It’s a Buyer’s Market: America Has 44% More Home Sellers Than Buyers—a Near-Record Gap

There were an estimated 44% more home sellers than buyers in the U.S. housing market in January (or 600,314 more, in numerical terms), according to a new report from Redfin, the real estate brokerage powered by Rocket. That’s up from 30% more a year earlier and represents the second largest gap in records dating back to 2013. The largest gap was in December 2025, when sellers outnumbered buyers by 45%.

Redfin defines a market with over 10% more sellers than buyers as a buyer’s market. By this definition, it has been a buyer’s market since May 2024. (…)

The number of homebuyers in the market fell 1% month over month and 8% year over year in January to an estimated 1.36 million—the lowest level on record.

The number of sellers in the market fell 1% month over month to an estimated 1.96 million. That’s the largest decline since June 2023 and the lowest level since February 2025. On a year-over-year basis, the number of sellers rose 2%.

Homebuyers are backing off due to stubbornly high home prices and mortgage rates, layoffs, and mounting economic and political uncertainty. Winter storms also swept much of the U.S. in January, which may have dampened sales. Sellers, many of whom are buyers themselves, are backing off in response to lackluster demand for their homes. Some sellers are delisting after watching their homes sit on the market for months with zero bites from buyers, while others are choosing not to list at all after seeing nearby homes sell for below the asking price.

Trump Considers New National Security Tariffs After Supreme Court Ruling New levies on a half-dozen industries would be issued separately from a new global 15% levy

The Trump administration is considering new national security tariffs on a half-dozen industries in the wake of a Supreme Court decision last week that invalidated many of the president’s second-term levies.

The new tariffs being considered could cover industries such as large-scale batteries, cast iron and iron fittings, plastic piping, industrial chemicals and power grid and telecom equipment, according to people familiar with the plans. They would be issued under Section 232 of the Trade Expansion Act of 1962, which gives the president broad powers to impose tariffs based on national security risks.

The new Section 232 tariffs would be issued separately from other levies that President Trump has already announced since the Supreme Court threw out many of his tariffs on Friday morning. Those announced include a new 15% tariff that Trump can keep in place for five months, and a number of levies planned for after that period, which would be issued under another legal authority, Section 301 of the Trade Act.

Products tariffed under Section 232 have so far been exempted from Trump’s other second-term levies. Trump has already used Section 232 to issue tariffs on sectors such as steel, aluminum, copper, cars, trucks and auto parts during his second term, and those levies aren’t affected by the Supreme Court decision last week. (…)

Section 232 requires lengthy investigations before levies can be imposed, but once in place can be altered by the president unilaterally. (…)

Trump has expanded the scope of many of those tariffs, covering not only raw materials such as steel, aluminum and copper, but consumer products made with them as well. And he has largely refused to offer exemptions to the tariffs, outside of limited relief for U.S. automakers.

In addition to the newly planned investigations, Trump’s team was already considering tariffs on nine other industries—including semiconductors, pharmaceuticals, drones, industrial robots and polysilicon used in solar panels—under existing Section 232 probes. Many of those investigations were opened nearly a year ago, and the administration could accelerate work on some in response to the Supreme Court ruling last week.

The administration is also still moving forward on plans to revamp some of the existing national security tariffs on steel and aluminum, the people said. Those changes will likely lower the nominal tariff on many goods, but would also apply tariffs to the product’s full value, rather than only the value of steel or aluminum in the product. That could mean that many companies end up being charged higher tariff payments in the end. (…)

The WSJ Editorial Board:

• The Unending Trump Tariff Mess

(…) The larger reality is that Mr. Trump is so bull-headed about tariffs that he’s going to re-impose them any way he can. Along with Section 122, he’ll fire up more Section 201, 301 and 232 (national security) studies and tariffs. But as our friend Don Luskin points out, these are pea shooters compared to the IEEPA tariffs the Court struck down. They are limited in scope and duration.

That isn’t to say they won’t do harm. They’ll create more uncertainty for business, at least for a while. And with the midterm elections coming soon, this timing is fraught for Republicans. Amid an “affordability” panic, Mr. Trump says he is going to impose more border taxes on enough imports to make up for his lost emergency tariffs. Democrats must be thrilled at their dumb luck.

Friday’s Supreme Court ruling should be a $150 billion tax cut as businesses apply for refunds from illegal tariffs. In its statements to the Court, Trump lawyers said the refund process would be a legal breeze. But now the Administration is suggesting it will fight refund requests in court. This is a political bait and switch, and it also delays refunds that could go to more productive economic uses.

• FedEx Files Lawsuit Against U.S. Seeking Refund of Tariffs

(…) FedEx joins a roster of other companies that have filed similar lawsuits against the Trump administration, including Costco, Revlon Consumer Products, Bumble Bee Foods and Kawasaki Motors Manufacturing.

FedEx, which has a customs brokerage business, collected tariffs from U.S. companies that were importing goods. It was also at times tasked with collecting the tariff directly from U.S. consumers who were receiving packages shipped from overseas. If the duties are refunded to FedEx, they could then be returned to those who paid them. (…)

Who said tariffs were paid by foreigners?

China Hits Japanese Firms With Export Bans Move marks another escalation in economic campaign against Japan over prime minister’s Taiwan comment

China banned the export of critical minerals and other goods with potential military uses to several major Japanese companies, further escalating its pressure campaign against Tokyo over remarks Prime Minister Sanae Takaichi made about Taiwan.

The new measures, announced by China’s Commerce Ministry Tuesday, show Beijing isn’t backing down in its dispute with Japan, even after Takaichi won a resounding victory in a recent parliamentary election.

The ministry said 20 Japanese companies have been added to an export control list that prohibits Chinese firms from selling them dual-use items that could have military applications. Prohibited items include rare earths used in motors and magnets, machine tools, batteries and chip-making equipment.

Another 20 companies have been added to a watchlist that means they can only receive dual-use items if they satisfy Chinese authorities that they won’t be used in equipment sold to the Japanese military, known as the Self-Defense Forces. (…)

Many of the companies subject to export bans are defense-related subsidiaries of major Japanese industrial firms, including Mitsubishi Heavy Industries, IHI and NEC. (…)

Shares in carmaker Subaru, which was added to the watchlist, closed down 3.5%. The company has an aerospace unit that supplies the Japanese military. (…)

Takaichi angered Beijing in November when she said Japan could get sucked into any conflict over Taiwan, a self-ruled island democracy that Beijing views as part of China’s territory and an internal matter. Beijing has vowed to absorb Taiwan by force if necessary.

Takaichi declined to retract her remark, with officials saying it reflected longstanding Japanese policy. Under its largely pacifist postwar constitution, Japan can exercise its right of self-defense if its own territory is attacked and under a 2015 law can come to the defense of U.S. forces in certain scenarios. (…)

BTW:

Viral Doomsday Report Lays Bare Wall Street’s Deep Anxiety About AI Future Citrini Research’s thought experiment rattles investors already wary of tech disruptions

(…) A viral report by Citrini Research tapped into a new strain of fears about AI, painting a dark portrait of a future in which technological change inspires a race to the bottom in white-collar knowledge work. Concerns of hyperscalers overspending are out. Worries of software-industry disruption don’t go far enough. The “global intelligence crisis” is about to hit.

The new, broader question: What if AI is so bullish for the economy that it is actually bearish?  (…)

Here’s Citrini’s essay.

THE 2028 GLOBAL INTELLIGENCE CRISIS A Thought Exercise in Financial History, from the Future

From a Bloomberg interview with one of the report authors:

Drawing a lesson from China, Shah said automation there has “rolled through the economy in a big way.” Companies aren’t creating jobs at the pace needed as the average firm can do far more with fewer workers — and increasingly choose not to hire. That weakens consumer demand and weighs on the economy, a scenario he sees as possible for the US over the next two years.

Using China as a model is dangerous. Everything is different there, including its 4 year-old real estate depression.

The FT’s Robert Armstrong:

(…) It feels like financial commentary that considers only one side of a trade (“stocks went down as sellers outnumbered buyers”, etc). Citrini pictures a world of massively increasing productivity accompanied by a collapse in consumption. Does that make sense?

Joseph Steinberg, an economist at the University of Toronto, helped me flesh out my intuition that something is amiss. “The first part of the argument I hope my economics students would flag is the bit about ‘ghost GDP’,” he told me. What does it mean for output to “show up in the national accounts but never circulate through in the real economy”?

If GDP is rising — all those robots out there making stuff, faster and faster — then something on the other side of the national account identity has to be rising, too. The possibilities are consumption, investment, government spending or net exports. In the Citrini scenario, consumption is falling, fast. So is government spending rising (on the basis of taxing or borrowing from who, exactly)? Or exports — to other countries undergoing the same crisis? (…)

It seems to me there has to be a distributional element to the argument that Citrini does not fully flesh out. Income and consumption rises, but this happens somewhere that doesn’t benefit your average US white-collar worker. Maybe it is all in the “economies that were purely convex to this trend, like Taiwan and Korea”. (…)

What I am claiming is that the Citrini account of the risks seems incoherent (perhaps readers with a better grasp of macroeconomics can make better sense of it?). The post went viral not because it elucidates the present situation, but because it speaks to ancient fears.

Did you miss Fear the Fear?

• The State of the Union for Small Business Is Dismal

(…) Small businesses, which have fewer than 500 employees and account for almost half of private sector payrolls, are suffering record bankruptcies and “still waiting for noticeable economic growth” as US gross domestic product continues to climb, the Republican-leaning National Federation of Independent Business reported last month.

The agricultural economy is sliding, with barely half of all farms forecasted to be profitable after Trump’s “Liberation Day” tariffs and war on immigrants, who account for almost 75% of all crop labor. (…)

The chaos caused by the tariffs, whose costs are borne by domestic companies and consumers – research the Federal Reserve Bank of New York and others show — pressured businesses with fewer than 50 employees to cut 120,000 jobs in November alone, the largest for any month since May 2020, according to the ADP National Employment Report. S&P Global Market Intelligence found at least 717 companies that filed for bankruptcy in 2025 through November, the most since 2010, the Washington Post reported.

“We’re heading into our most critical season not with optimism but with fear,” Gabe Hagen, the owner of Brick Road Community Corp., a coffee roaster in Tempe, Arizona, facing rising import costs and, more recently, cautious consumers, was quoted as saying in a December Bloomberg News report. “Fear that our customers can’t afford to spend, fear that policy failures are crushing our ability to compete and fear that we won’t survive another year of this economic squeeze.” (…)

“You see small manufacturers, family businesses, the farming community — they’re just scraping by,” Gene Seroka, executive director of the Port of Los Angeles, the largest gateway for international trade in America, said during an interview at Bloomberg headquarters in New York earlier this month. “Importers are dipping into cash to try to pay elevated product costs because of the tariffs and folks are making tough decisions.” (…)

Apollo Management:

Binance Fired Staff Who Flagged $1 Billion Moving to Sanctioned Iran Entities

Weeks after President Trump granted a pardon to convicted Binance founder Changpeng Zhao in October, executives at the crypto exchange dismantled a staff investigation into $1 billion that had recently moved through Binance to a network funding Iran-backed terror groups, according to company documents and people familiar with Binance’s operations.

A trading account belonging to a close Binance business partner was identified as a primary channel that moved cryptocurrency to the Iranian network.

Binance subsequently fired the investigators who had uncovered the transfers—and the network remained active. (…)

The episode echoed some of the same concerns that drew U.S. scrutiny in 2023, when prosecutors secured a plea deal with the world’s largest crypto exchange and a prison sentence for Zhao. Binance admitted to breaking sanctions and anti-money-laundering laws—violations that turned it into a money-laundering hub for criminals, terrorists and Iranian-sanction evaders.

The exchange paid a record $4.3 billion fine and pledged reform under U.S. oversight, including by expanding investigative staff to block illicit money. (…)

After Trump returned to office last year, Binance lobbied for Zhao’s pardon and pushed to remove U.S. monitors appointed as part of the plea agreement. It also took steps to boost the Trump family’s crypto business, World Liberty Financial, by providing crucial backing to its main product, a stablecoin whose market capitalization has surpassed $5 billion. After issuing the pardon, Trump said he had been told Zhao wasn’t “guilty of anything.”

Documents, foreign law-enforcement officials and the people familiar with Binance’s operations said the same conduct that broke the sanctions and anti-money-laundering laws has persisted at the exchange. And the law-enforcement officials said that, over the past year, Binance has started cooperating far less with their requests to obtain financial information about its hundreds of millions of users, such as by declining to provide customer details without a court order, or insisting requests are submitted via formal channels that can take months.

Internal reports submitted by Binance’s financial-crime investigations team connected accounts registered to Chinese clients to digital wallets that U.S. and Israeli authorities said were used by Iran to finance its proxies. In total, $1.7 billion flowed over 2024 and 2025 from the accounts, which funded Iran-backed groups including Yemen’s Houthi militants. The investigations team was composed of experts in sanctions and counterterrorist financing, many put in place as part of Binance’s pledges to reform. (…)

Investigators shared their findings with Binance’s leadership, including Chief Executive Richard Teng and Chief Compliance Officer Noah Perlman, in October. The next month, Binance suspended the investigators and later fired them.

In February 2025, Trump ordered a campaign of “maximum pressure” to deny Iran and its proxies access to cash, which violates sanctions levied over decades for its nuclear program, terrorism financing and other issues. Iran-backed militia groups have carried out attacks on American forces in Iraq and Syria, and Tehran supports multiple U.S.-designated terrorist groups such as Hezbollah in Lebanon. (…)

At Binance, investigators last year also uncovered 2,000 accounts that had been accessed from Iran using software that masks users’ locations. The investigators recommended asking users for additional information, according to documents. Teng, the CEO, rejected that plan, the documents said.

Binance’s leaders also declined to take action after its intelligence team found sailors of the Russian shadow fleet—ships used to transport sanctioned cargo, including oil from Russia, Iran and elsewhere—were being paid salaries through Binance accounts, according to documents.

Binance said it was confident it complied with legal and reporting obligations and didn’t knowingly permit sanctionable activity. The spokeswoman said the investigation didn’t establish that any Binance user transacted directly with a sanctioned entity, instead transmitting funds over several steps. She also said Teng didn’t reject a proposal to request more information from users, and added that Binance cooperates with law enforcement and regulators. (…)

It goes on and on, but never mind, Trump said he has been told Zhao wasn’t “guilty of anything”.

US sues Coca-Cola bottler for all-female casino networking event Equal Employment Opportunity Commission says men would have attended had they been invited

A US agency sued a Coca-Cola bottling company for discrimination over a networking event it held for female employees at a casino resort, as the Trump administration cracks down on corporate diversity initiatives.  The Equal Employment Opportunity Commission said the company had violated civil rights laws by not inviting male employees to the 2024 getaway in Connecticut, which it said included “a social reception, team-building exercises and recreational activities”. 

The case is a sign of the change in focus at the agency, which was set up at the height of the US civil rights movement during the 1960s to stop discrimination. In December its chair Andrea Lucas posted a video on social media in which she encouraged white men to file claims if they believed they had suffered sex or race discrimination. (…)

The EEOC said in its lawsuit that the company, Coca-Cola Beverages Northeast, “excused female employees who attended the event from their normal work duties . . . and paid them their normal salary or wages”. Male employees “would have attended . . . had they been invited”, it said. About 250 female employees attended the event at the Mohegan Sun resort, which included an overnight hotel stay and welcome reception for those who had to travel to be there.

The EEOC asked for a jury trial and said the company should pay compensation and punitive damages to male employees for its “malicious and/or reckless indifference”.

The case was initiated by a male production employee at the company’s Londonderry, New Hampshire facility. (…)

Such a finding often leads to a conciliation process and a settlement. The decision to escalate it to a lawsuit, a move the EEOC typically makes in only a small proportion of cases, was taken under the Trump administration. (…)

The Coca-Cola bottling company case “seems like a very minor case for the United States government given that they bring very few cases any given year,” said Michael Selmi, a professor specialising in discrimination law at Arizona State University.  “I think this case is meant as a signal that the EEOC is going after DEI and will do so on behalf of white men.”

The agency said this month that it was seeking information from Nike about allegations that it discriminated against white workers, including through its diversity programmes. (…)

FLASH PMIs

USA: Flash PMI indicates slowest business growth for ten months inFebruary

At 52.3 in February, down from 53.0 in January, the headline S&P Global Flash US PMI Composite Output Index signaled ongoing, but moderating, growth of business activity midway through the first quarter of 2026. Output has now grown continually for 37 months, but February’s rise was the weakest recorded since last April.

Growth slowed to modest rates across both manufacturing and services, down to seven- and ten-month lows respectively.

New orders growth likewise cooled, with factories reporting a slight drop in orders for the second time in the past three months while service providers reported a weakened, but sustained, inflow of new work. Both sectors reported falling export orders, which collectively fell at one of the steepest rates seen over the past year.

Companies cited high prices, stretched affordability, tariffs, and subdued confidence among customers as key drags on sales, though adverse weather was often noted as an additional factor disrupting business across both manufacturing and services during the month.

Sluggish sales growth and concerns over rising costs led to a further month of very modest employment growth, albeit with some companies also reporting difficulties finding staff. Payrolls rose only marginally for a third successive month and at the weakest rate since last April. Hiring slowed to marginal rates in both manufacturing and services.

Capacity constraints, combined with weather disruptions meanwhile caused backlogs of work to accumulate in the service sector at a rate not seen since May 2022, but backlogs fell in manufacturing as production often exceeded inflows of new work.

Supplier lead times into factories lengthened in February to a degree not reported since October 2022, when the pandemic disrupted supply chains. February saw deliveries delayed due to bad weather, but companies also reported congestion in supply lines and delays from abroad, in part linked to tariff policy. Inventories of inputs consequently fell in February to the greatest extent since January 2025.

Average prices charged for goods and services increased in February at the steepest rate since last August, rising at an elevated rate well above the survey’s long-run average. Although selling price inflation moderated in the manufacturing sector to a 14-month low, attributed to increased discounting to stimulate sales, services inflation jumped to a seven-month high, registering one of the strongest rates of increase recorded over the past three-and-a-half years.

Higher prices were widely linked to the need to pass through increased supplier charges, in turn often associated with tariffs, as well as rising labor costs. Measured across goods and services, input cost inflation ticked higher and remained elevated above long-run levels in both sectors, albeit below some of the peaks seen last year.

Companies’ expectations for output in the year ahead improved markedly in February, rising to a 13-month high. Greater optimism was seen in both manufacturing and services. Companies were hoping that better weather will help drive better sales after February saw many businesses hampered by extreme cold. Survey respondents also cited expectations of improving economic conditions based on supportive financial conditions, including lower interest rates and government policies such as tax breaks, as well as more aggressive marketing and investment in business expansion.

Despite February’s improvement, future sentiment was fractionally below its long run average, reflecting concerns among many businesses regarding the adverse impact of policies such as tariffs and the broader uncertain political environment.

The PMI data so far this year are indicative of GDP rising at an annualized rate of just 1.5%, signaling a marked cooling of the economy in the first quarter compared to the robust growth rates seen in the second half of last year.

S&P Global’s 1.5% GDP growth rate for Q1 is below Goldman Sachs’ which sees +3.4% after incorporating a 1.3pp contribution from the end of the government shutdown in 2025Q4 (which S&P did not do). GS forecasts “2.5% GDP growth for 2026 Q4/Q4, a 0.3pp acceleration from 2025 Q4/Q4 that partly reflects the fading drag from tariffs giving way to a boost from tax cuts.”

KKR modestly upgraded their 2026e US GDP forecast to +2.5% from +2.3%, reflecting the ongoing strength we are seeing across techrelated capex and consumer services spending.

The more important signals we draw from this report are the fundamental momentum we are seeing in tech capex and consumer services spending.

Tech-related capex grew at a blistering 19% annualized rate in 4Q25, contributing 1.1 percentage points to growth in the quarter (i.e., fully 78% of 1.4% net growth). Growth was robust across major categories including tech equipment spending (+36% SAAR), data center construction (+18% SAAR), and software investment (+7% SAAR).

Software spending looks even stronger on a y/y basis at +14%, which is near the highest rate we have seen in the past 10+ years – an interesting counterpoint to consider amid the current market volatility for the sector.

Capex trends look increasingly ‘K-Shaped’ across tech vs. non-tech spending. As mentioned, techrelated capex grew near 20% y/y, while non-tech capex contracted by 4%. This dynamic contributes to the broader “K-shaped” patterns we are seeing including high vs. medium/low-income households and mega-cap vs. smaller companies.

In aggregate, consumer spending remains robust, particularly on the services side. Real personal consumption spending grew +2.4% annualized in 4Q25, which we consider particularly resilient for a quarter with essentially zero employment growth.

Services spending was particularly robust at +3.4%, while goods spending was stagnant at -0.1%. We expect the consumer backdrop to remain healthy in 1H26, amidst OBBA-related tax rebates.

Eurozone business activity rises at fastest pace in three months

(…) Faster increases in activity were recorded across both the manufacturing and services sectors in February. The more notable acceleration in growth was in the manufacturing sector. Here, the rise in production was the sharpest since August 2025, outpacing the expansion in services activity for the first time since that month. Highlighting the improvement in the manufacturing sector during February, the headline PMI rose to a 44-month high of 50.8, posting above the 50.0 no-change mark for the first time in six months.

Back at the composite level, Germany posted a solid increase in business activity that was the fastest in four months, while France registered broadly no change in output since January. The rest of the eurozone continued to see output increase, albeit at the slowest pace since June 2025.

While the expansion in euro area business activity picked up in February, the rate of new order growth was unchanged from the start of the year, remaining marginal. Manufacturing new orders increased for the first time in six months, and at the fastest pace in almost four years, but services new business growth slowed. New business from abroad (which includes intra-eurozone trade) fell again, with the pace of reduction broadly in line with that seen in January. (…)

Input costs increased sharply in February. The pace of inflation quickened again to reach the joint-fastest in 34 months, equal with that seen in February 2025. The acceleration in the overall rate of increase was driven by manufacturers, where input costs rose at the fastest pace since December 2022. Meanwhile, services input prices increased at a slightly slower pace than seen in January.

While the pace of input cost inflation quickened in February, firms raised their selling prices at a slightly softer pace. Nonetheless, the latest increase in charges was still solid and the second-fastest in the past year. In line with the picture for input costs, a faster rise in manufacturing selling prices contrasted with a slower pace of inflation in the services sector. Charges were up solidly in Germany, but French firms lowered their output prices for the first time in three months. The rest of the eurozone posted an accelerated rise in charges.

Japan: Private sector activity in Japan expands at steepest pace since May 2023

(…) A solid and accelerated rise in composite new business was also observed in February. In line with the trend for business activity, the rate of growth was the quickest since May 2023. While new orders expanded at the fastest rate in 22 months at service providers, manufacturers recorded the steepest increase in sales since the start of 2022, with businesses often noting firmer underlying demand conditions and the positive impact of new product releases.

Japanese companies also signalled stronger overseas demand, with composite new export orders expanding at the fastest rate in eight years, largely driven by a further rebound in demand for goods.

US GDP Grows 1.4%, Missing Forecasts on Shutdown, Trade

Inflation-adjusted gross domestic product increased an annualized 1.4% in the fourth quarter after rising 4.4% in the prior period, according to the government’s initial estimate out Friday. Overall, the economy expanded 2.2% last year, data from the Bureau of Economic Analysis showed.

The weak quarterly result — which was below all forecasts in a Bloomberg survey of economists — came as the US government was shut down for almost half of the three-month period. The BEA said the reduction in federal services during the shutdown subtracted about 1 percentage point from GDP, though the full impact couldn’t be estimated. (…)

“Strip out the shutdown drag and growth looks closer to 2.5%, with the US consumer still carrying the load and AI-linked investment doing real work,” Olu Sonola, head of US economics at Fitch Ratings, said in a note. (…)

Separate monthly BEA data out Friday showed the Fed’s preferred measure of underlying inflation — known as the core personal consumption expenditures price index — rose 0.4% in December, the most in nearly a year. On an annual basis, the core PCE, which excludes food and energy, climbed 3%, compared to 2.8% at the start of 2025. (…)

Consumer spending, which comprises the largest share of economic activity, decelerated to a 2.4% pace from 3.5% in the prior period. The slowdown was mostly due to less spending on durable goods like cars. Health care services spending rose to a record as a share of GDP.

Net exports also weighed on fourth-quarter growth, barely adding to GDP after boosting growth in the middle of the year. (…)

Business investment grew by 3.7%, powered by information processing equipment, reflecting the boom in AI spending. (…) Excluding computer equipment and software, business investment has declined in each of the last three quarters.

Because swings in trade and inventories distorted overall GDP last year, economists are paying closer attention to final sales to private domestic purchasers, a narrower metric of demand. This measure rose at a 2.4% pace in the fourth quarter, also a slowdown but still solid. (…)

Data: Commerce Department. Chart: Axios Visuals

Nominal expenditures on goods declined 0.1% MoM in December, confirming the previously released flat retail sales. Calendar quirks were mentioned to explain the soft December. November-December were up 2.5% YoY in nominal, +1.0% in real terms, markedly below the 3.1% growth rate for the whole year and +3.0% in Q3.

Spending on durable goods was –2.8% YoY in December after +2.7% and +1.6% on average in the previous 7 and 3 months. Full year 2025: zero growth! The splurge is officially over.

The Real Tariff Liberation Day Arrives at the Supreme Court

A 6-3 Supreme Court majority on Friday struck down President Trump’s sweeping emergency tariffs (Learning Resources v. Trump) in a monumental vindication of the Constitution’s separation of powers. You might call it the real tariff Liberation Day.

It’s hard to overstate the importance of the Court’s decision for the law and the economy. Had Mr. Trump prevailed, future Presidents could have used emergency powers to bypass Congress and impose border taxes with little constraint.

As Chief Justice John Roberts explains in the majority opinion, “Recognizing the taxing power’s unique importance, and having just fought a revolution motivated in large part by ‘taxation without representation,’ the Framers gave Congress ‘alone . . . access to the pockets of the people.’” (…)

Plan B: (WSJ)

(…) We have Section 301 tariffs of up to 25% on around half of all Chinese imports, due to alleged unfair trade practices by Beijing. We also have global Section 232 tariffs of up to 50% on imports of steel and aluminum, automotive goods, heavy-duty trucks, copper, and wood products—each imposed on grounds that these goods threaten U.S. national security.

The Trump administration has also created a process whereby “derivative” products made from goods subject to Section 232 tariffs will be covered by those same tariffs. This “inclusion” system is mind-bendingly complicated and has already doubled the coverage of Mr. Trump’s steel tariffs. Several other Section 232 investigations—on semiconductors, pharmaceuticals, critical minerals, commercial aircraft and more—were initiated in 2025, setting the stage for more tariffs in the weeks ahead.

(…) he announced a slate of new actions to replace his IEEPA tariffs. This includes the current 232 actions, initiating new investigations under Section 301, and imposing a global 15% tariff under Section 122 of the Trade Act of 1974, which empowers the president to address “large and serious” balance-of-payments deficits via global tariffs of up to 15% for no more than 150 days (after which Congress must act to continue the tariffs). The administration might later consider Section 338 of the Tariff Act of 1930—a short and ambiguous law that authorizes the president to impose tariffs of up to 50% on imports from countries that have “discriminated” against U.S. commerce—but this is legally riskier.

These measures will create global tariff regime similar to what Trump imposed under IEEPA. The main difference—and the main benefit for America’s economy and trading partners—would rest in how the president does so. IEEPA was essentially an Oval Office “tariff switch” that Mr. Trump could flip on and off at any time, for any reason and in any amount. This created massive uncertainty and crippling complexity for businesses, foreign governments and the U.S. economy.

The alternative authorities, by contrast, have substantive and procedural guardrails that limit their size and scope or, at the very least, give companies time to prepare for tariffs (or lobby against them).

To be sure, “guardrails” is a relative term for a president who has already stretched Section 232’s “national security” rationale to cover whipped-cream cans and bathroom vanities. And the courts have largely rubber-stamped the administration’s previous moves under Sections 232 and 301—a big reason why the tariff Plan B will feature them. Abuse is likely, as is more litigation. And unlike with IEEPA, we shouldn’t expect the courts to save us.

The justices’ ruling is an important victory for constitutional governance and will eliminate the most destabilizing element of Mr. Trump’s tariff regime. But until Congress reclaims some of its constitutional authority over U.S. trade policy and limits the president’s legal tariff powers, costly and erratic tariffs will remain the norm in the U.S., to our economy’s great detriment.

(Bloomberg)

• Mexico, Canada Get Exemption to 15% US Levy But USMCA Risk Looms

(…) The president said in the afternoon the US would impose a 15% levy on foreign goods under a different law. It took several hours before the White House clarified it’s leaving in place an exemption for many goods shipped under the US-Mexico-Canada Agreement.

That exemption means the effective tariff rate for Canada and Mexico will decline. Until the court decision, products that didn’t qualify for the USMCA exemption were taxed at 35% if from Canada and 25% if from Mexico.

For Mexico and Canada, the events provided more proof of the value of the tripartite trade deal, which was signed during Trump’s first term. But the president’s frustration over the court’s decision also raises the risk he may try to radically alter or even blow up USMCA altogether in pursuit of the tariff revenue he wants. (…)

“The president didn’t lose his leverage, he just lost a lever,” said Barry Appleton, a trade lawyer who has advised governments including the Canadian provinces of Ontario and British Columbia.

Now, he said, “we’re going to see weaponizations of a variety of different tools that were never, ever conceived of in that way, utilized in that fashion, because the president does not want to go to Congress.”

Before Friday’s development, the effective US tariff rate on Canadian goods stood at around 3.7%, according to estimates from Desjardins economist Royce Mendes. For Mexican products, the effective rate was about 4.4%, according to Grupo Financiero Base. It will be slightly lower for both. (…)

“The Trump administration could expand section 232, and in that case there’s going to be an increasing number of Mexican and Canadian exports subject to tariffs.” That’s the part of US trade law being used for the metals and automotive tariffs. (…)

Marroquin said it may become harder for the three countries to successfully extend the USMCA. The deal is up for review this year and the White House has made it clear it wants changes. Trump has privately asked aides why he needs to keep the pact going, Bloomberg has reported.

“It is basically putting more wood to the fire,” Marroquin said. “It is making it more painful for Mexico and for Canada to trade with the US even if they comply with the trade agreement.” (…)

Bloomberg:

The reality is that even before the court decision, Trump had started to quietly peel back some of the import taxes, in response to a public outcry over rising grocery bills and lobbying from chief executive officers. The administration is now revisiting how it applies steel and aluminum duties with an eye to reducing the impact on consumer goods, from canned drinks to underarm deodorant.

On New Year’s Eve, as Trump hosted a party at Mar-a-Lago, the administration said it was delaying new tariffs on kitchen cabinets and furniture. In November, import taxes on bananas, beef, coffee, chocolate and other imported foods were removed.

The White House has delayed the rollout of semiconductor and pharmaceutical tariffs that would raise the cost of imported consumer electronics and drugs. Trump has also pledged to send out $2,000 “tariff dividend” checks to all but the richest Americans and announced a $12 billion aid package to compensate farmers for lost exports.

• Corporate America demands refunds

The US Chamber of Commerce and the National Retail Federation were among the industry groups to immediately push for reimbursement for the billions of dollars in duties paid since Trump’s tariffs took effect last year. (…)

Neil Bradley, the group’s chief policy officer, said: “Swift refunds of the impermissible tariffs will be meaningful for the more than 200,000 small business importers in this country and will help support stronger economic growth this year.”

Dan Anthony, executive director of We Pay the Tariffs, a small business coalition opposing the levies, said it was “imperative that that money is then given back without some of these onerous processes”.

“Full, fast automatic refunds is really where our focus is going to be.”

FYI: These refunds could be remarkably easy: With almost all duty payments now made electronically, and with every IEEPA-related import assigned a specific tariff code, U.S. Customs and Border Protection could return most of the money owed to importers, with interest, at the push of a button. In several past cases, CBP has issued automatic blanket refunds covering many years and billions of dollars, and duty refunds in general are a daily occurrence. (WSJ)

Trump on Friday said it was “crazy” that the Supreme Court did not address whether the administration needed to issue refunds for tariff payments based on the ruling. “It’s not discussed. We’ll end up being in court for the next five years,” he told a press conference.

US Treasury secretary Scott Bessent echoed Trump’s remarks, indicating refunds were unlikely to be paid anytime soon. 

“My sense is that could be dragged out over weeks, months, years,” Bessent said at an event in Dallas, Texas. “I’ve got a feeling the American people won’t see it.”

When a deal is a deal:

The Treasury chief also called on US trading partners that have already reached agreements with the Trump administration based on the IEEPA tariffs to abide by them.

“I think that everyone is going to honor their deal,” he said on Fox News. He also said the Supreme Court had reaffirmed that the president has the right to “a complete embargo,” so that poses a “draconian alternative” for other nations. (BB)

Higher U.S. Tariffs Not to Blame for Jump in Chinese Exports to Europe, ECB Says The central bank’s economists say the increase in exports from China was due to developments under way before Trump hiked tariffs

Higher U.S. tariffs are not the main reason for a surge in Chinese exports to the eurozone, Africa and other parts of Asia, according to economists at the European Central Bank.

While President Trump last year hiked tariffs on imports from countries around the world, the duties faced by Chinese businesses are higher than most other countries. That has led to a sharp fall in Chinese exports to the world’s largest economy.

Policymakers around the world feared that Chinese businesses would look elsewhere for buyers of goods that they could no longer sell in the U.S., a process known as trade diversion that would lead to even fiercer competition for their local rivals.

However, by comparing the impact of the various tariff rates faced by Chinese goods in the U.S. with changes in imports of those goods elsewhere, the ECB’s economists concluded that there was little evidence of trade being diverted to the eurozone, although they did find some signs of diversion to Africa and countries in the Association of Southeast Asian Nations.

“Overall, trade diversion accounts for only a limited role in recent Chinese export dynamics, with other factors playing a more prominent role,” the economists wrote. (…)

“Unfair competition, especially from China, puts a lot of pressure on us,” French President Emmanuel Macron said Thursday ahead of a meeting of EU leaders to discuss the bloc’s response to its new economic challenges.

But the ECB’s economists concluded that the increase in imports was due to developments that were under way before Trump hiked tariffs, rather than diversion that might ease if the tariffs were to be reduced.

“Weak domestic demand has pushed Chinese firms to channel excess capacity abroad, supported by falling export prices, competitiveness gains reinforced by a weak currency, and state-led expansion of manufacturing capacity,” they wrote.

The sharp increase in Chinese imports might also be a problem for the ECB. The eurozone’s annual rate of inflation fell to 1.7% in January, and the ECB’s economists expect it to stay below the 2% target for this year and next.

Policymakers expect inflation to return to their target in 2028, and don’t see the miss as large enough to warrant a response in the form of further rate cuts. But should the inflow of cheaper Chinese goods continue, the risk of a deeper, sustained drop in inflation will increase.

Trump Will Travel to China in Late March for High-Stakes Xi Meet

US President Donald Trump plans to travel to China from March 31 to April 2 for a meeting with his counterpart Xi Jinping as the two leaders will look to navigate a trade relationship again plunged into uncertainty and navigate tensions around Taiwan. (…)

The US president said he expects a welcome that includes pomp and ceremony that surpasses his visit to Beijing in 2017 during his first term.

“President Xi, he treated me so well, he gave me a display, I never saw so many soldiers all the same height, exactly the same height,” Trump said. “But I said, ‘You’ve got to top it.’ He said, ‘I’ll top it. We’re going to top it.’” (…)

High expectations!

In Trump’s first visit to China since 2017, he will discover that China is far from being where the US “borrows money from Chinese peasants to buy the things those Chinese peasants manufacture” as Vance said last April.

BTW:

Brazil, India Seal Rare Earth Deal Amid Global Supply Strains

Brazil and India sealed a framework pact on critical minerals with the two countries agreeing to work closely on processing in a move aimed at securing rare earth supplies at a time of global disruption. (…)

Brazil, home to the world’s second-largest reserves of rare earths, offers India a potential alternative source of supply as it seeks to reduce reliance on China and secure inputs critical for electronics, clean energy and defense. The deal comes soon after India joined the US-led Pax Silica initiative to build resilient supply chains in semiconductors, artificial intelligence, and critical minerals. (…)

Brazil and India are strengthening cooperation, in part to emerge as leading voices for the developing world and seek greater influence over the technologies and supply chains reshaping the global order. (…)

New Delhi and Brasilia sought closer ties after US President Donald Trump slapped both countries with 50% tariffs. Indian tariffs were subsequently lowered to 18% after it signed a trade deal earlier this month. (…)

Trump Eases Mercury Rules for Power Plants in Bid to Boost Coal The Environmental Protection Agency rolled back limits on mercury and other toxic air pollutants for coal- and oil-fired plants.

The Environmental Protection Agency on Friday rolled back regulations limiting mercury and other toxic air pollution from power plants, the latest in a series of moves by President Donald Trump’s administration designed to boost the nation’s shrinking coal sector.

The 2012 Mercury and Air Toxics Standards for power plants rule — called MATS for short — requires the facilities to reduce emissions of mercury and other metal air pollutants, such as arsenic and lead, which have been linked to heart attacks, cancer and developmental delays in children. (…)

“The Trump EPA knows that we can grow the economy, enhance baseload power, and protect human health and the environment all at the same time.” (…)

The EPA says the new MATS rule could save $670 million starting in 2028 through 2037. In the final rule, the agency acknowledged that it did not quantify the human health effects resulting from changes in emissions of small particulate matter called PM2.5, nitrogen oxides, or NOx, and volatile organic compounds, or VOCs. The Biden EPA had estimated its strengthened rules would yield $300 million in health benefits and an additional $130 million in climate benefits.

The policy change comes days after the agency scrapped a scientific determination that climate change poses a threat to human health, and with it, greenhouse-gas standards for vehicles. (…)

• The FT:

Trump has made supporting the coal industry a significant objective of his second term, arguing that “beautiful, clean coal” is needed to meet booming electricity demand and shore up the grid in times of stress like extreme weather.

The administration has used emergency powers to keep open five coal plants that were scheduled for retirement, directed the defence department to buy coal-fired electricity and relaxed emissions and environmental standards which regulate coal ash disposal.

Just as leaded gas was a “cheap” fix for engine knock that cost trillions in lost human potential, easing mercury rules provides a “cheap” fix for power grid demands that may result in long-term health burdens for the next generation.

• Trump order to promote weedkiller sparks fury in MAHA movement Allies of Health Secretary Robert F. Kennedy Jr. are frustrated that the Trump administration has embraced chemicals that they say harm human health.