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Axios
5 days ago
- Business
- Axios
Trade threats consume the U.S. economy
An upbeat inflation report on Friday was overshadowed by President Trump's warning about escalating U.S.-China trade tensions. Why it matters: Little captures the rattled state of the American economy like the morning's sequence of events. Inflation kept decelerating in April, defying gloomy warnings about tariff-related price hikes. But Trump's social media post about China, pushed out minutes before the data hit the tape, was a clear reminder that the economy is largely at the mercy of the White House's trade agenda. By the numbers: The Personal Consumption Expenditures Price Index — the Federal Reserve's preferred inflation gauge — was benign for yet another month. After a streak of hot reports, the economy looks to be solidly back on a disinflationary path. The core measure that excludes food and energy increased 2.5% from a year ago, the lowest annual gain since February 2021. By another measure, core PCE rose at a 2.7% annualized rate over the last three months — down sharply from 3.5% in March. What to watch: So far, Trump's trade drama has played out against a largely favorable economic backdrop. But spending data released with the upbeat inflation figures offers an early warning that this backdrop might be shifting. Personal consumption expenditures rose 0.2%, a pullback from the 0.7% increase in March. Spending on services was partially offset by a drop in goods purchases. That is despite another jump in disposable income, which rose 0.8% last month, up from the 0.7% increase in March. The Commerce Department said that jump largely reflected new legislation that allowed certain public sector employees to receive more Social Security benefits. The personal saving rate soared by 0.6 percentage point to 4.9%, as consumers socked away more of their income than they spent. What they're saying:"The U.S. consumer remains resilient, though that resilience, to some degree, is underpinned by fear of what's likely to come," Olu Sonola, an economist at Fitch Ratings, wrote in a note Friday morning — referring to tariff-related disruptions. "The Fed will welcome the favorable inflation reading in this report, but they are likely to interpret it as the calm before the storm. They will continue to wait for the storm—unless consumer spending buckles and the unemployment rate rises rapidly," Sonola added. State of play: Trump implemented the steepest tariff rates to date in April before backing off days later. China was the exception, with U.S.-bound goods taxed at 145% for much of April. Economists don't expect price pressures to seep into the data until the summer months. Retailers are rolling through inventory stockpiled before the worst of the tariffs took effect. The bottom line: Even if the courts decide Trump's expansive tariffs are illegal, the White House can implement the levies through other authorities.
Yahoo
06-05-2025
- Business
- Yahoo
April jobs report: Employers added robust 177,000 jobs as Trump's tariffs kicked in
U.S. hiring remained sturdy in April as the economy added 177,000 jobs despite jitters over President Donald Trump's massive import tariffs and widening federal government layoffs. But payroll gains for February and March were revised down sharply, at least partly offsetting the big jump last month. The unemployment rate held steady at 4.2%, the Labor Department said Friday. Ahead of the report, economists forecast 135,000 job gains, according to a Bloomberg survey. "The 'R' word that the labor market is demonstrating in this report is resilience, certainly not recession," said Olu Sonola, head of U.S. economic research for Fitch Ratings. So far this year, monthly job gains are averaging 143,000, down from 168,000 in 2024 but a solid figure in light of heightened uncertainty over the Trump administration's economic policies and stock market turmoil. What field is hiring the most right now? Health care, a steady payroll generator the past couple of years, again led the job gains with 51,000. Transportation and warehousing added 29,000 as many companies stepped up imports ahead of tariffs. Leisure and hospitality, which includes restaurants and bars, added 24,000; professional and business services, 17,000; and financial activities, 14,000. But manufacturing cut 1,000 jobs and retail shed 1,800. Both industries are beset by uncertainty amid tariffs that are likely to squeeze their profits or curtail sales as they pass the costs to consumers. And federal employment declined by 9,000 in a sign that sweeping cuts by Elon Musk's Department of Government Efficiency (DOGE) are starting to crimp the jobs numbers. Are wages in the US increasing? Average hourly earnings rose 6 cents to $36.06, keeping the yearly increase at 3.8%. Wage growth generally has slowed in recent months and is now consistent with the Federal Reserve's 2% inflation goal, economist Nancy Vanden Houten of Oxford Economics wrote in a research note. Fed officials 'no longer see wage growth as a source of inflationary pressure,' she said. Strong growth in productivity, or output per worker, also has allowed companies to give slightly bigger raises without having to raise prices, economists say. Will the Fed lower interest rates in 2025? The report is expected to do little to prod the Federal Reserve to cut its key interest rate at a meeting next week, portraying a healthy labor market. While the tariffs are projected to sap Americans' buying power and have raised the prospect of recession later this year, they're also expected to boost prices. That would leave the central bank torn between its missions. It raises rates or keeps them higher for longer to battle inflation. It lowers rates to head off – or dig the economy out of – recession.
Boston Globe
03-04-2025
- Business
- Boston Globe
What to know about the Trump tariffs upending global trade and markets
Even countries with which the U.S. enjoys trade surpluses – meaning it sells to them more than it buys, such as the United Kingdom and Argentina – are being targeted with a minimum tariff of 10%. And the highest tariffs are landing on two tiny territories that trade little with America — the African kingdom of Lesotho and the French possession of Saint Pierre and Miquelon off Canada's Atlantic coast. Get Starting Point A guide through the most important stories of the morning, delivered Monday through Friday. Enter Email Sign Up For decades, global commerce abided by tariff rates agreed to by the U.S. and 122 other countries during the 1980s and 1990s. On Wednesday, Trump detonated that arrangement, saying that other countries had exploited the system and 'ripped off'' the United States for years, causing its once-mighty manufacturing base to shrink. Advertisement 'Our country has been looted, pillaged, raped and plundered,' the president said in the Rose Garden. Global financial markets recoiled on Thursday. On Wall Street, the Dow Jones industrial average dropped 1,679 points, or nearly 4%, and the U.S. dollar fell against other major currencies – a sign that investors are worried about the U.S. economy. Advertisement 'This is a game changer, not only for the U.S. economy but for the global economy,' said Olu Sonola, head of U.S. economic research for Fitch Ratings. 'Many countries will likely end up in a recession. You can throw most forecasts out the door, if this tariff rate stays on for an extended period of time.' Trump is doing what he said he'd do During the presidential campaign, Trump repeatedly talked about imposing a 'universal tariff'' of 10% to 20% on all imports -- and the new 10% baseline tariffs fit the description. He also threatened to hit imports from China with 60% tariffs, and he's now slapping a 'reciprocal'' tariff of 34% on China – on top of the 20% levies he'd announced earlier this year. Combine the new tariffs on China with the ones left over from his first term, and from President Joe Biden's, and the full tax on Chinese goods will now approach 70%, said Julian Evans-Pritchard of Capital Economics. 'It's extreme, but it aligns with what Trump campaigned on,'' said Erica York, vice president of federal tax policy at the Tax Foundation. Nobody knows if the tariffs will prove permanent or if the U.S. will lower or drop them in response to other countries negotiating to reduce their own tariffs and other trade barriers. U.S. tariff rates are going back more than 100 years Even before Wednesday's bombshell, the president had been lobbing tariffs with abandon in his second term. He restored 25% tariffs from his first term on steel and aluminum, imposed 25% levies on cars and light trucks, hit China with 20% import taxes and levied 25% tariffs on some Canadian and Mexican imports. The Budget Lab at Yale University estimates that his 2025 tariffs – including Wednesday's – would lift America's effective average tariff rate to 22.5%. That would be up from 2.5% last year and the highest level since 1909 — even higher than the notorious Smoot-Hawley tariffs that Congress passed during the Great Depression. Advertisement Before lawmakers ratified the 16th amendment to the Constitution in 1913, introducing a national income tax, tariffs supplied a big share of the federal government's revenue – more than 90% at times in the mid-1800s. The U.S. moved from tariffs to income taxes to raise more money to finance an expanding government, collect more revenue from the wealthy and make the economy more efficient by reducing trade barriers and encouraging competition. Trump wants to return to those days and replace income tax collections with tariffs. Last year, tariffs accounted for less than 2% of federal revenue, while 51% came from the income tax and 36% from Social Security and Medicare taxes. Tariffs are likely to damage the U.S. and world economies The Yale Budget Lab estimates that Trump's 2025 tariffs will increase U.S. consumer prices by 2.3% in the short run, costing American households $3,800 a year. The tariffs he announced on 'Liberation Day' alone will push up prices by 1.3%, the lab calculates – a $2,100 tax on households. Clothing prices will go up 17% as higher import tariffs hit textiles from Southeast Asia and Bangladesh. The lab says that Trump's tariffs will reduce U.S. economic growth – which was 2.8% in 2024 -- by 0.9 percentage points this year. The damage will also extend to Europe, Southeast Asia and China. 'We can expect global economic growth to start plummeting as trade flows decline, prices increase and businesses put off investments,'' said Wendy Cutler, a former U.S. trade official who is now vice president at the Asia Society Policy Institute. Advertisement Trump hits allies and poor countries Between the so-called reciprocal and baseline tariffs, Trump hit allies and adversaries, rich and poor countries, and those open and closed to U.S. exports. Even Singapore, perhaps the freest-trading economy in the world, is getting slugged with the 10% levies, belying Trump's claims to be balancing other countries' protectionist policies, said Scott Lincicome, a trade analyst with the libertarian Cato Institute. 'This is not reciprocal at all,'' Lincicome said. 'Getting to real numbers on foreign trade barriers and their effects on U.S. trade numbers would require lengthy investigations and would take months, if not years, to produce. ... They might as well have pulled the numbers out of a hat.'' Taiwan, a U.S. ally, faces a 32% tariff, not much less than geopolitical rival China's 34%. Poor countries also bore the brunt of some of Trump's most onerous tariffs. Lesotho, a tiny country surrounded by South Africa, is facing a 50% 'reciprocal'' tariff, for example, even though its annual economic output per person is less than $2,900 (compared to America's $76,200). Cambodia, whose annual economic output per person is about $7,200, is absorbing a 49% tariff. That is partly, the White House says, because it has been a conduit for Chinese-made goods eventually headed to the United States to dodge U.S. tariffs on China. Canada and Mexico got off relatively easy Trump's trade policies toward America's northern and southern neighbors has been erratic. He has twice announced and then suspended or watered down 25% tariffs on Canadian and Mexican goods, ostensibly to get them to do more than crack down on fentanyl and immigrants crossing into the U.S. illegally. Advertisement Last month, Trump suspended the 25% duties on Canadian and Mexican goods that comply with the US-Mexico Canada Agreement, a trade pact he negotiated with the two countries in his first term. On Wednesday, the White House said that USMCA-compliant imports could continue to enter the United States duty free. Once the two countries have satisfied Trump's demands on immigration and drug trafficking, the tariff on the rest of their imports would drop from 25% to 12%, the White House said. 'The obvious winners were Canada and Mexico,'' Neil Shearing and Paul Ashworth of Capital Economics wrote in a commentary.
Globe and Mail
03-04-2025
- Business
- Globe and Mail
Fear that Trump tariffs will spark recession wipes out $2 trillion in value from US stock values
U.S. companies had trillions of dollars in value wiped out Thursday after President Donald Trump slapped sweeping tariffs on foreign imports. Virtually every sector suffered big losses as U.S. financial markets at one point were headed toward their biggest one-day drop since COVID-19 flattened the global economy five years ago. Banks, retailers, clothing, airlines and technology companies were among the hardest hit, with consumers expected to cut spending if tariffs lead to higher prices for goods and services. Many economists called the tariffs much worse than expected, and investors dumped shares in companies they predict will suffer most from what is effectively a business tax. In many cases that tax will be passed on to consumers. If consumers pull back their spending because of higher prices, businesses will produce fewer goods and economic growth could stall or contract. Consumer spending makes up about 70% of economic activity in the U.S. 'This is a game changer, not only for the U.S. economy but for the global economy," Olu Sonola, Fitch Ratings' head of U.S. Economic Research, said in a report. "Many countries will likely end up in a recession.' With less than an hour before markets closed, $2.01 trillion in value had vanished according to Howard Silverblatt, a senior index analyst at S&P Dow Jones Indices. Here's a breakdown of some of the market's worst performing sectors and companies on Thursday. Airlines Airlines had been projecting a strong year for profits. However, if Americans are faced with higher prices for essentials, economists say that could put a crimp in their travel budgets. United Airlines, down 13.8% American Airlines, down 9.3% Delta Air Lines, down 9.4% Clothing and shoes Most major shoe and clothing makers have their products made outside of the U.S., meaning they will have to pay a tariff, or import tax, on all the goods that are shipped back into the country for sale here. Nike, down 13.4% Under Armour, down 18.3% Lululemon, down 9.6% Ralph Lauren, down 15.7% Levi Strauss, down 12.4% Retailers Big box and online retailers also import a massive amount of their inventory from outside the U.S. Amazon, down 8.1% Target, down 10.6% Best Buy, down 17% Dollar Tree, down 11% Kohl's, down 21% Technology Companies that make and sell computers, smartphones and other technology source many of their parts from abroad. Some manufacture their entire products overseas, meaning they will have to pay a tariff when those products are shipped back for sale to consumers. Apple, down 9.3% HP, down 13.9% Dell, down 17.5% Nvidia, down 6.5% Banks If the economy slips into a recession, households and businesses will be less likely to borrow money as demand for products and services decline. Wells Fargo, down 7.8% Bank of America, down 10.1% JPMorgan Chase, down 6.2% Restaurants American consumers, feeling less confident about their financial futures this year, have already been pulling back on spending at restaurants as they tighten their budgets and prioritize only essential goods and services. Starbucks, down 10.6% Cracker Barrel, down 13.9% Cheesecake Factory, down 8.7% Automakers Somewhat surprisingly, automakers didn't get hit as hard most other sectors did on Thursday. That could be because most of Ford, GM and Stellantis' steel and aluminum — which Trump previously announced tariffs on — already comes from the United States, reducing the direct impact the companies would feel from higher duties. General Motors, down 3.6% Ford, down 4.7% Tesla, down 4.7% Stellantis, down 8.8%
The Hill
03-04-2025
- Business
- The Hill
Fear that Trump tariffs will spark recession slashes billions of dollars from US stock values
U.S. companies had billions of dollars in value wiped out after President Donald Trump slapped sweeping tariffs on foreign imports. Virtually every sector suffered big losses Thursday as U.S. financial markets careened toward their biggest one-day drop since COVID-19 flattened the global economy five years ago. Banks, retailers, clothing, airlines and technology companies were among the hardest hit, with consumers expected to cut spending if tariffs lead to higher prices for goods and services. Many economists called the tariffs much worse than expected, and investors dumped shares in companies they predict will suffer most from what is effectively a business tax. In many cases that tax will be passed on to consumers. If consumers pull back their spending because of higher prices, businesses will produce fewer goods and economic growth could stall or contract. Consumer spending makes up about 70% of economic activity in the U.S. 'This is a game changer, not only for the U.S. economy but for the global economy,' Olu Sonola, Fitch Ratings' head of U.S. Economic Research, said in a report. 'Many countries will likely end up in a recession.' Here's a breakdown of some of the market's worst performing sectors and companies on Thursday. Airlines Airlines had been projecting a strong year for profits. However, if Americans are faced with higher prices for essentials, economists say that could put a crimp in their travel budgets. United Airlines, down 11.6% American Airlines, down 8.5% Delta Air Lines, down 8.6% Clothing and shoes Most major shoe and clothing makers have their products made outside of the U.S., meaning they will have to pay a tariff, or import tax, on all the goods that are shipped back into the country for sale here. Nike, down 10.4% Under Armour, down 17.4% Lululemon, down 11.1% Ralph Lauren, down 15.6% Levi Strauss, down 11.5% Retailers Big box and online retailers also import a massive amount of their inventory from outside the U.S. Amazon, down 7% Target, down 9.5% Best Buy, down 14.8% Dollar Tree, down 8.4% Kohl's, down 24.4% Technology Companies that make and sell computers, smartphones and other technology source many of their parts from abroad. Some manufacture their entire products overseas, meaning they will have to pay a tariff when those products are shipped back for sale to consumers. Apple, down 8% HP, down 13.1% Dell, down 15.4% Nvidia, down 6.3% Banks If the economy slips into a recession, households and businesses will be less likely to borrow money as demand for products and services decline. Wells Fargo, down 7.5% Bank of America, down 8.9% JPMorgan Chase, down 5.7% Restaurants American consumers, feeling less confident about their financial futures this year, have already been pulling back on spending at restaurants as they tighten their budgets and prioritize only essential goods and services. Starbucks, down 10.8% Cracker Barrel, down 11.1% Cheesecake Factory, down 7.3% Automakers Somewhat surprisingly, automakers didn't get hit as hard most other sectors did on Thursday. That could be because most of Ford, GM and Stellantis' steel and aluminum — which Trump previously announced tariffs on — already comes from the United States, reducing the direct impact the companies would feel from higher duties. General Motors, down 3% Ford, down 4% Tesla, down 4.4% Stellantis, down 7.9%
