Marc Lasry Says Economy ‘Can't Survive' Under Trump Uncertainty
Marc Lasry, the billionaire co—founder of Avenue Capital Group, said the uncertainty over President Donald Trump's policies, particularly on tariffs, is stalling investors looking to take advantage of market opportunities.
'The problem for the markets is when they don't know what to do,' Lasry, 65, said in an interview Friday at the Credit Opportunities Symposium at New York University. 'An economy can't survive like that. It just slows everything, and could push this economy into a recession.'
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Yahoo
39 minutes ago
- Yahoo
4 Major Questions Are Lingering About Tariff-Related Inflation
Tariffs' effects haven't shown up in official inflation measures yet, but retailers have said they are raising their prices in response to the increased import taxes. There are lingering questions about how those price increases will work their way through the economy. How much of the tariffs companies will cover, which items will see price increases, the extent to which price increases persist, and whether workers think they need a pay raise will be crucial in determining the path of tough to forecast the economy these days, but one thing is sure: prices on some goods are going up. Tariffs haven't yet pushed up official measures of inflation, but economists say that's certain to change soon as Walmart, Macy's, and smaller businesses raise prices on imported goods. Even so, airfares, hotels, and gasoline prices are dropping, and there are signs that rents are peaking after years of hikes. Wall Street analysts and D.C. policymakers are debating how noticeable the tariff-related sticker shock will be and what items will be most affected. With tariff headlines changing by the day, the inflation outlook is 'unusually uncertain,' Barclays economist Marc Giannoni wrote in a recent note to clients. The answer to how high inflation is headed may vary on any given day. But below are four questions that are driving the debate. President Donald Trump has said companies should 'eat' the tariffs, taking a hit on their profits rather than passing costs onto customers and driving up inflation. But if a megaretailer like Walmart felt forced to raise prices, smaller ones with thinner margins and less negotiating leverage may feel more pressure, said Richard Moody, chief economist at the Alabama-based bank Regions Financial. It may take time for that to happen, since retailers are still selling their existing inventories—and some bulked up ahead of tariff uncertainty. But economists expect consumers to feel a bigger hit nonetheless. 'The jury is still out if retailers and wholesalers will pick up much of the tab, but we remain comfortable for now with our working assumption that something like 80% to 90% of the tariff costs ultimately will be passed on to consumers,' Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, wrote in a note to clients. While some imported goods may get pricier, consumers tend to spend more on services such as restaurants or travel. Services make up roughly two-thirds of consumer spending, noted Regions' Moody, who foresees more deceleration in service prices ahead. 'That's going to mitigate some of the impact from rising goods price inflation,' Moody said, though he noted that may be of little comfort to lower-income households that spend less on travel. Another possible mitigator is housing costs. Those make up a large chunk of inflation gauges, and while housing remains expensive following a post-COVID boom, rents have started to fall in some markets. Overall, service prices should 'remain relatively subdued,' Oliver Allen, an economist at Pantheon Macroeconomics, wrote in a note to clients. But he doubted they'll prevent an overall increase in inflation. Inflation may lead to a one-time hit to Americans' pocketbooks, but the effects are more painful if higher prices feed off each other and become persistent. Goldman Sachs Economist David Mericle wrote he's skeptical about the latter scenario, expecting a one-time jump that pushes inflation gauges above 3.5% before coming back down. While the post-COVID bout of prolonged inflation is fresh in consumers' minds, this year's inflation rebound will be 'less threatening than the 2021-2022 episode,' he wrote. At the time, supply chain snarls led to a spike in prices, all while consumers had elevated spending power from stimulus assistance, he noted. But the economy looks different today, with GDP expected to grow at a measly pace of 1% this year and the unemployment rate potentially drifting higher. Economists say wages are critical to determining whether inflation will be one-time or prove stickier. When consumers expect inflation to rise, they tend to seek higher pay from their employers. Those companies then may pass on some of their higher labor costs to consumers, raising prices on the goods and services they buy. If that dynamic stays in check, inflation can rise without causing massive problems. However, one fear is a wage-price spiral, which the U.S. experienced in the 1970s. This spiral only ended after the Fed hiked rates aggressively and brought about a recession. 'A pickup in wage growth would be a crucial intermediate step for high inflation to become persistent, but so far as the trade war has gotten underway, anxiety about the outlook appears to be outweighing any boost from higher inflation expectations,' Goldman Sachs' Mericle wrote. Read the original article on Investopedia
CNBC
41 minutes ago
- CNBC
Most companies are already raising prices or plan to because of tariffs, data shows
Data from the New York Federal Reserve shows a majority of companies have passed along at least some of President Donald Trump's tariffs onto customers, the latest in a growing body of evidence indicating the policy change is likely to stretch consumers' wallets. In May, about 77% of service firms that saw increased costs due to higher U.S. tariffs tariffs passed through at least at least some of the rise to clients, according to a survey conducted by the New York Fed that was released Wednesday. Around 75% of manufacturers surveyed said the same. In fact, more than 30% of manufacturers and roughly 45% of service firms passed through all of the higher cost to their customers, according to the New York Fed's statics. Price hikes happened quickly after Trump slapped steep levies on trading partners, whether large or small. More than 35% of manufacturers and nearly 40% of service firms raised prices within a week of seeing tariff-related cost increases, according to the survey. Trump announced in early April that he would impose "reciprocal" tariffs on more than 180 countries and territories, sending the stock market into a tailspin. But Trump soon rolled back or paused those levies for three months, unleashing the equity market to claw back most of its initial losses. Companies and investors alike are now looking to a July 9 deadline for the return of those suspended tariffs, coping in the meantime with continued confusion regarding to trade policy. The U.S. has already announced one trade deal with the United Kingdom, and Deputy Treasury Secretary Michael Faulkender said this week that the Trump administration is "close to the finish line" on some other agreements. The New York Fed's survey is the latest in a salvo of data releases and anecdotal reports that have shown companies' willingness to pass down cost increases despite pressure from Trump not to do so. Nearly nine out of 10 of the 300 CEOs surveyed in May said they have raised prices or planned to soon, according to data released last week by Chief Executive Group and AlixPartners. About seven out of 10 chief executives surveyed in May said they plan to hike prices by at least 2.5%. Corporate executives have been careful in how they speak about the impact of Trump's policies on their business, especially when it comes to trade, to avoid getting caught in the president's crosshairs. Last month, for example, Trump warned Walmart in a social media post that the retailer should "eat the tariffs" and that he would "be watching." Consequently, survey data and anonymous commentary offer insights into how American business leaders are discussing the tariffs behind closed doors. "The administration's tariffs alone have created supply chain disruptions rivaling that of Covid-19," one respondent said in the Institute for Supply Management's manufacturing survey published Monday. Another respondent said "chaos does not bode well for anyone, especially when it impacts pricing." While another pointed to the agreement between the U.S. and China to temporarily slash tariffs, they said the central question is what the landscape will look like in a few months. "We are doing extensive work to make contingency plans, which is hugely distracting from strategic work," this respondent said. "It is also very hard to know what plans we should actually implement." Responses to the ISM service sector survey released Wednesday revealed a similar focus on the uncertainty stemming from controversial tariffs. "Tariffs remain a challenge, as it is not clear what duties apply," one respondent wrote. "The best plan is still to delay decisions to purchase where possible."
The Hill
44 minutes ago
- The Hill
Trump's tariffs would cut US deficits by $2.8T over 10 years and shrink the economy, CBO says
WASHINGTON (AP) — President Donald Trump's sweeping tariff plan would cut deficits by $2.8 trillion over a 10-year period while shrinking the economy, raising the inflation rate and reducing the purchasing power of households overall, according to an analysis released Wednesday by the Congressional Budget Office. The numbers were revealed in a letter sent to Democratic congressional leadership outlining how the Trump administration's plan to impose wide-ranging tariffs on countries around the world will affect American households. Baked into the CBO analysis is a prediction that households would ultimately buy less from the countries hit with added tariffs. The budget office estimates that the tariffs would increase the average annual rate of inflation by 0.4 percentage points in 2025 and 2026. The budget office's model also assumes that the tariffs, announced through executive action between January and May, will be in place permanently. Since the analysis was conducted, a federal court struck down sweeping tariffs that Trump invoked under an emergency-powers law. An appeals court allowed the Trump administration to continue collecting the tariffs while the case goes through appeals. Largely confirming what other economic models have predicted, the CBO's estimations show that the tradeoff for a $2.8 trillion deficit reduction over 10 years would be an overall reduction in household wealth. In addition, the tariffs would shrink the economy, or reduce the rate of the gross domestic product by 0.06 percentage points per year. The Penn-Wharton Budget Model's April report predicted that the Republican president's tariffs would reduce long-run GDP by about 6% and wages by 5%. A major caveat of the CBO's estimates is written into the report — its estimates are 'subject to significant uncertainty, in part because the Administration could change how the tariff policies are administered.' Trump has often announced changes and pauses to his tariff plans on his social media platform. In April, he posted that he was backing off his tariffs on most nations for 90 days and jacking up the tax rate on Chinese imports to 125%. Last week, he announced plans to hike the tariffs on steel and aluminum imports to a punishing 50%, a move that's set to hammer businesses and likely push up prices for consumers even further. The 50% tariffs went into effect Wednesday. The Organization for Economic Cooperation and Development forecast Tuesday that the U.S. economy, the world's largest, will slow growth to just 1.5% in 2026. A representative from the White House did not respond to an Associated Press request for comment ___ Associated Press writer Paul Wiseman in Washington contributed to this report.
