Economy & Markets
Edited by Donato Masciandaro and Gianmarco Ottaviano
The Oval Office Desk and the Paradoxes of Trump’s Protectionism
In a remake of a film already seen in 2018, President Donald Trump has resumed imposing or threatening to impose tariffs on imports from the United States’ main trading partners. Now, as then, the rationale behind this escalation is twofold. On the one hand, an administration led by a “deal-maker” believes that all trade agreements signed by previous administrations (including his own, as in the case of the 2020 agreement with Canada and Mexico) are, if not disastrous, at least unambitious and therefore need to be renegotiated – preferably through pressure or threats. On the other hand, ...
Trump, the Dollar and the Euro
In the wake of Donald Trump's second term as President of the United States, global attention has turned to the future of the dollar and its implications for the world economy. From a short-term economic analysis perspective, the dollar has appreciated, influenced in part by the tariff policies first announced and later implemented by the newly elected president. What does this mean for the euro? A depreciation of our currency increases the risk of inflation. This is a scenario that the European Central Bank (ECB) is well aware of, yet it does not seem to be a pressing concern ...
Italy's Economic Future: What Exports Reveal
Financially speaking, whether exports exceed imports or vice versa is generally insignificant. Exports represent surplus goods and services that cannot be absorbed domestically and that our trade partners kindly accept in exchange for goods and services we lack. When exports surpass imports, we effectively extend credit to foreign customers; when the reverse happens, we take on debt with them. Sometimes it is better to lend, other times to borrow. As long as debts are eventually settled, exports and imports hold equal importance. So, why is discussing exports in Italy so important? There are several ...
Viral Macroeconomics: Trump, the Fed, and Sentiments
Every time Wall Street takes a rollercoaster ride, someone inevitably evokes the specter of a viral recession. But should we truly fear such recessions? And what role can the Fed play in mitigating this risk? First, what are we talking about? Italian Poet Giovanni Pascoli might describe it as something new–yet ancient. The phenomenon of a viral recession can indeed be characterized as a blend of tradition and innovation. The traditional factor lies in the role of sentiments – or beliefs, or perception – introduced into macroeconomic analysis by John Maynard Keynes as early as 1936. Keynes’s ...
European Capital Markets: The Lost Decade and Draghi’s Wake-Up Call
European stock markets are thriving, but this is not necessarily a sign of a broader positive trend. In fact, if politicians and bureaucrats fail to act, the Union could lose the historic opportunity to create the European capital market it so desperately needs, especially in light of the challenges posed by the "Three Ds"—deglobalization, demographics with declining birth rates, and decarbonization. Having discussed this since 2015, we have already lost a decade. Stock exchanges are having a momentous year, with European ones in the front ranks: Paris, Frankfurt, Milan, Amsterdam, with the ...
Marine and Submarine Routes: the Red Sea and the Future of Global Trade
We tend to think of the global market as a seamless large bazaar where goods from all over the world flow with ease. In reality, it consists of countless bazaars of all sizes, connected by a circular flow of goods. The most important connections are maritime, and they are quite few. For this reason, the attacks on ships off the coast of Yemen raise concerns that may seem exaggerated, considering that very few of these have had significant effects. To put things in perspective: since the beginning of the conflict between Israel and Hamas last October, the Houthis, a group of Yemeni rebels backed ...
Artificial Intelligence, Stock Markets, and “Newton's Lesson”
Stock markets are in good health, but AI-related stocks are performing even better: within the generally positive trend of stock prices, the performance of companies associated with so-called artificial intelligence stands out. It is undeniable that the applications of technologies for the production and distribution of information and knowledge, summarized under the term "artificial intelligence," are influencing the decisions of companies and sectors, and will have macroeconomic impacts—yet to be fully explored systematically—that will affect productivity and the labor market, hence production ...
Western Sanctions and Russia's Resilience: A Dead End?
According to the Russian Statistical Office, 2023 saw the gross domestic product grow by 3.6%, outpacing the average global economic growth. While data from Moscow should be evaluated cautiously, even the IMF revised its estimate to 3%, suggesting that Russia's economy has indeed grown faster than the global average. The oil and gas industry has been at the forefront of supporting Moscow's economic resilience, providing foreign currency to the Kremlin, expanding trade horizons, and generally shifting Russia's economic center of gravity toward Asia. To maintain a steady flow of foreign currency ...
Declining Interest Rates and the Five Faces of the Fed
In recent months, financial markets seem stuck in a repetitive cycle: analysts closely watch US economic indicators to gauge the timing of the Fed's interest rate cuts. This represents the "macroeconomic" face of the Fed. Yet, there are at least four other faces that need attention: the political and bureaucratic ones, followed by the psychological aspect, and not forgetting, albeit last, the financial. Last March, the Fed confirmed its decision to maintain the maximum level of the benchmark interest rate at five hundred and fifty basis points, as decided eight months prior. This phenomenon is ...
Ecological Transition, Carbon Taxation, and the Competitiveness of Businesses: the European Gamble
Climate change is a global problem that requires global solutions. One significant cause of the phenomenon is greenhouse gas emissions associated with high-carbon-intensity production. Left to their own devices, businesses generally do not consider the negative impact of their emissions on the climate when making production decisions. Hence the idea of using a tax on greenhouse gas emissions (also known as a "carbon tax"), which imposes a "fair price" on such emissions for companies, forcing them to internalize the damage caused to the climate by high-carbon-intensity production. Unfortunately, ...