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CNN
16 hours ago
- Business
- CNN
Trump is calling Wall Street's bluff on tariffs
Tariffs Donald Trump Investing StocksFacebookTweetLink Follow Wall Street traders embraced the term TACO — Trump always chickens out — earlier this year to describe President Donald Trump's on-again, off-again position on tariffs. Trump liked to impose hefty import taxes but would inevitably back off when markets plunged, analysts said. Now Trump is calling the market's bluff. Yet another round of new tariffs went effect on Thursday, lifting the average tax on US imports to the highest level since the 1930s. Trump bet markets would absorb this latest news, adapt and move on — and so far he appears to have been right. Stocks still closed higher on the week, with the Nasdaq hitting a record high on Friday and the S&P 500 notching its best week in over one month. It's a remarkable shift from early April, when the president's 'Liberation Day' tariffs caused stocks across the globe to plunge. But with economists saying tariff effects could take weeks or months to play out, it's too soon to declare victory just yet. 'He is succeeding in implementing major tariffs without shocking the stock market,' said Ethan Harris, former head of global economics at Bank of America. 'It's surprising, and you could call it an accomplishment if you're in favor of tariffs.' Trump may be winning the hand, but Wall Street has lots of cards left. The game isn't over. Investors in recent months have embraced the 'TACO' trade. A better description would be, 'Trump always tries again,' according to Harris. With the latest import taxes, Trump is pushing forward with an average tariff rate just slightly slower than what he tried to impose on April 2, according to the Budget Lab at Yale. While stocks are hovering near record highs, Harris said he expects tariffs will inflict 'real damage' on the economy, and it remains to be seen if investors will stay complacent. The inclusion of carveouts has softened the blow of tariffs, according to Kurt Reiman, head of fixed income at UBS. That has helped temper investors' concerns. Apple (AAPL), for example, is exempt from tariffs on some imports from India and tariffs on semiconductors because of its pledge to develop production in the United States. Apple stock last week soared 13% and had its best week since 2020. 'The tariff wall being built by the administration also has many holes because of numerous product exemptions, carveouts and delayed implementation dates,' Reiman said. Enthusiasm about the AI boom in the United States is also driving market momentum and drawing attention away from tariffs. While investors have been concerned about trade, blowout earnings from big tech companies like Nvidia (NVDA) and Meta (META) have helped buoy the market. In addition, trading partners have largely not retaliated, avoiding a global trade war that would have had worse outcomes for the US economy, according to David Doyle, head of economics at Macquarie. 'What's really struck me is how little Trump has had to chicken out from,' Robert Armstrong, the Financial Times columnist who coined the term 'TACO,' told CNN's Richard Quest in an August 1 interview. Wall Street's fear gauge, the CBOE Volatility index, spiked in early April above 50 points — a historic level not seen since the Covid pandemic or the 2008 financial crisis. The VIX in August just briefly breached 20 points — a level associated with slightly noticeable volatility — before retreating. Investors are maintaining faith in a 'Trump put,' or the notion that if the markets do plummet, the president will refine his approach. The 'Trump put' is different from chickening out, analysts say, as the president might back down just enough to satisfy markets before pushing forward again with his tariffs when he is able to. 'He always tries again until the equity market punishes the policy,' Harris said. 'That's the old 'Trump put' idea, which is the way people used to talk about it, and is still the correct way to think about the trade war.' While Trump has implemented his tariffs, it might be too soon to call victory. Investors are awaiting data on inflation and the labor market in upcoming months to get a better sense of how tariffs are impacting the economy. 'As an investor, you can talk yourself into not worrying about tariffs, but if you're a company trying to make business plans, you can't afford to ignore the tariffs,' Harris said. 'The stock market and the economy are not the same thing.' Arun Sai, senior multi-asset strategist at Pictet Asset Management, said investors are taking two leaps of faith in believing in the resilience of the US economy and that 'the stagflationary impulse of tariffs' — slower growth and stickier inflation — won't be as bad as initially feared. Markets are a 'little too complacent,' Sai said, and he will be watching the next two inflation reports ahead of the Federal Reserve's September policy meeting for any sign of tariff-induced increases in prices. 'By no means are we out of the woods,' Sai said. ' We are priced for nothing to go wrong, and yet we still have a very important inflection point ahead of us.'
NBC News
3 days ago
- Business
- NBC News
Not today, AI: Despite corporate hype, few signs that the tech is taking jobs — yet
The job market has begun looking shakier. How much is artificial intelligence to blame? Not a whole lot. At least not yet. A review of employment surveys, interviews with labor market analysts and recent company earnings reports shows little evidence, so far, that would support assertions of a widespread economic impact from AI's growing usage. 'It's such an emotional thing for people, many of whom are determined to see it in the data,' said Martha Gimbel, executive director and co-founder of the Budget Lab at Yale University and a former President Joe Biden economic adviser. 'And it's just not there yet.' Much is riding on the payoff from AI. The stock market has been hitting record highs largely thanks to gains from tech giants like Nvidia, Google parent Alphabet, Facebook parent Meta and Microsoft, which have made enormous investments in pumping out AI-related products. For precisely that reason, analysts say, some businesses may be incentivized to hype AI's potential as a disruptive force. Through the end of July, the term 'AI' has been cited on about two-thirds of second-quarter earnings calls conducted by S&P 500 companies, according to the data provider Factset. That's up from less than half in the first quarter. Amid a downshifting economy, cost pressures are mounting, prompting corporate leaders to hype AI's potential as a savings source — even if it's not quite there yet. 'In 2023, you'd have a high-profile public company do a job cut and cite rising interest rates or uncertain macro conditions,' Roger Lee, a tech entrepreneur who also runs a website that tracks tech industry layoffs, said. 'Today, it's AI.' The most extreme warning about AI's short-term impact has come from Dario Amodei, co-founder and CEO of AI firm Anthropic. In May, he told Axios that he foresees half of all entry-level white-collar jobs being wiped out in the next one to five years, spiking unemployment to between 10% and 20%. So far, evidence for this scenario is mixed. All job openings, entry-level or otherwise, have been declining since 2023, according to labor market analytics company Revelio Labs, though the trend has not been linear. Revelio said entry-level jobs exposed to AI have been declining fastest — but senior roles exposed to AI have actually begun to recover. The broader picture for white-collar professions most at risk of disruption actually indicates fairly stable employment trends. Last week's official jobs report showed office and administrative roles have actually returned to their pandemic-era highs, while employment in other professional sectors, like accounting and legal services, has held relatively steady. It's a gloomier story in tech — but also a more nuanced one when it comes to AI's impact. The leaders of Amazon and Microsoft have both signaled the ability to run their businesses with reduced headcount thanks to AI. Tech layoffs tracked by Lee's website hit a three-month high in July, with three companies — Intel, Microsoft and Recruit Holdings, the parent of Indeed and Glassdoor — largely responsible. All three of those companies cited artificial intelligence as playing a role in the job reductions, Lee said. But he noted that in the case of Recruit Holdings, there were no specifics about how AI had impacted the lost positions. The company simply said the technology was 'changing the world.' 'It does seem like many of the roles being cut are in line with ones being used by AI,' Lee said. 'But it's still being used as a cover in other cases.' A representative for Recruit did not respond to a request for comment. The simple calculus behind AI is that businesses will be able to do more with less, increasing overall productivity while reducing hiring needs. Yet economists say it is difficult to calculate accurate changes in productivity over the short term — though so far, the broadest national measure has shown a deceleration in recent quarters. Most of the benefits of AI are instead accruing to consumers, not businesses, according to a forthcoming paper from researchers at Carnegie Mellon and Stanford University. If it feels like much of the value from the current generation of AI seems mostly to allow ordinary people to generate emails and papers faster, or do quicker research, you're not imagining things. 'Free goods are invisible in the GDP numbers, even if they make consumers better off,' the authors, Avinash Collis and Erik Brynjolfsson, wrote in a recent Wall Street Journal op-ed. They calculate consumers derived the equivalent of $97 billion in surplus welfare from generative AI in 2024, compared with $7 billion in revenues logged by the tech firms actually creating AI products. Economies typically see a 'J-curve' effect when transformative technologies are introduced, Collis told NBC News. At first there is a bottleneck that can cause some disruptions, though these initial effects are often not captured in official figures. For example, the iPhone increased the total global volume of photos from billions to trillions, something that directly impacted workers at camera giant Kodak, but created incalculable opportunities elsewhere, Collis said. 'There will likely be a lot of impact, perhaps on some sectors negatively,' Collis said. 'But at the same time lots of new jobs could be created as well.' Other indicators do suggest the stirrings of a more pronounced AI effect on jobs. The July employment survey from consultancy Challenger, Gray and Christmas found companies have blamed 'automation and AI implementation' for 20,000 job cuts in 2025, with another 10,000 or so directly attributable to artificial intelligence. Challenger said this shows 'a significant acceleration in AI-related restructuring.' Those figures are dwarfed by cuts related to government spending declines and general economic and market conditions, which account for nearly 500,000 lost roles this year, Challenger said. Some companies appear to be keeping payroll counts steady in response to the broad uncertainty in the economy, and using any additional resources to explore AI's potential to boost their bottom lines. Stacy Spikes, CEO of MoviePass, told NBC News that internal workflows at his company become vastly more efficient thanks to AI. That's made him more gun-shy about bringing on new workers into certain departments, like software. As of Tuesday, MoviePass' careers page showed no open positions. 'We haven't seen headcount need to increase,' Spikes said. Businesses like MoviePass still appear to be the exception, however. Analysts at Goldman Sachs say only about 9% of all companies are regularly using new AI tools to produce goods or services. As a result, they see only limited effects at the moment. 'When I look at the impact that AI has had on the overall labor market data so far, it looks pretty small to me,' Joseph Briggs, head of the global economics team at Goldman Sachs Research, said on a recent company podcast. Even for recent college grads, who have seen unemployment rates tick higher, 'the anecdotes and the relationship that the anecdotes have to AI is often a little bit overstated,' Briggs said. JP Morgan analysts came to a similar conclusion, finding that, for now, its research 'failed to find a significant impact on job growth.' But they cautioned that this could change at the next economic downturn. For white-collar workers, 'we think that during the course of the next recession the speed and the breadth of the adoption of the AI tools and applications in the workplace might induce large scale displacement for occupations,' they said in a recent note to clients. Others remain more optimistic about the potential for new opportunities to overcome any negative effects. That's how Nvidia co-founder and CEO Jensen Huang sees it. As the head of an AI giant, he may also have reason to hype its potential — but his outlook is notably rosier than Anthropic's Amodei's. Huang told Axios last month that the technology would ultimately lead to more jobs, even if there are some redundancies elsewhere. 'Everyone's jobs will change,' he said. 'Some jobs will be unnecessary. Some people will lose jobs. But many new jobs will be created. ... The world will be more productive.'
The Hill
3 days ago
- Business
- The Hill
Trade war will push prices 1.8 percent higher in short term: Analysis
President Trump's tariff war could push prices 1.8 percent higher in the short term, potentially costing the average American household about $2,400, according to a new analysis from The Budget Lab at Yale. The nonpartisan think tank found that consumers faced an overall effective tariff rate of 18.6 percent, the highest in nearly a century. Adjusting for changes in consumer preference due to the tariffs, the Budget Lab estimated that the overall effective tariff rate would be 17.7 percent, still the highest since 1934. The Budget Lab's price analyses assume that the cost of the duties will be entirely passed onto consumers, and do not take into account any reaction the Federal Reserve could have to tariffs. The new tariffs include a 50 percent levy on India. Laos, Switzerland and Iraq are also facing blanket tariff rates of 35 percent or higher. The Budget Lab projected that low-income households would feel the costs of the tariffs more than their high-income counterparts. In the short run, the tariffs will primarily impact leather products like shoes and bags, textiles and other clothing items, the lab estimated. In the long run, automobile prices could rise nearly 10 percent, the equivalent of about $4,500 added onto the price tag of a new car in 2024. Groceries could be impacted to a lesser extent. The Budget Lab projected that food prices would rise 3.2 percent in the short term before stabilizing at 2.9 percent higher in the long run.
NDTV
4 days ago
- Business
- NDTV
What Trump's New Tariffs Could Mean For US Consumers
American businesses and consumers soon will have a better idea of how President Donald Trump's foreign trade agenda might affect them now that the United States has imposed higher tariffs on products from dozens of countries. It's been nearly 100 years since the nation had an overall import tax rate as high as the one set Thursday. But the individual impact on business costs and consumer prices could vary as much as the tariffs applied to goods of nearly 70 US trading partners, from complicated economies like the European Union to the small African nation of Lesotho. Exports from a majority of them are getting taxed at 15%. For a handful of countries in Asia, the rate is 19%. Products from the rest are subject to taxes of 20% to 50%. Meanwhile, a 55% tariff on Chinese-made goods is scheduled to take effect next week if a US-China trade deal is not agreed on before then. Businesses in the US and abroad have been dealing in various ways since February with Trump's fluctuating tariffs on specific products and countries. Many automakers appeared to have absorbed the costs for now. But recent government data indicated that retail prices for groceries, furniture and appliances started creeping up in June. Because tariffs are a tax on imports, economists have expected US consumers to foot at least part of the bill eventually. The country-specific round enforced Thursday, together with the president's earlier tariffs on specific sectors such as automobiles and steel, will increase prices 1.8% in the short term, the Budget Lab at Yale estimated. That's the equivalent of a $2,400 loss of income per US household, according to the non-partisan policy research center The projections were based on an analysis of duties implemented this year through Wednesday, as well as a doubling of the levy on items made in India that Trump said would be implemented near the end of August. "Retailers have been able to hold the line on pricing so far, but the new increased tariffs will significantly raise costs for US retailers, manufacturers and consumers," Jon Gold, vice president of supply chain and customs policy at the National Retail Federation trade group, said in an emailed statement to The Associated Press. Here's what to know about the tariffs and where US consumers are most likely to notice effects: Trump unveiled sweeping import taxes on goods coming into the US from 66 countries, the European Union, Taiwan and the Falkland Islands in April. He said the "reciprocal" tariffs were meant to boost domestic manufacturing and restore fairness to global trade. The president paused the country-specific tariffs a week later but applied a 10% tax to most imports. In early July, he began notifying countries that their exports would be subject to higher tariffs on August 1 unless they reached trade deals. A week ago, he pushed the start date to Thursday. In the meantime, Trump announced a 35% tariff on imports from Canada, but delayed action on Mexico while negotiations continued. However, a free trade agreement reached with Mexico and Canada during Trump's first term shields most of those countries' products from punishing duties. The president also ordered a 50% tariff on goods from Brazil. This week, he signed an executive order to take India's tariff rate from 25% to 50% for its purchases of Russian oil. The timing gives India and Russia a chance to negotiate with the Trump administration. Other duties not specific to countries remain in place, such as a 50% tariff on imported aluminum and steel announced in June. Trump also threatened 100% tariffs on computer chips that aren't made in the US. The administration has said tariffs are still coming on imported pharmaceutical drugs. The US Commerce Department reported on July 31 that prices rose 2.6% in June, up from an annual pace of 2.4% in May. Earlier in July, the government reported that its primary inflation measure, the Consumer Price Index, also ticked higher in June as the cost of furniture, toys and other frequently imported items increased. Shoppers should be prepared to pay more for clothes and shoes because the combined tariffs "disproportionately affect clothing and textiles," according to the Budget Lab at Yale. It estimates that shoe prices will go up 39% temporarily and stay 19% above where they are now. For apparel, the Budget Lab put the comparable figures at 37% and 18%. Overall, Americans face an average tax of 18.6% for imported products, the highest rate since 1933, the research center said. The tariffs will almost certainly result in higher food prices, according to an analysis by the nonpartisan Tax Foundation. The US simply doesn't make enough of some products, like bananas or coffee, to satisfy demand. Fish, beer and liquor are also likely to get more expensive, the foundation said. The US Wine Trade Alliance and other alcohol industry trade groups sent a letter to Trump that warned a 15% tariff on European wines and spirits could result in more than 25,000 American job losses and cost the industry nearly $2 billion in lost sales. "Mr. President, we need toasts, not tariffs, as we head into the most important season for our industry," read the letter dated Wednesday. Wine distributors and retailers avoided price increases before now by accelerating shipments from France and other EU countries earlier in the year. But with the EU's tariff rate raised to 15% on Thursday, customers may see European wines costing 30% more in September, U.S. Wine Trade Alliance President Ben Aneff said. Some automakers already raised prices to counteract tariffs. Luxury sports car maker Ferrari said last week it was waiting for more details of Trump's trade deal with the EU before scaling back a 10% surcharge it put on most vehicles in the US. For the most part, automakers waited for details instead of passing on tariff costs to consumers. But that could change. General Motors said on July 22 that the impact of the tariffs could get more pronounced in the third quarter of the year. GM has estimated the tariffs will cost it $4 billion to $5 billion this year. Toyota reported Thursday a 37% drop in profits in the April-June quarter, cutting its full-year earnings forecasts largely because of Trump's tariffs. Even with so many new tariffs kicking in, the tariff situation remains fluid. Trump's use of an emergency powers law to implement tariffs is being challenged in the courts. The case is expected to wind up before the US Supreme Court. Moreover, the tariffs on goods from China haven't been finalised. Consumers may start seeing more effects when the administration ends a tax exemption for small parcels sent from other countries. Trump last week signed an order to suspend the "de minimis" exemption that has allowed shipments valued at $800 or less to enter the US duty-free. International e-commerce companies have widely used the rule to avoid paying customs charges. Trump withdrew the exemption in early April for goods shipped from China and Hong Kong tariff-free. It is now set to be eliminated for low-value packages from every country on August 29.
National Observer
4 days ago
- Business
- National Observer
Carney vows to build Canadian economy as Trump slaps other nations with increased tariffs
Prime Minister Mark Carney said Thursday Canadians are focused on building up their economy after U.S. President Donald Trump again hit nations around the world with increased tariffs — days after slapping Canada with a higher duty. Carney said there is a lot to do in Canada and his government is focused on "what we can control." "Yes, we are having discussions with Americans, but Canadians want us to focus here at home," the prime minister told reporters in Ottawa. Trump escalated his trade war last week by hitting Canada with a baseline 35 per cent tariff that applies only to goods not covered by the Canada-United States-Mexico Agreement on trade, better known as CUSMA. Just after midnight on Thursday, U.S. tariffs on goods from more than 60 other nations and the European Union were increased. The duties range from a low of 10 per cent to 50 per cent for Brazil. "BILLIONS OF DOLLARS IN TARIFFS ARE NOW FLOWING INTO THE UNITED STATES OF AMERICA!" Trump posted on social media just after the duties took effect. The EU, Japan and South Korea — which have brokered trade agreement frameworks with the Trump administration — saw U.S. tariffs increase to 15 per cent. Bangladesh and Vietnam were hit with 20 per cent duties. Switzerland saw its tariff increase to 39 per cent. Prime Minister Mark Carney said Thursday Canadians are focused on building up their economy after U.S. President Donald Trump again hit nations around the world with increased tariffs — days after slapping Canada with a higher duty. Nations are also being hit with Trump's separate tariffs on steel, aluminum, copper and automobiles. American tariffs are now at a level not seen in the U.S. in almost a century. The Budget Lab at Yale, a non-partisan policy research centre, has said Americans will see an average tax of 18.3 per cent on imported products, the highest rate since 1934. Ontario Premier Doug Ford told media outlet CNN on Wednesday that "a tariff on Canada is a tax on the American people." "This is hurting the American people," Ford said, adding that Canada and other countries are "diversifying our trade." When asked how Canadians view Trump, Ford said he's "probably the most disliked politician in the world in Canada because he's attacked his closest family member, and that's the way we look on it." "And when I talk to the governors, senators and congresspeople, even Republicans totally disagree, but they're too scared to come out and say anything because the president will go after them," he added. Signs are emerging that Trump's tariffs are starting to drag down the American economy. After the release of a bleak jobs report last week, Trump fired the head of the agency that produces the monthly figures. The U.S. Commerce Department said inflation was ticking slightly upward in June. The greatest hurdle facing Trump's ongoing efforts to realign global trade may be the courts. Last week, Trump's use of a national security statute for the so-called "Liberation Day" duties and fentanyl-related tariffs faced tough questions from federal appellate judges in the U.S. Court of Appeals for the Federal Circuit. The judges asked the Trump administration's lawyer about the president's use of the International Economic Emergency Powers Act of 1977 to impose duties — despite the fact that the word "tariff" is found nowhere in the statute. No decision was issued from the bench last week but the pending ruling was clearly weighing on the president just before his global tariffs came into place. "THE ONLY THING THAT CAN STOP AMERICA'S GREATNESS WOULD BE A RADICAL LEFT COURT THAT WANTS TO SEE OUR COUNTRY FAIL!" Trump posted on social media just before midnight. Conservative Leader Pierre Poilievre said Thursday that Canada should maintain targeted tariffs to pressure the Americans to "restore a true free-trading relationship." "We need to narrowly target our counter-tariffs at things that maximize the impact on the Americans while minimizing impact on Canadians," he told a press conference in Calgary. Carney told reporters earlier this week that he might lift some counter-tariffs if that helps Canada in the ongoing trade dispute. The Liberal government's approach has divided the premiers. Ford has said Ottawa should hit back hard with counter-tariffs, while Saskatchewan Premier Scott Moe has called for easing retaliatory measures. Poilievre slammed Carney for failing to get a deal by Trump's Aug. 1 deadline. "He has made concession after concession to President Trump. He's been bending over backwards for the president and so far has gotten nothing in return," he said. The Conservative leader pledged to introduce a bill in Parliament this fall to repeal a list of laws he said are blocking production and development. Poilievre will first have to win a seat in the House of Commons in an Aug. 18 byelection.
