US President Donald Trump addressed the World Economic Forum (WEF) in Davos via video conference yesterday and declared from the high screen the death of “orthodox” economic policies that have been on the agenda for decades, but especially after the 2008 crisis.
Despite the warnings of mainstream economists that such approaches will harm the economy, new experiments will now be launched in the economy with the aim of reviving economic growth after the old policies fail.
Trump said, “My message to the business world is simple: Come and make your product in America, and we will give you the lowest tax rate in the world. But if you don't make the product here, you will have to pay customs duties," he said, he said.
But it came out later than the "big radish" masty. Trump, who called on Saudi Arabia and OPEC to lower oil prices, dropped the bomb, saying that he would "demand an immediate fall of interest rates" with the fall of crude oil prices.
Noting that interest rates should fall all over the world, the US President argued that global interest rates should follow the USA.
Implied support from Wall Street to 'heteredox' policies
It is possible to say that Trump's tariff threats have some positive echoes in the face of the bosses. For example, Bank of America CEO Brian Moynihan signaled in an interview with Axios that tariffs could support if used in "moderation", "Lower regulation load will result in higher profit margins and allow us to manage the tariff burden differently."
Moynihan said they “absorbed” tariffs imposed during the first Trump administration and that they “did not have the desired effect,” adding that a decade later, we are talking about extreme economic growth by trends and the rest of the world.
The positive responses from Wall Street are not just Moynihan. JPMorgan CEO Jamie Dimon also said in response to a question about tariffs on CNBC yesterday, “[Customs duties] If it's a bit inflationary but good for national security, so be it. I mean, get over it now," he said.
Bessent's warnings: Treasure can't save us anymore
Kevin Warsh, one of the candidates who are likely to be Trump's next Fed president, wrote in an article in the Wall Street Journal last week, "The Trump administration is taking over a financial and monetary mess."
As a matter of fact, the new Treasury Secretary Scott Bessent also drew attention to the debt at the Congressional approval session. Bessent stated that deficits will be around 7% of GDP in the coming years, pointing out that “in the absence of recession or war, they have never seen this before.”
“I'm worried because the US Treasury has been called to save the nation many times,” Bessent listed the Civil War, the Great Depression, the Second World War, or the recent COVID-19 pandemic.
According to Bessent, the Treasury, along with the entire government and Congress, used its borrowing capacity to save unity, save the world and save the American people, but judging by what the US currently has, it is now extremely difficult to do the same.
In a statement on last Friday, the Congressional Budget Office predicted a budget deficit of $1.9 trillion in 2025, which corresponds to 6.2% of the projected GDP.
The office predicts that national debt will rise from about 100% of GDP this year to 119% in 2035, in the absence of recessions, wars or other crises.
Milei calls on leaders to 'do not act according to the scenario anymore'
Trump and Elon Musk's southern ally of the continent, Argentina President Javier Milei also pointed out a similar point in his speech in Davos.
Criticizing mainstream economic thinking, Milei said, "I say to all global leaders, it's time to get out of the scenario."
Arguing that there is "something badly wrong" in the ideas promoted through forums such as the WEF, the Argentine emphasized that "it is essential to break these ideological chains" to start a "new golden age".
EU's concession signals to the US
It is clear that the first ring of the chain is broken on the other side of the Atlantic. Concern prevails on this side of the Atlantic. In his speech, Trump also reacted strongly to the EU by describing the penalties Brussels imposed on US technology companies on the grounds that they violated the competition rules as "a kind of taxation".
Trump said, “They are American companies and in my opinion, they should not do that. This is a kind of taxation. We have huge complaints with the EU," he said.
At this point, European leaders face a painful choice for their economy: Either they will take a new approach or they will fall further behind the struggle they have been carrying out for years.
Valdis Dombrovskis, the European Union's commissioner for economics, told CNBC on Wednesday that the EU will respond "proportionally" when the bloc's economic interests need to be defended.
Germany tends to relax its fiscal rules
In this context, the "debt brake" discussions in Germany, which is the leader of the hawkist EU countries financially, are very instructive. Known to have taken the toughest positions in decades on the constitutional debt brake, anti-inflation and price stability, the German Central Bank Bundesbank has given the green light to constitutional debt brake reform.
President Joachin Nagel said the long-standing debt rule works well, but added: “But now we live in a world of tectonic change, and we need to address it. ... We have to start going out of the ordinary.”
Speaking also in Davos, German Chancellor Olaf Scholz called for an expansion of borrowing for infrastructure investments, which should be remembered that the idea caused the dissolution of the traffic light government last year.
Berlin's industrial and commercial dependence on Washington
Moreover, Germany's commercial and industrial dependence on the US is currently an irreversible point. The USA has been Germany's largest export market since 2015. In 2024, for the first time since 2015, it has become Germany's largest trading partner, asking ahead of China.
The USA is by far the leading destination for German foreign investments. Bundesbank statistics show that in 2022, direct and indirect German investments in the USA reached 448 billion euros, while direct German investments in China were only 122 billion euros.
The Federal Republic is gaining more from trade with the US than from trade with other countries: as early as 2023, in the case of the US, Germany's exports were more than 63 billion euros in imports.
The high dependence in trade with the US means that the possible US tariffs will particularly challenge Germany.
For example, France will be in a better position in this regard; because it ranks only fifth in the ranking of foreign trade partners after the USA, Germany, China, Italy and Spain.
In addition, the customs duties that the USA will apply to imports from Mexico will also have serious consequences for German companies. Many German companies produce goods in Mexico with low fees for the US market by taking advantage of the North American free trade agreement USMCA.
For example, almost 60 percent of Volkswagen's cars sold in the USA are produced by VW de México in Puebla, Mexico. In 2024, 29 percent of newly registered Audi vehicles in the USA were also produced in Mexico.
For this reason, Wolfgang Niedermark, a member of the board of directors of the German Federation of Industry (BDI), who is also cautious and who are able to determine an approach to the "water" of the USA, demanded that "the EU should make economic cooperation proposals" on Thursday last week.
Christine Lagarde: We must prepare for customs tariffs
European Central Bank (ECB) President Christine Lagarde told CNBC on Wednesday that Europe should "be prepared" and that Donald Trump should anticipate potential trade tariffs.
Lagarde argued that it was a "very smart approach" that Trump did not implement general tariffs on the first day of his presidency, because general tariffs did not always give the expected results.
Lagarde said that's why Trump expects tariffs to be "more selective and focused".
“What we need to do in Europe is to be prepared and predict what will happen to respond,” the ECB President told Karen Tso of CNBC at the WEF summit.
Lagarde said the theory of "imported substitution", that is, reducing imports from Europe to strengthen production in the US, is "questionable" because the US economy is almost "hot" at the moment.
The ECB leader said, “If you look at the [US] labor market, you see that you have a very low unemployment rate. If you look at the capacity, it already works almost full capacity. Therefore, the idea that you can produce things that you will no longer import or import them at much higher prices... something that will take some time," he warned.
Lagarde added that importers will not be able to do business with low margins for a long time, which means that "money will eventually pass to the consumer".
Lagarde also called for the removal of barriers to trade within Europe, noting that despite the desire to create a single market, barriers that prevent goods and services from traveling from time to time without spoiling are still present.
According to the President of the ECB, this is also one of the answers that can be given to the changing trade policy of the USA. According to Lagarde, he argued that it was important if we were strong at home, “I'm not saying we want to switch to a protectionist approach, beca