The Price Point

As Stuyvesant students prepare to enter the world, understanding the economy becomes an essential skill. In today’s society, knowledge of economics provides us with a foundation for navigating financial issues, understanding the effects of public policy on the market, and making informed decisions about our own personal finances.

President Trump Proposes Decreased Tariffs on China

In a string of posts on his Truth Social account, President Donald Trump seemed to summarize his demands ahead a meeting between U.S. Secretary of Treasury Scott Bessent, U.S. Trade Representative Jamieson Greer, and other Chinese officials. He expressed his desire for China to import more American goods and for the U.S. to lower its tariff on Chinese goods to 80 percent in return, though he said that he would ultimately leave the decision up to Bessent. This would de-escalate the trade war between China and the U.S. by allowing many more Chinese goods to be imported into the U.S. However, many businesses may still not be convinced to increase their Chinese imports even after the tariff cut.

Bank of England Cuts Interest Rates Amidst Global Uncertainty and Inflation

The Bank of England reduced its benchmark interest rate from 4.5 percent to 4.25 percent as a result of global economic uncertainty and continued inflation. Bank of England Governor Andrew Bailey expressed the necessity of rebuilding trade relations with the European Union in order to foster more economic stability. Economists also say that the bank should take caution when handling interest rates, since it could worsen inflation in the services sector.

Investors Move Away from US Dollar Assets

As large institutions begin to avoid investing in assets that are dominated by the U.S. dollar and to move towards European markets, concerns over the weakening of the U.S. dollar increase as a result of U.S. trade policies—specifically regarding tariffs. Since the start of 2025, the value of the U.S. dollar has depreciated by more than seven percent, and European assets begin to attract more investors.

Economics Concept of the Issue

Hotelling’s Rule

Hotelling’s Rule is an economic concept that explains how the price of a non-renewable resource, such as oil or another natural resource, rises over time to maximize profit in a competitive market. The resource’s value increases at the same rate as the interest rate, because the owner of the resource has to decide whether to sell it now or later. For example, if the price of the resource is projected to rise at a faster rate than the interest rate, it is better to wait to sell it. Therefore, if the price rises at the same rate as the rate of interest, the value of the resource remains constant over time.