No recession in sight for the US, Europe more ‘vulnerable’ (Yellen)

The United States does not expect to enter a recession. On the other hand, it is less confident about Europe, which has been hardest hit by the crisis in Ukraine due to its dependence on Russian energy. That, however, is what Secretary of State for the Treasury Janet Yellen estimated this Wednesday.

“I don’t really expect the United States to fall into a recession,” she explained during a press conference held before the G7 finance ministers’ meeting in Germany, adding: “I think Europe may be more vulnerable and energy-exposed to the United States.”

In doing so, it joins the statements of the President of the US Central Bank, the Federal Reserve (Federal Reserve), Jerome Powell, who confirmed on May 4 that the US economy remains strong, even if growth slows, and that he did not provide anything immediate. stagnation risk.

Slowing US growth, Fed target to fight inflation

“The current environment is fraught with risks, both in terms of inflation and potential economic deflation »Janet Yellen added. But We currently have a lot of momentum for the economic recovery,” with a “very low unemployment rate” in particular.

In fact, the US economy has seen a strong economic recovery after the coronavirus pandemic, thanks in particular to the broad stimulus plans from the federal government. But in recent months, inflation and disruptions in global supply chains, including the war in Ukraine and the coronavirus epidemic in China, have dampened that momentum. And so the country saw a 1.4% drop in GDP in the first quarter of 2022. But US leaders say they don’t expect Technical stagnation, that is, two consecutive quarters in decline. However, some experts do not rule out a recession at the beginning of next year, if prices remain high despite the rise in interest rates.

The recession scenario is explained by the high rates needed (which started in March) to curb demand and thus inflation. The equation to be solved is tricky: At what level are key prices raised this year to control price hikes without causing a recession, which would have consequences for employment.

Europe in slow motion

On the other hand, dOn the other side of the Atlantic, the concerns are even greater. to meWith slow growth and record inflation, the European economy, barely recovering from the consequences of the pandemic, is bearing the brunt of the shock of the war in Ukraine and risks stagnation in the coming months. Eurozone growth that highly dependent on the energy supplied by Russia, slow. It was 0.3% in the first quarter compared to the previous quarter and is expected to contract further in the second quarter. All for inflation at 7.4% in April, driven mainly by energy prices.

“Eurozone GDP is expected to contract in the second quarter due to the fallout from the war in Ukraine and increasingly high energy prices on household income and consumer confidence, while making life difficult for industrialists,” said Andrew Kenningham, an expert at Capital Economics.

According to him, German manufacturers will be “more affected” than those in other European countries, “but the rise in energy prices will affect the entire region, and the demand for export products and business confidence will also decrease.”

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Washington is ready to raise some tariffs on China

To fight inflation, some tariffs on China, implemented under the mandate of former US President Donald Trump, in retaliation for Chinese trade practices deemed “unfair”, have been questioned by the Biden administration. US Treasury Secretary Janet Yellen agreed. On Wednesday, she said, some of those tariffs “are harmful to consumers and businesses and are not very strategic.” In front of the press, before the meeting of G7 finance ministers in Germany.

“They don’t address the real issues we have with China, whether it’s supply chain weaknesses, national security issues, or other unfair trade practices,” the US Treasury secretary said. “We’re having these discussions” about the future of tariffs, added Janet Yellen.

The United States imposes tariffs on $350 billion of imports from China It will automatically expire on July 6, if no company asks to keep it, and the Biden administration is under pressure to remove it due to record inflation in the United States.

(with AFP)