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Irish Examiner
20 hours ago
- Business
- Irish Examiner
David McNamara: US economy may be succumbing to uncertainty
Following a bumper week of macro data and tariff announcements, the durability of the US economy to the current uncertainty is being called into question by markets and forecasters for the first time since the post Liberation Day period in April. A strong economy has supported markets and the US dollar of late, but this unwound somewhat at the end of last week, as investors were roiled by an exceptionally weak US jobs report. Looking at the trade deals which have been rapidly concluded in recent weeks, they suggest the landing zone for US tariffs is not far from those announced on Liberation Day in April. For example, the 15% rate agreed with the EU, Japan, and South Korea compares to an initial range of 20% to 25% in April, while other major trading partners, such as Canada, have received sharply higher rates of 35% on some sectors. According to the Yale Budget Lab, this leaves the average effective US tariff at 16%, compared to the pre-Trump rate 2.5% — a historically rapid increase which brings the US tariff regime back to 1930s' levels. More pertinently, macro data and the Fed's actions (or lack of) have been the primary drivers of the currency over the past week. Investors interpreted chair Jerome Powell's equivocating comments on a rate cut as a hawkish tilt in guidance. Market rate expectations firmed in the aftermath of Powell's comments, reflecting the lack of any clear signal about a September cut. However, that weak jobs report on Friday has now reset rate expectations to below where they were at the start of the week, with more than two 25bp cuts now priced in by end-2025, compared to just one following the Fed meeting. The data showed the US economy added a meagre 35,000 per month on average between May and July. This sharp downward provision prompted a 'shoot the messenger' order by US president Donald Trump, removing the head of the statistics agency which compiles the labour market data. All in, there remains risks on both sides to the US economy. The economy has continued to grow at a solid rate so far this year, boosted by exceptional investment in areas such as AI. However, markets are now focusing once more on tentative trade deals which might unravel in the coming months, including the uneasy truce with China. The unusual split among the Fed's Board of Governors on monetary policy last week (two rebels voted for a 25bp cut) also highlights the nascent risk to the independence of US monetary policy as the government piles pressure on chair Powell in the final months of his term, and candidates jockey for position in the race to be the next chair. While Mr Trump is riding high on his political wins (trade deals, tax bill), the dollar is still about 12% lower against the euro year-to-date, and its recent gains have proved somewhat fleeting in the face of a weak jobs data. David McNamara is chief economist at AIB
Atlantic
2 days ago
- Business
- Atlantic
Trump Is a Degrowther
In the past few weeks, Americans learned that Robert F. Kennedy Jr. canceled half a billion dollars of government investment in the development of mRNA vaccines, Las Vegas saw a 7 percent drop in visitors, residential electricity prices shot up by an average of 6.5 percent, the number of housing permits issued hit their lowest point in half a decade, employers quit adding workers, the manufacturing sector shrank, and inflation rose. These bleak figures depict an American economy slowing and its labor market weakening. A recession isn't guaranteed, but it's becoming much more likely and the stagflation that forecasters described as inevitable when President Donald Trump began prosecuting his global trade war is now a lot closer. Americans, now and in the future, will be paying more and buying less. Trump's second-term economic ideology is not only one of protectionism, mercantilism, atavism, and cronyism. It is also one of degrowth. Trump, who entered the White House promising to slash prices on household goods and supercharge the American economy, would never use that term himself. Degrowth—the notion that wealthy countries can and should reduce their consumption and production—is associated with environmental activists and leftist and green parties in Europe. Still, at its heart, degrowth argues that people should not only tolerate but desire a smaller economy. That's second-term Trumponomics, and everyone stands to be worse off for it. Without admitting it, the White House is pursuing a multipronged strategy to raise prices, suppress consumption, freeze production, and lower productivity in the United States. The trade war is the most obvious example, as well as the one having the most immediate consequences. Since January, Trump has raised and lowered and raised tariffs on goods imported from American allies around the world. Such barriers will eliminate the country's bilateral trade deficits and boost domestic manufacturing, the White House has promised, while warning that consumers and employers might have to endure a chaotic period of adjustment. But Trump has slapped tariffs on commodities and parts that factories use to make things in America, such as engine components and timber. He has slapped tariffs on products that are not or cannot be produced here, such as bananas and gallium. And he has slapped tariffs on items that would be too expensive for American consumers to purchase if they were made in this country, given the cost of American wages and the network of factories in operation, such as costume jewelry and sneakers. The Yale Budget Lab estimates that the country's effective tariff rate now stands at 18.3 percent, the highest since 1934. Prices are beginning to rise as importers pass the cost of Trump's import taxes on to retailers and families. Industrial production is falling, as uncertainty plagues the sector. In response, Trump has argued with reality. 'We're only in a TRANSITION STAGE, just getting started!!! Consumers have been waiting for years to see pricing come down,' he wrote on Truth Social. 'NO INFLATION,' he added, pointing to egg and gas prices. But those are just two of 80,000 prices the government tracks each month to calculate the overall inflation rate. The cost of eggs has declined as the bird-flu pandemic has waned; the price at the pump has gone down due to weaker global growth and increased OPEC production. Across the economy, costs have remained witheringly high, despite the Federal Reserve combatting them with high interest rates. If the Fed cut borrowing costs, inflation would climb. Trump's campaign against reality extends beyond the price of consumer goods. Unhappy with the pace of employment growth, the president canned the head of the Bureau of Labor Statistics. 'Important numbers like this must be fair and accurate,' he wrote on Truth Social. 'They can't be manipulated for political purposes.' (Touché.) Unhappy with Fed policy, he has threatened to put Jerome Powell, his own appointee, 'out to pasture.' At the same time as he has prosecuted his bizarre unilateral war on imports, Trump has reduced government subsidies for a range of necessities. He has taken $1 trillion away from Medicaid, while vowing not to reduce the program's budget. He has cut food-stamp benefits, meaning low-income families will buy fewer groceries. He has eliminated support for the loans and grants that poor kids rely on to get a higher education. And he has slashed financing for renewable-energy production. Each of these policies will raise costs and reduce supply. Trump's One Big Beautiful Bill Act, for instance, is expected to eliminate 1.6 million green-energy jobs and reduce electricity-generation capacity by 330 gigawatts by 2035. (That's roughly equivalent to the country's current solar-production capacity.) Americans a decade from now will pay higher prices for electricity and will use less of it, thanks to Trump. Right now, the United States is suffering from shortages—yes, shortages—of immigrants and visitors. Tourist meccas around the country are reeling as visitors from Europe and Asia opt to take their euros and yen elsewhere. Farms and nursing facilities are suffering from a lack of workers. Global investors are opting to park their money abroad, raising domestic borrowing costs and weakening the dollar. In the long term, Trump's attack on colleges and scientific-research institutions might end up being the most damaging of his degrowth policies. The American system of higher education—for all of its many, many faults—is an engine of global modernity. The country's land-grant schools help feed the world. Its public colleges vault poor kids up the income ladder. Its name-brand universities are laboratories of scientific innovation. But for the crime of supporting Black and brown kids, admitting foreign students, and hiring liberal thinkers, these institutions are under assault. The mathematician Terence Tao, described by some of his contemporaries as a latter-day Albert Einstein, might not be able to continue his research at UCLA, because of Trump's budget cuts. What good could possibly come of that? The same good that will come from slashing financing for mRNA-vaccine research, meant to prevent cancer and end pandemics. 'I've tried to be objective & non-alarmist in response to current HHS actions—but quite frankly this move is going to cost lives,' argued Jerome Adams, a physician who served as surgeon general during the first Trump administration. As a counterweight, the White House has cut taxes and slashed regulations, for some industries at least. The wealthy stand to do just fine in the Trump economy—happy, I suppose, to have a smaller pie if they get a bigger piece of it. Yet Trumpian degrowth will hurt them, too, in time. Rich people purchase homes and sneakers and bananas, and send their kids to college. Rich people use energy. Rich people hire workers to provide them with home-health support and staff their businesses. And rich people use vaccines and require cancer treatments. Unlike typical degrowthers—with their focus on long-term human flourishing and the conservation of the planetary ecosystem—Trump is engaged in financial nihilism. The president has, at least once, admitted that his policies will lead to Americans having less instead of more: 'Maybe the children will have two dolls instead of 30 dolls, you know? And maybe the two dolls will cost a couple of bucks more than they would normally.' If only that was the worst of it.
The Independent
2 days ago
- Business
- The Independent
Trump's tariffs set to hit American's in the pocket
A new Yale Budget Lab study indicates that tariffs imposed by Donald Trump, combined with existing import taxes, will result in an 18.6 per cent effective tariff rate, the highest for US imports since 1933. Contrary to claims that foreign nations pay these tariffs, the study clarifies they are import taxes typically borne by American importers and passed on to consumers through higher prices. The tariffs are projected to cost American households approximately $2,500 annually due to increased prices, with an average price rise of 1.8 per cent in the short term. Specific sectors like clothing and textiles will be disproportionately affected, with shoes and apparel expected to become 39 and 37 per cent more expensive respectively, alongside significant tariffs on goods from India, Laos, Switzerland, and Iraq. Industries such as alcohol anticipate substantial financial losses and job cuts, while major companies like Diageo, Toyota, General Motors, and Ford projecting significant profit declines due to the tariffs.
The Independent
2 days ago
- Business
- The Independent
Trump's trade war about to cost Americans 1.8% more in the short term, Yale analysis finds
The massive import taxes being imposed on Americans by President Donald Trump will liberate American households from approximately $ 2,500 that will be cut out from their yearly income as a result of higher prices. According to a new study from the Yale Budget Lab, the new Trump tariffs combined with existing import taxes will cause consumers to pay an overall effective tariff rate of 18.6 percent, the highest tariff level for U.S. imports since 1933. While Trump has frequently claimed that the tariffs are being paid by foreign nations as an entry fee for access to the American economy, they are actually import taxes typically paid by American importers and passed on to consumers, often in the form of higher prices. The Yale study found that prices will rise on average by 1.8 percent 'in the short run,' with the latest tariffs imposed by Trump set to disproportionately hit consumer purchases of clothing and textiles. For example, shoes and apparel will become 39 and 37 percent more expensive in the short run, the study found. The new tariffs include a whopping 50 percent tax on Indian imports, plus 35 percent taxes on goods from Laos, Switzerland, and Iraq. Everyday items ranging from coffee to Toyotas, home furnishings to Gap jeans, are expected to become more expensive as companies adjust their prices to counteract the impact of tariffs. While the president has asked companies to absorb any increases in costs, many cannot forever. Here are some of the goods expected to cost more: Alcohol tariff on the European Union. The E.U. is a major exporter of wines and spirits to the U.S. In 2024 alone, the E.U. accounted for $3.4 billion worth of imported spirits. Despite pleas from the beverage industry, the president's trade deal did not create exemptions for alcohol, which will likely drive up the price of imported wine or liquor – either in stores or restaurants. 'Without productive negotiations reducing reciprocal tariffs on wine and spirits, American wine retailers anticipate a significant decline in sales on top of the already difficult market, as well as significant job losses and subsequent business closures,' Tom Wark, the executive director of the Association of Wine Retailers, said. A letter to the president from the Toast Not Tariffs Coalition, a group of 57 associations representing the U.S. alcohol industry and related industries, said tariffs on the E.U. could result in 25,000 American job losses, and nearly $2 billion in lost sales. Diageo, the maker of Guinness, Bailey's, Johnnie Walker, and more, said the company expects to see a $200 million slump as a result of the tariffs. Cars and car parts Already, consumers have seen cars and car parts become more expensive over the last few months as a result of Trump's tariffs because the U.S. relies heavily on its trading partners for auto parts. Cox Automotive, an industry service and technology provider, expects the sticker price of vehicles to rise anywhere from 4 to 8 percent by the end of the year. That means the average car price would be above $50,000. While the president struck several deals with countries, many of them still make imported vehicles more expensive. Imported cars from the U.K., such as Range Rovers, are subject to a 10 percent tariff. Japan, which sells more cars to the U.S. than any other country, is facing a 15 percent tariff rate, which is expected to cause major disruption. Toyota said on August 7 it expects a $9.5 billion profit loss for the year. "It's honestly very difficult for us to predict what will happen regarding the market environment," Takanori Azuma, Toyota's head of finance, said. But given that many car parts are imported from Japan, the tariffs are likely to hurt U.S. carmakers as well. General Motors projects a $4 billion loss, Stellantis, the maker of Jeep, said it anticipates tariffs will add $1.7 billion in expenses, and Ford, which builds more cars in the U.S. than any of its rivals, said it expects tariffs to cause a $2 billion loss this year. Clothing Clothing is expected to see one of the most significant price increases, and much of it comes from countries in Asia. Vietnam, one of the largest exporters of appear to the U.S., has agreed to a 20 percent tariff. Brands such as Nike, Adidas, Zara, and Gap manufacture much of their clothing in Vietnam. While many can absorb some of those costs, even raising prices 10 percent would make a $65 pair of shoes $71.50, without tax. Bjorn Gulden, the CEO of Adidas, said the tariffs 'will directly increase the cost of our products for the U.S.' Other countries that are high producers of clothing face significant tariffs as well. Bangladesh has a 20 percent tariff, while Indonesia and Cambodia both face a 19 percent tariff. India, also a large producer of apparel, faces a steep tariff of 25 percent and Trump has threatened to increase that to 50 percent by the end of August if the country does not stop importing Russian oil. While the U.S. also imports a large portion of clothing from China, which is still negotiating a trade deal, Trump's decision to get rid of the de minimis exemption will make it more costly for consumers to purchase cheap clothing from stores like Shein or Temu. The U.S. relies heavily on Brazil to import coffee for the 165 million people who need their daily caffeine fix, but Trump's 50 percent tariff threatens the long-term availability and price of the drink. "When people go to their local coffee shop, whether it's Starbucks or something else, by and large they will likely be buying some form of Brazilian coffee," Monica de Bolle, senior fellow at the Peterson Institute for International Economics, told NPR.
Fashion United
2 days ago
- Business
- Fashion United
US fashion industry faces historic price surge following reciprocal tariffs
The retail landscape in the United States underwent a dramatic shift on August 7 as the most comprehensive tariff increases since the 1930s took effect. Thursday saw the reciprocal tariffs come into effect under the Trump administration after months of delays, with most imports into the country being hit with a baseline 10 percent duty. But with higher tariffs on key US trading partners critical to fashion brands' and retailers' supply chains, including including India (50 percent), Brazil (50 percent), Bangladesh (20 percent), China (30 percent), Sri Lanka (20 percent), Cambodia (19 percent), Malaysia (19 percent), and Thailand (19 percent), the average effective tariff rate jumped to 17.3 percent, a level not seen since the Great Depression era of 1935, according to recent data from nonpartisan Yale Budget Lab think tank. Tariffs consumer impact: $2,400 average household loss Consumers across the nation will feel the brunt of this shift, as the price level from all 2025 tariffs increased by 1.8 percent in the short run, equal to an average loss of 2,4000 USD per household for 2025, according to the Yale Budget Lab. Last month, the US Commerce Department reported that apparel and footwear prices were experiencing particular upward pressure due to tariffs and other external factors. Retail prices jumped 2.6 percent in June, up from 2.4 percent in May, with the cost of furniture, toys, and other imported goods increasing. With the reciprocal tariffs 'disproportionately' affecting the apparel, footwear, and textiles sectors, consumers are expected to face a 40 percent price increase in footwear and a 38 percent jump in clothing prices in the short run. The Yale Budget Lab estimates that these price increases will moderate to 19 percent and 17 percent increases for both categories in the long run, respectively. Apparel & footwear prices could increase as much as 40 percent Which makes sense, as tariffs were cited as the most significant factor driving sourcing costs increase for US fashion companies in 2025, according to the 2025 Fashion Industry Benchmarking Study from the United States Fashion Industry Association. Although many fashion businesses chose to swallow the additional taxes during the early days of the Trump administration's trade war, data indicates that brands and retailers are hitting a wall as profit margins tighten and their capacity to maintain price stability diminishes. 'We have no interest in running a lower-margin business, particularly due to tariffs,' said Richard Westenberger, the chief financial officer of children's apparel producer Carter's, during a call with analysts on July 25. 'And if this is something that's going to be a permanent increase to our cost structure, we have to find a way to cover it.' Carter's is not alone, as brands from Adidas to Levi Strauss have announced strategies to counter the impact of tariffs. On July 30, Adidas warned that it would most likely have to increase its prices in the United States, noting that US tariffs would add around 231 million USD in costs to the year's second half. 'We will try to keep the prices on known models (stable) as long as we can, and then do new pricing on products that haven't existed before,' said Bjorn Gulden, CEO of Adidas, during a call with analysts. During the call, Gulden also voiced concerns regarding consumer demand and inflation. 'What I'm mostly worried about, to be honest, is not only the cost, but it's what is going to be the consumer reaction in the market with all these price increases that I think will come not only in our sector, but in general in the US. Should we get mega inflation in the US, things will happen on the demand side, then of course volumes will go down.' Supply chain scramble as geographic diversification accelerates To help drive its costs down and mitigate the impact of tariffs, Adidas, Ralph Lauren, and other fashion companies have been exploring various options, including supply chain diversification. Two of Adidas's largest sourcing hubs in 2024 were Vietnam and Indonesia, with Vietnam producing 27 percent and Indonesia 19 percent of the sportswear brand's total product for 2024. However, with the US introducing a 20 percent tariff on Vietnamese exports and a 19 percent tariff on Indonesian imports, Adidas will likely shift the bulk of its production elsewhere. The sportswear brand is not alone in this strategy. Over 80 percent of respondents from the 2025 Fashion Industry Benchmarking Study stated they are diversifying their sourcing geographically by sourcing from more countries and regions to mitigate the impact of increasing tariffs and policy uncertainty. A further 72 percent said they plan to ramp up duty-free sourcing from countries covered by US free trade agreements and trade preference schemes. Overall, the reciprocal tariffs have disrupted fashion supply chains substantially, with close to 70 percent of respondents noting they have canceled or delayed select sourcing orders due to the tariff increases. Most Spring 2026 orders placed in late 2025 will likely operate under fundamentally different cost structures than those placed just months earlier, requiring retailers to make rapid adjustments to price points, margin expectations, and market positioning strategies. However, this transition may not be as straightforward as it seems, as around 40 percent of respondents added they had reduced investments in crucial areas, such as sustainability and product innovation, due to financial strain from the tariff hikes. The reallocation of resources highlights a troubling secondary effect: while brands scramble to maintain profitability in the face of higher input costs, they're simultaneously sacrificing the very initiatives that could differentiate them in an increasingly competitive market and meet growing consumer demands for responsible business practices. With fashion companies set to grapple with the highest trade barriers since the Great Depression, the ultimate test will be whether they can maintain consumer loyalty while passing along unavoidable cost increases.
