Trump: 'I don't think we'll need to extend the deadline on tariffs'

There is no point in extending the July 9 deadline on tariffs. Donald Trump is convinced of this, explaining that the US administration is "sending letters" to the approximately 200 countries affected by the measures. "We have made an agreement on tariffs with China and Great Britain, we are working on agreements with all the others". The race for protectionism triggered by Donald Trump has already caused damage before the tariffs actually came into force.

But the real impact on economic growth will be something else entirely, because it will combine with a mix of pre-existing "vulnerabilities" that already by themselves create risks for financial stability and debt sustainability. The alarm is raised by the Annual Economic Report of the Bank for International Settlements (BIS), Basile's institution that serves as a link and coordination between the world's central banks. With a document that arrives just as, on the one hand, a sort of agreement between the US and China seems to be taking shape, on the other, there is a rift between Washington and Canada over the taxation of Big Tech, in what sounds like a warning to the European Union in the final stages of negotiations with Trump.

The global economy - warns the BRI - "will feel the impact of high uncertainty even before the full effect of tariffs": businesses - as can also be seen from Istat data for Italy - are delaying investments and families are increasing savings to protect themselves. But the slowdown in growth has yet to be seen in the data: what we can see now is that "high uncertainty and declining consumer and business confidence clearly signal an impending deterioration in economic activity", with growth expected to worsen significantly "for several countries". A threat that, with two theaters of war on the margins of Europe, in the exit from the pandemic and the inflationary shock from energy prices, does not reach economies in full health.

Far from it: the tariff shock comes on a world already grappling with pre-existing vulnerabilities—from record debt in some countries to economic fragmentation already underway, to less regulated non-bank financial institutions like hedge funds and crypto issuers—that “exacerbate risks” to financial stability and debt sustainability. Everyone—governments, financial institutions, central banks—will be “essential as a stabilizing force” and will need to “act decisively on multiple fronts to ensure price stability and promote sustainable economic growth, while preserving economic and financial stability,” says BRI Director General Agustín Carstens.

The "risk pockets" identified by the BIS for the financial system are in some cases old acquaintances: this is the case of the "unprecedented" public debt in some countries that requires budgetary margins; of private credit markets that bypass the banking system with its supervisory constraints; of the 'relative value' policies of hedge funds. Then there is an emerging risk where the Basel 'lighthouse' has been focusing its attention for some time, and that is crypto finance and its increasingly intertwined ties with traditional finance at the instigation of the USA. In particular, stablecoins anchored to US treasuries on which an influential part of Trump's entourage seems to be banking to finance the debt. "If they continue to grow, they could represent risks including that of a rush to sell off safe assets".

Despite relatively small aggregate market capitalizations, stablecoin issuers such as Tether and Circle “have significant reserves in U.S. Treasuries and provide a substantial portion of supply to repo markets,” the nearly 120-page document reads. “Their growing weight raises concerns about financial stability, exposing traditional finance to the ups and downs of the crypto ecosystem”: negative shocks in the crypto market “could lead to significant crashes that could destabilize the proper functioning of the treasury market.”