Economics in the News – May 13-19, 2024
Economics impacts our lives every day. Below are some of the top storylines from this past week related to economics.
o High interest rates for millions of low- and moderate-income families are taking their toll. Many Americans are falling behind on credit card payments and auto loans, even while taking on more debt. The gap between poorer and affluent households is widening. Many households have received pay increases and continue to spend on travel, restaurant meals, and entertainment.
Poorer families are more likely to carry a balance on their credit cards. According to data from the Federal Reserve, roughly 56 percent of people earning less than $25,000 carried a credit card balance in 2022, compared to 38 percent of those earning more than $100,000. [The New York Times]
o China leads the world in the production of electric vehicles (EVs), with automakers such as BYD, Geely and SAIC. The automobile industry in the United States has worries about China’s abilities to produce inexpensive EV models, which has so far had little impact on the United States market. Automaker industry officials welcomed the new tariffs that President Joe Biden’s administration levied on China, including a 100 percent tariff on electric vehicles from China.
The new tariff on EV models was one of several levied on China, including a 25 percent duty on steel and aluminum, 50 percent levy on semiconductors and solar panels. The increased tariff on EVs is due to fears that the inexpensive Chinese vehicles would undercut the investment in electric vehicles and battery factories within the US. Currently, the United States imports only a few Chinese gas or electric vehicle makes, including the Polestar 2 and the Volvo plug-in hybrid sedan – S90 Recharge. [The New York Times]
o The Dow Jones Industrial Average surpassed 40,000 points for the first time ever last week, signaled by new data that showed that annual inflation was easing. For investors, the news of cooling inflation was positive news because it could allow the Fed to start cutting rates, bringing relief to millions of Americans who carry debt.
Artificial intelligence has also led the market rally for the better part of the last year. In addition, investment in large tech companies, such as, Microsoft, Apple, Alphabet, Meta, Nvidia, and Tesla, have pushed up broader markets even if only three of those seven companies are traded in the Dow Jones index. [NPR]
o Iranian President Ebrahim Raisi was killed in a helicopter crash on Sunday, May 19, along with Foreign Minister Hossein Amir-Abdollahian. The military said that the cause of the crash was under investigation, even as the Iranian state news media said it was due to a “technical failure.”
A leadership transition amid the turmoil in the Middle East is an additional challenge for Iran to navigate, after Iran attacked Israel last week in an attack that saw many of the 300 missiles intercepted by a US and Israeli coalition. Under Raisi, Iran bolstered its ties to China and Russia, supplying weapons to Russia for its war in Ukraine. Meanwhile, Iran’s relationship with the West has depreciated in part to a harsh civil rights crackdown. [The Wall Street Journal]
o Grab – a ride-hailing company predominant in Southeast Asia – is utilizing generative artificial intelligence to trim expenses, as it seeks to achieve profitability. Grab has previously used AI and machine learning to automate processes needed to build its in-house mapping service for drivers and users.
Grab has been focusing on cost-cutting maneuvers in recent quarters after its stock price has suffered since its initial public offering. [The Wall Street Journal]
