth within stability, increase employment, and boost exports through investments that enhance value added and productivity,” he added.
Another report from the statistical office on Monday showed that producer price inflation eased slightly to 24.19% in July from 24.45% a month ago.
Prices of mining and quarrying climbed 28.3%, and manufacturing reported a 24.02% rise.
Producer prices of electricity, gas, steam and air conditioning grew 22.1% and surged 55.74% for water supply.
Month-over-month, producer prices moved up 1.73% after rising 2.46% in the prior month.
Italy’s competition authority (AGCM) slapped a 1-million-euro ($1.16-million) fine on Chinese online fast fashion retailer Shein on Monday, arguing it misled customers about the environmental impact of its products.
It is Shein’s second financial sanction by a European competition authority in less than a month, following a 40 million euro fine by France on July 3 for offering fake discounts and making misleading environmental claims.
The Italian fine was imposed on Infinite Styles Services Co. Limited, a Dublin-based company that operates Shein’s website in Europe, following an investigation by AGCM launched last September.
In a statement, Shein said it has cooperated fully with AGCM and took immediate action to address the concerns raised.
AGCM said the environmental sustainability and social responsibility messages on Shein’s website “were sometimes vague, generic and/or overly emphatic and in other cases omitted and misleading.”
Shein’s claims on circular system design and product recyclability “were found to be false or at the very least confusing,” and the green credentials of its ‘evoluSHEIN by design’ collection were overstated, the regulator said.
Shein promotes the ‘evoluSHEIN by design’ collection as clothes made using more sustainable and responsible manufacturing.
AGCM stated that consumers could be misled into thinking that the collection was made from fully recyclable materials, “a fact that, considering the fibres used and currently existing recycling systems, is untrue.”
Shein, in its statement, said: “We have strengthened our internal review processes and improved our website to ensure that all environmental claims are clear, verifiable and compliant with regulations.”
AGCM also took issue with Shein’s “vague and generic” commitments to reduce greenhouse gas emissions by 25% by 2030 and to achieve net zero by 2050, noting that Shein’s emissions increased in 2023 and 2024.
The Italian regulator said its overall assessment was influenced by an “increased duty of care” falling on Shein “because it operates in a highly polluting sector and with highly polluting methods.”
AGCM is responsible for consumer protection as well as competition.
White House economic advisers defended on Sunday the move of President Donald Trump to fire the head of the Bureau of Labor Statistics (BLS), pushing back against criticism that surprise action could undermine confidence in official U.S. economic data.
Later on Sunday, Trump again criticized BLS Commissioner Erika McEntarfer, without providing evidence of wrongdoing and said he would name a new BLS commissioner in the next three or four days.
U.S. Trade Representative Jamieson Greer told CBS that Trump had “real concerns” about the BLS data, while Kevin Hassett, director of the National Economic Council, said the president “is right to call for new leadership.”
Hassett said on Fox News Sunday that the main concern was Friday’s BLS report, which showed net downward revisions indicating that 258,000 fewer jobs had been created in May and June than previously reported.
Trump accused McEntarfer of faking the jobs numbers, without providing any evidence of data manipulation. The BLS compiles the closely watched employment report as well as consumer and producer price data.
The BLS gave no reason for the revised data but noted “monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.”
McEntarfer responded to her abrupt dismissal on Friday in a post on the Bluesky social media platform, saying it was “the honor of her life” to serve as BLS commissioner and praising the civil servants who work there.
McEntarfer’s firing added to growing concerns about the quality of U.S. economic data and came on the heels of a raft of new tariffs on dozens of trading partners, sending global stock markets tumbling as Trump presses ahead with plans to reorder the global economy.
Investors are also watching the impact of the surprise resignation of Federal Reserve (Fed) Governor Adriana Kugler, which has opened a spot on the central bank’s powerful board and could shake up what was already a fractious succession process for Fed leadership amid complex relations with the Trump administration.
Trump said on Sunday he would announce a candidate to fill the open Fed position within the next couple of days.
Revisions are common
In an interview with CBS’s “Face the Nation,” Greer acknowledged there were always revisions of job numbers, “but sometimes you see these revisions go in really extreme ways.”
Brian Moynihan, CEO of Bank of America, stated that significant revisions to economic data could erode public confidence and that government officials should develop methods to enhance data quality.
“They can get this data, I think, other ways and I think that’s where the focus ought to be: how do we get the data to be more resilient and more predictable and more understandable?” he said on CBS. “Because what bounces around is restatements … that creates doubt about it.”
Critics, including former leaders of the BLS, slammed Trump’s move and called on Congress to investigate McEntarfer’s removal, arguing that it would erode trust in a respected agency.
“It undermines credibility,” said William Beach, a former BLS commissioner and co-chair of the group Friends of the BLS.
“There is no way for a commissioner to rig the jobs numbers,” he said. “Every year, we’ve revised the numbers. When I was commissioner, we had a 500,000 job revision during President Trump’s first term,” he said on CNN’s “State of the Union.”
Former Treasury Secretary Larry Summers, who worked in both the Clinton and Obama administrations, also criticized McEntarfer’s firing.
“This is a preposterous charge. These numbers are put together by teams of literally hundreds of people following detailed procedures that are in manuals,” Summers said on ABC’s “This Week.”
Large revision
The BLS surveys 121,000 employers – businesses and government agencies – each month, seeking their total payroll employment during the week in which the 12th day of the month falls. The response rate has fallen sharply since the COVID-19 pandemic, from 80.3% in October 2020 to about 67.1% in July.
Knowing that, BLS allows late-arriving employer submissions and revisions to earlier submissions to be taken into account over the next two months.
That means each month’s initial estimate of employment for the immediately preceding month also contains revisions to the two months before that.
The revisions in Friday’s report were large by historic standards. The downward revision of 125,000 jobs for May was the largest between a second estimate and a third estimate since a 492,000 reduction for March 2020. That was the largest ever and was reported in June 2020 for the May 2020 payrolls report.
Shares in Swiss luxury watchmakers, including Richemont and Swatch, were volatile in early trade on Monday, underscoring the challenge the industry faces after U.S. President Donald Trump imposed a steep 39% tariff on Switzerland.
The sector, which exported watches worth 26 billion Swiss francs ($32.79 billion) in 2024, is already under pressure from a stronger franc and falling global demand.
Watch exports are on track to hit their lowest levels since the COVID-19 pandemic in 2020.
Shares in Richemont and Swatch were both down 0.8% at 08:25 a.m. GMT, paring back losses after earlier falling as much as 3.4% and 5%, respectively.
Monday was the first day of trading following the U.S. tariff announcement, as markets were closed on Friday for the Swiss National Day.
“The impact of the U.S. tariffs, if they stay at 39%, could be devastating for numerous brands in Switzerland,” said Jean-Philippe Bertschy, an analyst at Vontobel.
“We expect a strong negative impact for watches in the entry- to mid-price segments,” he said.
The U.S. is Switzerland’s leading foreign market for watches, accounting for 16.8% of exports worth about 4.4 billion francs ($5.45 billion), according to the Federation of the Swiss Watch Industry.
Shahzaib Khan, who runs a business exporting Swiss luxury watches, said many brands would not be able to deal with the 39% tariff rate.
“I suspect … there won’t be any goods being shipped to the U.S. until the situation clears,” he said.
While Richemont generated 32% of its full-year 2025 sales in the watches category, its exposure to the U.S. market should be just below 10% of overall sales, analysts at Jefferies said.
Swatch, meanwhile, generated 18% of its 2024 sales in the U.S., with its CEO saying the company had raised prices by 5% following the first tariffs announcement in April.
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