Trump conjures new peace accord as storm clouds gather over stocks, global economy
(Originally published June 12 in “What in the World“) Trump Taco’d again.
Faced with plummeting stock prices Wednesday, Trump on Thursday claimed a peace deal with Iran was imminent and so called off further airstrikes. Iran’s official broadcaster said nothing had been finalized.
The global economy may now be at the mercy of a regime so unpredictable, so prone to vacillating between violent extremes, that people liken it to a small child with its sudden mood swings and tantrums.
No, not Trump’s presidency. El Niño.
The latest El Niño Pacific Ocean weather pattern emerged Thursday, and meteorologists say it is likely to bring drought, floods, and intense heat to the Pacific Rim. While climate change doesn’t intensify El Niño itself, it can amplify its associated heatwaves and rainfall. So, expect a lot more rain over the world’s two largest economies, China and the U.S., until at least November, and a shortage of rain over the world’s most populous nation, India.
El Niño arrives as the global economy braces for the impact of Trump’s own volatile behavior. Trump’s war in Iran has pushed energy prices so high that it is pushing the global inflation rate this year to 4% and slowing global economic growth to 2.5% from 2.7% last year, according to the latest forecast from the World Bank.
Back in April, the International Monetary Fund predicted that global economic growth would slow to 3.1% this year from 3.4% in 2025. Although the IMF expects U.S. growth to rise to 2.3% from 2.1% last year, that’s still 0.1 percentage point below its January forecast.
On the heels of its report showing a 4.2% surge in U.S. consumer prices, the U.S. Bureau of Labor Statistics said Thursday that U.S. producer prices increased 6.5% in May from a year ago, higher than expected. Energy prices led the increase, climbing 10.4%. Excluding energy and food, the producer price index rose just 1.8%.
While the U.S. economy is still growing, that growth relies on rising levels of corporate and household debt. U.S. household debt is now higher than it stood before the global financial crisis of 2008.
Rising inflation is increasing the likelihood that the Federal Reserve will raise interest rates, driving up debt-servicing costs for heavily indebted households.