Wharton's Jeremy Siegel on what's driving the market rally
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Los Angeles Times
26 minutes ago
- Los Angeles Times
Along with a strong second quarter rebound for the economy, some red flags
The U.S. economy expanded at a surprising 3% annual pace from April through June, bouncing back at least temporarily from a first-quarter drop that reflected disruptions from President Donald Trump's trade wars. Still, details of the report suggested that U.S. consumers and businesses are wary about the economic uncertainty arising from Trump's radical campaign to restructure the American economy by slapping big taxes — tariffs — on imports from around the world. 'Headline numbers are hiding the economy's true performance, which is slowing as tariffs take a bite out of activity,' Nationwide chief economist Kathy Bostjancic wrote. America gross domestic product — the nation's output of goods and services — rebounded after falling at a 0.5% clip from January through March, the Commerce Department reported Wednesday. The first-quarter drop, the first retreat of the U.S. economy in three years, was mainly caused by a surge in imports — which are subtracted from GDP — as businesses scrambled to bring in foreign goods ahead of Trump's tariffs. The bounceback was expected but its strength was a surprise: Economists had forecast 2% growth from April through June. From April through June, a drop in imports — the biggest since the COVID-19 outbreak — added more than 5 percentage points to growth. Consumer spending registered lackluster growth of 1.4%, though it was an improvement over the first quarter's 0.5%. Private investment fell at a 15.6% annual pace, biggest drop since COVID-19 slammed the economy. A drop in inventories — as businesses worked down goods they'd stockpiled in the first quarter — shaved 3.2 percentage points off second-quarter growth. A category within the GDP data that measures the economy's underlying strength weakened in the second quarter, expanding at a 1.2% annual pace, down from 1.9% from January through March and the weakest since the end of 2022. This category includes consumer spending and private investment but excludes volatile items like exports, inventories and government spending. Federal government spending and investment fell at a 3.7% annual rate on top of a 4.6% drop in the first quarter. Wednesday's GDP report showed inflationary pressure easing in the second quarter. The Federal Reserve's favored inflation gauge – the personal consumption expenditures, or PCE, price index – rose at an annual rate of 2.1% in the second quarter, down from 3.7% in the first. Stripping out volatile food and energy prices, so-called core PCE inflation rose 2.5%, down from 3.5% in the first quarter. On his Truth Social media platform, Trump heralded the GDP gain and stepped up his pressure on the Federal Reserve to cut interest rates: '2Q GDP JUST OUT: 3%, WAY BETTER THAN EXPECTED! 'Too Late' MUST NOW LOWER THE RATE. No Inflation! Let people buy, and refinance, their homes!'' Trump sees tariffs as a way to protect American industry, lure factories back to the United States and help pay for the massive tax cuts he signed into law July 4. But mainstream economists — viewed with disdain by Trump and his advisers — say that his tariffs will damage the economy, raising costs and making protected U.S. companies less efficient. They note that tariffs are paid by importers in the United States, who try to pass along the cost to their customers via higher prices. Therefore, tariffs can be inflationary — though their impact so far has been modest. Wiseman writes for the Associated Press.
The Hill
26 minutes ago
- The Hill
Lutnick: ‘plenty of horse-trading left to do' with EU on trade deal
Commerce Secretary Howard Lutnick said during a recent interview that there is still 'plenty of horse-trading left to do' when it comes to certain aspects of the trade framework between the U.S. and the European Union (EU). 'And do I expect to continue to be talking to the European Commission's trade people? Yeah, they called me this morning to talk about, what are other things to talk about, digital services, taxes and the attack on our tech companies. That is going to be on the table. It wasn't on the table today,' Lutnick said during his Tuesday appearance on CNBC's 'Squawk Box.' 'There are other things that they would like, like steel and aluminum that were not included in this deal, that will be on the table. There's plenty of horse-trading still to do, but the fundamentals of their $20 trillion economy are set. We sell to them without a tariff. They sell to us for 15 percent, but they protect themselves on autos, they protect themselves on pharma. They protect themselves on semiconductors.' President Trump and the European Commission President Ursula von der Leyen outlined a trade deal over the weekend, with most EU goods being hit with a 15 percent tariff. Trump said the EU will buy $750 billion in American energy and the EU agreed to invest $600 billion into the U.S. Previously, Trump threatened to impose a 30 percent tariff on EU goods. The U.S.-EU trade pact was criticized by France as an act of 'submission' by the EU. Lutnick said 'protections' on automobiles, pharmaceuticals and semiconductors were 'fundamental' for the European Commission and argued that 'anybody who picks on them is going to learn over the next two weeks why the people who did that deal were really smart to get the deal done with Donald Trump.'
Politico
27 minutes ago
- Politico
‘ALL THINGS NOT GOOD!': Trump says he's imposing 25 percent tariff on India
President Donald Trump announced Wednesday he is imposing a 25 percent tariff on India that will go into force at the end of the week, in addition to a penalty because of the country's energy and military purchases from Russia. 'Remember, while India is our friend, we have, over the years, done relatively little business with them because their Tariffs are far too high, among the highest in the World, and they have the most strenuous and obnoxious non-monetary Trade Barriers of any Country,' Trump wrote on Truth Social. 'Also, they have always bought a vast majority of their military equipment from Russia, and are Russia's largest buyer of ENERGY, along with China, at a time when everyone wants Russia to STOP THE KILLING IN UKRAINE — ALL THINGS NOT GOOD! INDIA WILL THEREFORE BE PAYING A TARIFF OF 25%, PLUS A PENALTY FOR THE ABOVE, STARTING ON AUGUST FIRST,' the post added.
