BofA Economist Sees Cold War Between U.S., China

(Source: MIRS.news, Published 08/29/2025) (BOSTON) -- A top global economist for one of the country’s biggest banks told state legislators earlier this month that he does not expect interest rates to come down anytime soon nor an influx of manufacturing investment in the United States, but supply chains could move to closer, friendlier nations to avoid risks related to China.

During a presentation at the National Conference of State Legislatures (NCSL) Legislative Summit, Claudio Irigoyen, global economist for Bank of America (BofA), said he foresees a continued shift away from free trade.

“I wish we would move toward free trade, but I am very skeptical we are moving toward more free trade," he said.

"The way I see the world is there is a cold war between the U.S. and China. It’s a race to see who will become self-sufficient in the production of microchips first … everything that has to do

with trade policy is under the assumption or with the idea of containing China.”

Irigoyen said uncertainty about if, when and how tariffs will have an effect will contribute to the case for the Federal Reserve to avoid cutting interest rates, because it will be hard to know when inflation has peaked. Businesses have been stocking up on supplies and inventory to give themselves a cushion to respond and to raise their prices gradually to avoid loss of market share.

“The more incentives companies have to front-run tariffs, the longer it’s going to take for the effect of tariffs to show up on inflation, and therefore the more complicated the job of the Fed,” he said.

One audience member asked Irigoyen what it will take for the U.S. to reach trade deals with other nations, saying he and others thought the U.S. was getting close to an agreement with India, and yet Trump had unleashed social media criticism on India even as Irigoyen was speaking, threatening a big tariff increase over India’s purchase of Russian oil.

“I personally think that the true deals, the deals that will stick, that will settle, that will be implementable, are going to take a lot of time to be perfected. You have had a lot of announcements, but not necessarily a lot of deals that are 100 percent completed. Because the devil’s in the details, and negotiations are still taking place even on deals that have been announced, I don’t think he wants to just raise tariffs everywhere for the sake of raising tariffs. I think he wants to extract concessions from countries, different concessions from different countries,” Irigoyen said.

“In the meantime, he will tweet a lot of things, we know. We have tariffs in the morning and no tariffs in the afternoon, it’s a fact,” he said. “I think the market has been doing a good job discounting the noise and focusing on what really sticks. So I would recommend to be patient,” he said.

The length of time it takes to sort out those details, however, contributes to the uncertainty that business leaders face in making decisions. Irigoyen said when he talks to hedge fund investors, they want to know what will happen next week, but when he talks to CEOs, they want to know what will happen in five years.

“You need to think not so much in terms of producing what is cheaper to produce, you have to produce what is safe to produce,” he said.

Tariff effects are not durable enough to encourage bringing back production to the U.S., but the trend toward avoiding the risks of the Chinese market are enough to encourage “near-shoring” and “friend-shoring” of supply chains to countries closer to or with better relations with the U.S, he argued.

“Tariffs are a very volatile tool to convince companies to send capital with five-, 10-year horizons,” he said.

Irigoyen said as countries’ economies mature, they transition away from goods manufacturing toward services, with one major exception – national security. “This one exception screws up everything because it’s difficult to quantify how far you’re going to go with this,” he said.