Tariffs are playing havoc with economic behaviors & data, triggering the mother of all front-running cycles.
- Imports soared in the first quarter, as companies scrambled to get ahead of tariffs, which when combined with weak exports, caused the largest jump..
- Imports soared in the first quarter, as companies scrambled to get ahead of tariffs, which when combined with weak exports, caused the largest jump..
..in the trade deficit on record.
In April, we saw a massive pull-back and plunge in the trade deficit - largest on record.
BUT, pause in most prohibitive of tariffs on China triggered another scramble to get goods into the country.
Much like the pandemic…
In April, we saw a massive pull-back and plunge in the trade deficit - largest on record.
BUT, pause in most prohibitive of tariffs on China triggered another scramble to get goods into the country.
Much like the pandemic…
The pause disrupted shipping and triggered a surge in shipping costs as ships were redeployed to get goods from China back on the water and in the door prior to the risk of another surge in tariffs.
Those shifts boosted some survey data on manufacturing & orders
Those shifts boosted some survey data on manufacturing & orders
in May and June, but gains will be short-lived.
The disruptions to supply chains are similar but not as bad as the pandemic, while consumer have less cushion to blunt blow of higher prices.
The disruptions to supply chains are similar but not as bad as the pandemic, while consumer have less cushion to blunt blow of higher prices.
Even if tariffs do not go up from here - more are in the pipeline - the on again off again front running borrows from growth in the second half.
The challenge is that those shifts will be occurring, even as the cumulative effects of earlier curbs on federal employment & grant freezes hit the ecosystems of some of economies across the country.
The @AtlantaFed has estimated that the collateral damage…
The @AtlantaFed has estimated that the collateral damage…
..of federal employment cuts could top 1.2M total jobs due to spillover effects. That is prior to grant freezes and contract cancellations.
Historically, hospitals & research universities were the largest employers in a community. Reversing course on those gains…
Historically, hospitals & research universities were the largest employers in a community. Reversing course on those gains…
..has consequences for all in the community, not just scientists.
That is prior to the unique role that government & university research has played in spurring innovation and breakthroughs that save lives. I am a beneficiary of those breakthroughs surviving cancer.
That is prior to the unique role that government & university research has played in spurring innovation and breakthroughs that save lives. I am a beneficiary of those breakthroughs surviving cancer.
Hard not to enter the second half with headwinds.
The deficit financed tax & spending package will initially stimulate the economy, but at a price.
We have given up thinking about deficits, which makes buyers of our debt more skittish about lending long to us than in the past
The deficit financed tax & spending package will initially stimulate the economy, but at a price.
We have given up thinking about deficits, which makes buyers of our debt more skittish about lending long to us than in the past
That is hard as it could create a floor under Treasury bond yields - the compensation needed for investors to lend us long.
We still see the economy averting a recession but growth is below potential and that will nudge the unemployment rate higher.
We still see the economy averting a recession but growth is below potential and that will nudge the unemployment rate higher.
It just doesn’t rise fast enough for to be considered an “official” recession
2026 looks better as long as the Fed can begin rate cuts to provide an additional lift to activity.
That said, if it walks like a 🦆& quacks like a 🦆, it’s a 🦆.
Could be bumpy second half 2025
2026 looks better as long as the Fed can begin rate cuts to provide an additional lift to activity.
That said, if it walks like a 🦆& quacks like a 🦆, it’s a 🦆.
Could be bumpy second half 2025
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