CONSUMER WATCH

I generally don’t put much weight on consumer confidence surveys, being mainly coincident indicators and often in sync with gas prices.

The present exceptional circumstances suggest to not dismiss current expectations given slowing labor income growth and a historically low savings rate amid potentially accelerating inflation and a shaky equity market.

Source: The Conference Board and Wells Fargo Economics

Ed Yardeni sums it up nicely:

Consumers are feeling okay about the present situation, but they are losing their confidence in the future. (…) Americans are worrying that a recession is becoming more likely and that means fewer jobs. (…)

The percentage of respondents in the CCI survey expecting fewer jobs in 12 months rose to 28.5% in March from 16.2% last October. The percentage expecting the same availability of jobs fell from 65.4% to 54.8% over this same period. That magnitude of decline has coincided with the start of previous recessions. (…)

The percentage of respondents reporting that jobs are hard to get edged up to 15.7%, which is a relatively low reading. The percentage saying jobs are plentiful edged down to 33.6%, suggesting that the JOLTS job openings series remains relatively high. These are not recession readings.

(…) the percentage of respondents expecting lower stock prices in 12 months jumped from 21.7% in November of last year to 44.5% in March. That’s the sort of jump that has occurred in the past at the start of bear markets and recessions.

On the other hand, from a contrarian perspective, high levels of bearish sentiment have often signaled stock market bottoms. But those bottoms have also coincided with the implementation of the Fed Put, which isn’t likely to happen anytime soon since Fed officials have stated that they are in no rush to lower interest rates given the current resilience of the economy and the potential inflationary impact of tariffs.

Consumer Survey’s Decline Adds to Evidence of Gloom Forward expectations drop to 12-year low, Conference Board survey shows

(…) Expectations fell to an index level of 65.2, below the threshold of 80 that often signals a recession, the Conference Board said.

Meanwhile, the survey’s broader headline index fell to 92.9, down 7.2 points from a month earlier, marking the fourth straight month of declines. (…)

Another closely watched consumer survey, run by the University of Michigan, has fallen precipitously, declining by 27% over the year through mid-March. The latest figures from the Michigan survey are due on Friday.

How Tariffs Could Affect Consumer Spending

• Consumers believe that tariffs will be inflationary; this belief is particularly prominent among the high-income cohort.

• Across all income cohorts, consumers expect to cut spending. While a higher share of lower and middle income households expect to scale back spending when countered with tariff-driven inflation, higher-income households’ decision will be more crucial for the topline spending number as they have had a more significant share of the spending pie in recent years.

US consumers slow spending as inflation bites, Synchrony says

(…) “Purchase volumes have gone down across the industry as consumers across all income groups become more thoughtful about spending,” Axler told Reuters.

Synchrony, which issues credit cards in partnership with retailers and merchants, has more than 100 million consumer credit accounts. (…)

Retailers Bulk Up Inventories to Blunt Tariff Impact Companies from Costco to Williams-Sonoma say they pulled forward merchandise to get ahead of President Trump’s new tariffs

(…) The strategy is a hedge against the costs of increased tariffs, but logistics experts say it opens up retailers to the risk of getting stuck with piles of unsold goods as consumer spending slows. (…)

Costco’s inventories were up about 10% compared with the previous year in the three months ended Feb. 16, according to company filings. “We have been continuing to buy more inventory, which we think will be helpful as you think about some of the unpredictability that we’ve seen in supply chain timing and also with the potential risk around tariffs,” said Gary Millerchip, Costco’s chief financial officer, on an earnings call March 6.

Williams-Sonoma said inventory was up 6.9% for the quarter ended Feb. 2. The company said the elevated inventory level included shipments that were pulled forward from China to reduce the potential impact of increased tariffs.

Zumiez reported inventories up nearly 14% in the quarter ended Feb. 1, partly due to the company bringing in inventory early “in anticipation of the tariffs planned to go into effect late in the quarter,” said Chief Financial Officer Christopher Work on an earnings call this month.

The Logistics Managers’ Index, a monthly survey of supply-chain managers, showed inventory levels expanded in February at the fastest rate since June 2022. (…)

Target reported inventory was up about 7% year-over-year for the quarter ended Feb. 1, ahead of 1.5% growth in comparable sales, those from stores and websites operating at least 12 months. (…)

Walmart said its inventories were up about 2.8% for the quarter ended Jan. 31 as comparable sales grew 4.6%. “We did pull a little bit forward around the edges, but we’re selling through that stuff quickly,” said Chief Executive Douglas McMillon on an earnings call Feb. 20.

Also front loading?

• March Vehicle Forecast: Sales Increase to 16.6 million SAAR, Up 5.9% YoY

From WardsAuto: U.S. Light-Vehicle Sales Heading for Long-Time-High Gain in March (pay content).  Brief excerpt:

Deliveries appear to have accelerated sharply in the middle of the month, creating momentum that could cause sales to overshoot the forecast. Conversely, overall inventory is relatively lean – and could atypically decline at the end of March from February – so the acceleration could slow before the end of the month after enough stock is pulled from dealer lots.

On a seasonally adjusted annual rate basis, the Wards forecast of 16.6 million SAAR, would be up 3.8% from last month, and up 5.9% from a year ago.

Optimism Among CFOs Falls Amid Concerns about Tariffs, Uncertainty

Optimism about the economy among CFOs fell in the first quarter of 2025 amid concerns about tariffs and uncertainty, according to the latest CFO Survey.

The economic optimism index fell from 66.0 in the fourth quarter to 62.1 in the first quarter of 2025, almost erasing gains from a post-election jump in the fourth quarter. Optimism about their own firm’s financial prospects also fell, although not nearly as much.

CFOs revised downward their expectations for real GDP growth over the next four quarters to 1.9 percent from 2.2 percent in the prior survey. Moreover, the probability respondents assign to negative year-ahead economic growth rose to 14.2 percent from 8.5 percent last quarter.

About a quarter of firms reported that changes to trade policy would negatively impact their hiring and their capital spending plans in 2025. Next to tariffs and trade policy, changes in regulatory policy seemed most likely to affect hiring and capital spending plans, both positively and negatively. Only a few firms reported altering plans due to changes to immigration or corporate tax policy.

When asked whether they had taken certain actions due to the current international trade environment, almost 30 percent of firms said they planned to diversify supply chains, 20 percent moved up purchases, and there were some reports of finding new domestic or foreign suppliers.

Uncertainty?

The chart below shows individual FOMC members’ forecast of where they think interest rates will be over the coming years. The degree of disagreement on the committee is remarkable, with one FOMC member saying that in 2026, the Fed funds rate will be almost 4%, and other FOMC members saying that they think interest rates in 2026 will be just above 2.5%.

The dot plot also shows that there is debate about where the Fed funds rate will be in the long run, also with a range between 2.5% and 4%.

Perhaps most importantly, none of the FOMC members are predicting a sharp decline in the Fed funds rate to zero, telling the market that nobody on the FOMC is expecting a recession. (Apollo)

Trump May Implement Copper Import Tariffs Within Weeks

US President Donald Trump in February directed the Commerce Department to open an investigation into potential copper tariffs and submit a report within 270 days, though it’s now expected to be resolved sooner, said the people who asked not to be identified because the discussions are confidential. (…)

Trump has threatened to impose a duty of as much as a 25% on all copper imports, a move that could roil the global market for one of the world’s most ubiquitous metals, which is used in pipes and electrical cables.

Implementing copper tariffs with such haste would stand in stark contrast to the investigations that preceded steel and aluminum tariffs imposed by Trump during his first administration. They took some 10 months to complete. (…)

The large price differential between London and New York created a worldwide dash among traders and dealers to ship the red metal to America to capture a lucrative premium. Such a move has left the rest of the world, especially top consumer China, short of the metal. (…)

• Trump Says He Doesn’t Want ‘Too Many’ Exceptions in Tariff Push

(…) “I know there are some exceptions, and it’s an ongoing discussion, but not too many, not too many exceptions,” Trump said in an interview with Newsmax. “No, I don’t want to have too many exceptions.” (…)

Trump said Monday at the White House that he “may give a lot of countries breaks.” (…)

US Fiscal Strength Seen Weakening Further, Moody’s Says

(…) A sharp and sustained rise in US Treasury yields from very low levels in 2020, has resulted in diminished debt affordability, and Moody’s forecasts a rising pace of deterioration due to interest payments-to-revenue increasing to about 30% by 2035 from 9% in 2021. “At these levels, fiscal flexibility is considerably reduced,” it said.

Moody’s explained that a weakening US debt affordability profile means the country’s “extraordinary economic strength and the unique and central roles of the dollar and Treasury bond market in global finance are even more critical in supporting the sovereign’s Aaa credit profile.”

Still, Moody’s warned “the potential negative credit impact of sustained high tariffs, unfunded tax cuts and significant tail risks to the economy,” could result in the US strengths of being the key player in global finance proving less effective in countering “widening fiscal deficits and declining debt affordability.” (…)

The report said even the most optimistic scenario where the US economy experiences “sustained 3% real GDP growth, a terminal 10-year Treasury yield of 3% and significant cuts to government spending,” would only stabilize debt affordability “at weaker levels than in 2023 and remains materially weaker than for other Aaa-rated sovereigns.” (…)

Moody’s is the only one of the three main credit companies with a top rating on the US after Fitch Ratings downgraded the US government in August 2023 after another debt-ceiling battle in Congress. S&P Global Ratings stripped the US of its top score in 2011 amid that year’s debt-limit crisis.

• Moody’s expect the “federal government’s fiscal deficit will widen to about 8.5% of GDP by 2035 from around 6.3% in 2025,” due to increased interest payments and health-related entitlement costs.
• The debt burden is projected to “rise to around 130% of GDP by 2035 from nearly 100% in 2025.”
• The US debt burden was about 109% of GDP in 2024 relative to a much lower median ratio of about 43% for Aaa-rated sovereigns.”
• They expect the 10-year Treasury yield to peak at an average of around 4.4% in 2025 and gradually decline thereafter to settle at a terminal yield of 4% by 2029.
• A decline to 3% in Treasury yields is deemed, “very unlikely in the near term absent a major economic shock that results in de-risking of global financial markets.”

• Dalio Warns GOP of ‘Dire’ Debt as Lawmakers Weigh Tax Cuts

Bridgewater Associates founder Ray Dalio warned House Republicans of the dangers of rising US deficits and urged them to cut the budget deficit to just 3% of gross domestic product or risk debt service costs squeezing government spending.

Dalio’s message of austerity comes as House and Senate Republicans battle over the size of spending cuts to be paired with a giant tax cut coming later this year. The US budget deficit was 6.6% of GDP in 2024, according to the Congressional Budget Office. (…)

The House has drafted a $4.5 trillion tax cut blueprint paired with $2 trillion in spending cuts over ten years, which would add about $3 trillion to deficits over the decade. Senate Republicans want to deploy a budget gimmick to allow them to add trillions more in tax cuts without more spending cuts. (…)

After the Dalio meeting, House Budget Chairman Jodey Arrington said he’s resolved to block any Senate tax plan that lacks sufficient spending cuts, saying it would be dead on arrival in the House. But Arrington also acknowledged that the House’s own budget blueprint fails to meet Dalio’s 3% GDP target.

“This is not something you accomplish in one bill,” he said. “We need to begin exercising the spending cut muscles.” (…)

The risk of recession has resurfaced, at least in many economist comments. Today, Alan Blinder, former vice chairman of the Federal Reserve, writes an op-ed in the WSJ that reflects my own thinking:

Trump Plays Recession Roulette With the American Economy

(…) My assessment of the probability of a recession in 2025 was about as close to zero as it could be. Everything looked too good. Since then, however, Mr. Trump’s actions seem designed to drive the U.S. economy into the ground. This would truly be a Trumpcession.

Start with high tariffs. The president’s press secretary may think tariffs are tax cuts. In fact they are tax increases—probably big ones. And any tax increase saps the purchasing power of consumers. Take away enough and you’re flirting with a consumer-driven recession—or stagflation, since tariffs also drive up prices. The stock market understands the peril and is dancing to tariff news. (…)

The negative reactions to Trumpian uncertainty may be even greater among businesses that must make hiring and investment decisions. (…) It makes sense for businesses to wait to see what happens. In the case of investments, waiting means both less aggregate demand today and less aggregate supply in the future. (…)

S&P Global’s March flash PMIs may seem to suggest that “apprehension begins to look overplayed” as Deutsche Bank wrote, but read carefully.

Services recovered some of the previous weather impacted slowdown while manufacturing output dropped back to negative territory after what seems like pre-tariff front loading.

The bizarre irony is that manufacturers, seeing stalling new orders, remain very optimistic on “hopes of stronger demand amid supportive trade and other policies, such as lower taxes”, while service providers’ optimism keeps falling on “concerns over the adverse impact of federal spending cuts, tariffs and wider policy changes from the new administration.”

Rather that trying to decipher what these two groups think or feel, let’s watch what they are actually doing:

• Manufacturers’ input buying “fell back into decline”. They are “cutting headcounts for the first time since last October.”
• Service providers’ “job creation was marginal, and much weaker than at the turn of the year”, reporting “sluggish demand”.

This is feeding the “stag” part in the stagflation scenario. Next Tuesday, S&P Global will provide its complete PMI and we will get the ISM survey for a more comprehensive picture.

For the “flation” part:

• “Across both goods and services, input costs increased at the sharpest rate for 23 months, surging especially in manufacturing (where the rate of inflation hit a 31-month high) but also picking up further pace (to an 18-month high) in the service sector. Higher costs were first and foremost attributed to tariffs”.
• “Higher costs fed through to a steeper rise in manufacturing selling prices, which rose in March at the sharpest rate for 25 months”.
• Service providers cut their margins reporting “the need to offer competitive prices in a weak-demand environment.”

Here’s the complete report:

U.S. Flash PMI: Output growth revives in March but confidence in the outlook deteriorates further

The headline S&P Global US PMI Composite Output Index rose nearly two points in March, up from 51.6 in February to hit a three-month high of 53.5, according to the preliminary ‘flash’ reading (based on approximately of 85% of usual survey responses). The index signals an acceleration of activity growth after slipping to a 10-month low in February. However, the rate of expansion remains well below December’s 32-month high.

 

The improvement was driven by the services economy, where output growth picked up momentum for the first time this year, having slumped to a 15-month low during February. The resulting rise in service sector output was the largest recorded so far this year, with companies reporting improved new business inflows amid some signs of strengthening customer demand and better weather compared to earlier in the year. Services exports acted as a drag on activity, however, declining for a third successive month. Manufacturing output meanwhile fell into decline, contrasting sharply with the gains seen in the first two months of the year (February’s rise in output was the largest recorded since May 2022). Factories reported fewer instances of output having been buoyed by the front-running of tariffs, and new orders growth came close to stalling in the goods-producing sector. Input buying in the sector also fell back into decline. However, export sales showed the smallest decline for nine months thanks to rising orders in particular from Canada, Germany and other EU countries, hinting at some further efforts to fulfil orders ahead of tariff implementation.

Although current output growth picked up pace in March, optimism about the coming year fell for a second successive month. The decline took confidence to its lowest since October 2022 barring the nadir seen last September (when business was unsettled by uncertainty ahead of the Presidential election).

On one hand, sentiment about the future in manufacturing remained among the highest seen over the past three years, which factories commonly linked to hopes of stronger demand amid supportive trade and other policies, such as lower taxes. On the other hand, service sector confidence deteriorated for a third consecutive month, sliding noticeably from December’s one-and-a-half year high to its second-lowest since October 2022. The deterioration in service sector confidence was attributed to concerns over the adverse impact on demand for services and financial markets of federal spending cuts, tariffs and wider policy changes from the new administration.

Employment rose slightly in April, returning to growth after a small decline in February. The upturn was led by renewed hiring in the service sector. However, even here the rate of job creation was marginal, and much weaker than at the turn of the year. Some companies reported job losses due to sluggish demand plus a wariness to hire due to the uncertain outlook. Manufacturers in particular reported concerns over payroll numbers and rising costs, cutting headcounts for the first time since last October. Cost pressures intensified across the economy in March. Across both goods and services, input costs increased at the sharpest rate for 23 months, surging especially in manufacturing (where the rate of inflation hit a 31-month high) but also picking up further pace (to an 18-month high) in the service sector. Higher costs were first and foremost attributed to tariffs, though increased staffing costs were also widely reported. Higher costs fed through to a steeper rise in manufacturing selling prices, which rose in March at the sharpest rate for 25 months. The March survey also saw a modest acceleration in services selling price inflation, albeit to a level that was historically subdued as firms reported the need to offer competitive prices in a weak-demand environment. The resulting combined increase in prices levied by companies across both sectors was the second largest seen over the past six months – surpassed only by the rise seen in January – but remaining below the survey’s long-run average.

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said:

A welcome upturn in service sector activity in March has helped propel stronger economic growth at the end of the first quarter. However, the survey data are indicative of the economy growing at an annualized 1.9% rate in March and just 1.5% over the quarter as a whole, pointing to a slowing of GDP growth compared to the end of 2024.

Near-term risks also seem tilted to the downside. Growth is concentrated in the service sector as manufacturing fell back into decline after the front-running of tariffs had temporarily boosted factory output in the first two months of the year. Similarly, some of the March upturn in services was reportedly due to business picking up after adverse weather conditions had dampened activity across many states in January and February, which could prove a temporary bounce.

Business confidence in the outlook has also darkened, souring further from the buoyant mood seen at the start of the year to one of the gloomiest readings seen over the past three years, largely caused by growing worries over negative impacts from recent policy initiatives from the new administration. Most widely cited were concerns about the impact of Federal spending cuts and tariffs.

A key concern over tariffs is the impact on inflation, with the March survey indicating a further sharp rise in costs as suppliers pass tariff-related price hikes on to US companies. Firms’ costs are now rising at the steepest rate for nearly two years, with factories increasingly passing these higher costs onto customers. Thankfully, from the Federal Reserve’s perspective, services inflation remains relatively subdued, but this reflects the need to keep prices low amid weak demand, which will harm profits.”

Trade War Explodes Across World at Pace Not Seen in Decades Proliferating tariffs engulfing U.S., China and their partners draw parallels to 1930s protectionist spiral

Barriers to open trade are rising across the world at a pace unseen in decades, a cascade of protectionism that harks back to the isolationist fervor that swept the globe in the 1930s and worsened the Great Depression. (…)

Even before Trump retook the White House, many countries were increasing trade barriers, often against China, as they tried to beat back a flood of electric cars, steel and other manufactured goods pressuring their homegrown industries.

Now those efforts are proliferating as countries brace for a new wave of goods redirected across the globe by the U.S.’s rising tariff shield. The European Union said this month it plans to toughen measures to protect its steel and aluminum producers from imports diverted from the U.S. by Trump’s 25% tariffs on those two metals.

Economists and historians say the flurry of recent moves suggest the world could be heading toward the largest, broadest surge in protectionist activity since the U.S. Smoot-Hawley Tariff Act of 1930 touched off a global retreat behind tariff walls that lasted until after World War II.

Economists don’t think the world is headed for anything like the Depression of the 1930s, or a rerun of that decade’s collapse in global trade. Average tariff rates globally are still much lower than in the 1930s and 1940s.

But they do warn of lasting damage, both economically and diplomatically, as tariffs and other hurdles to trade increase. Among the risks: slower growth, higher inflation and a collapse in global cooperation that further fractures longstanding alliances. (…)

In addition to the many high-profile steps taken against the U.S. in recent weeks—including new Canadian levies on American computers and sports gear—many countries have been stepping up pressure on China.

In February, South Korea and Vietnam imposed stiff new penalties on imports of Chinese steel following complaints from local producers about a surge of cut-price competition. Similarly, Mexico has begun an antidumping probe into Chinese chemicals and plastic sheets, while Indonesia is readying new duties on nylon used in packaging imported from China and other countries.

Even sanctions-hit Russia is seeking to stem an influx of Chinese cars, despite warm relations between Russian President Vladimir Putin and Chinese leader Xi Jinping. Russia in recent weeks increased a tax on disposing of imported vehicles, effectively jacking up their cost. More than half of newly sold vehicles in Russia are Chinese-made, compared with less than 10% before its 2022 invasion of Ukraine.

“We do seem to be on the threshold of a much broader if not all-out trade war,” said Eswar Prasad, professor of trade policy at Cornell University and a former International Monetary Fund official. In this hostile new landscape, “it’s every country for itself,” Prasad said. (…)

According to the Tax Foundation, a think tank that scrutinizes tax policy, the average tariff rate facing goods imported into the U.S. is now back to where it was in 1946, at 8.4%, compared with 1.5% when Trump first took office in 2016.

If Trump follows through on all his remaining tariff threats, tariffs on U.S. imports could hit 18% on average, Fitch Ratings estimates—the highest level in 90 years. (…)

The fallout of the widening trade war might be less painful today than during the 1930s, given changes in the world economy. For many rich nations, services are more important than goods, and central banks and governments have learned valuable lessons about stabilizing economies with stimulus. (…)

The global economy is already fracturing into blocs, with capital and trade flowing increasingly between geopolitical allies, according to the IMF.

Fitch Ratings said last week it expects global economic growth to slow this year, to around 2.4%, from 2.9% in 2024, citing the likely effects of the escalating trade war in the U.S. and beyond. (…)

Returning to the level of openness to trade that existed a decade ago will be tough, assuming countries even wish to do so. The world’s trade referee, the WTO, has been sidelined by Washington, which has accused it of overreach into domestic-policy decisions and refused to approve judges to its top appeals panel since 2019. The big, multilateral efforts to reduce trade barriers that the WTO once shepherded are likely a thing of the past. (…)

Bringing down trade barriers once they go up is hard, said Douglas Irwin, professor of economics at Dartmouth College and the author of a history of U.S. trade policy. That is because every trade restriction is a potential bargaining chip, so no one wants to “unilaterally disarm,” he said.

Throw in geopolitical rivalries, especially with China, and domestic priorities such as rebuilding industries and rearming, and the chances for dialing back the current protectionist fervor look slim.

“That is why I worry the de-escalation scenario is a really tricky one,” Irwin said.

If you missed it, my March 21 post chronicled the Smoot-Hawley era. History does rhyme…

Trump Says Auto Tariff Coming, Teases Reciprocal Duty Breaks

President Donald Trump said he will announce tariffs on automobile imports in the coming days — and indicated nations will receive breaks from next week’s “reciprocal” tariffs.

Trump’s comments at the White House Monday sowed further confusion about his plans for a sweeping tariff announcement scheduled for April 2. The president told reporters he planned to proceed with long-threatened auto import tariffs “fairly soon, over the next few days” ahead of the broader package. (…)

“I may give a lot of countries breaks,” Trump said. “They’ve charged us so much that I’m embarrassed to charge them what they’ve charged us, but it’ll be substantial, and you’ll be hearing about that on April 2.”

Trump also said he planned to proceed with sector-specific tariffs on lumber and semiconductors “down the road,” without elaborating. Earlier Monday, he repeated his threat to impose duties on pharmaceutical drugs and said they would come in “the very near future.”

On top of that, Trump announced on social media he would charge a 25% tariff on other nations purchasing Venezuelan oil starting on April 2.

The president’s barrage marked the latest example of his erratic approach to trade policy, which has frazzled investors and foreign governments. (…)

• Helter-Skelter

“Helter-skelter” is a term used to describe disorderly haste, confusion, or chaos. That seems to be descriptive of the modus operandi of President Donald Trump’s trade policy. Then again, perhaps there is method to the madness. Perhaps it is Trump’s approach to the art of the deal. So the chaos is a feature and not a bug of his style of dealmaking. The technique is to bully his opponents by threatening to harm them, then wait for them to come back with offers to please him in order to win his forgiveness. (…)

The stock market rallied on Friday and today on news that Trump’s tariffs will be flexible and negotiable. Yet today he also said countries that purchase oil and gas from Venezuela will face a 25% tariff on the trade those nations have with the US. China was the largest destination for Venezuelan crude last year, followed by the US, India, and Spain. So is Trump really about to slap China with a 25% tariff on top of the 20% he already imposed? Beats us! (…)

John Authers:

(…) So what exactly is the idea behind the reciprocal tariffs that will liberate us?

The idea of reciprocity is simple — even “beautiful,” as the president puts it. Compared to the various plans Trump has aired for blanket tariffs on particular sectors, like those in place on steel and aluminum, they are also far lighter, creating less disruption for the economy and generating much less revenue for the Treasury. Strategas Research Partners’ Dan Clifton estimates sectoral tariffs are roughly twice the size of likely reciprocal tariffs. That’s because, as revealed in UBS research that Points of Return covered earlier, the US is not that hard done by, and its main trading partners’ tariffs are already reciprocal. In general, they’re the countries with which the US already has free trade agreements.

Further, reciprocity is difficult, as products can be subdivided any number of ways. Morgan Stanley’s economics team comments that “to define reciprocity at a product or sector level requires excruciating details not only around product classification but also how products are treated by domestic policy.” They are also further subject to override or amplification by the president after companies and countries have lobbied him. (…)

The administration must also convince investors and businesses alike that these tariffs won’t hurt the US. “Countries that sell to the United States are inflexible. They’ve only got the United States to sell to,” Stephen Miran — chairman of the Council of Economic Advisers — told Bloomberg TV on Monday. “So they’re the ones who bear the burden of these tariffs.”

This is a good point, but may prove to be overstated. US trading partners are already scurrying to find alternative markets, and to rebuild their own capacity. The European attempt to rearm is only the most spectacular example. But as a broad rule, US tariffs should indeed hurt others more than they hurt the US.

At least initially.

• Trump Economic Adviser Rejects Short-Term Pain From Tariff Hikes

(…) “I don’t think there is going to be material short-term pain from the tariffs,” Stephen Miran, chair of the White House Council of Economic Advisers, said Monday in a Bloomberg Television interview with Saleha Mohsin. “US consumers are flexible. We have options. We can produce stuff at home.” (…)

“Countries that sell to the United States are inflexible — they’ve only got the United States to sell to,” Miran said. “So they’re the ones who bear the burden of these tariffs, which means that there’s going to be very limited pass-through into downside economic risk or into higher prices.” (…)

FLEXIBILITY WATCH

• Investors are not showing much flexibility, are they? (Apollo)

• Citing data from Citigroup, Bloomberg relays today credit card spending on luxury products ebbed 5% year-over-year in February, while the share of consumers drawing annual salaries of at least $150,000 who are 60 to 89 days delinquent on their debts doubled in January relative to 2023 according to VantageScore. That compares to a 30% uptick in such slow-payments from lower income consumers over that period. “If you start seeing that this [higher-income] group is coming under more pressure, that may well [paint] a concerning picture for how consumer spending is going to evolve,” VantageScore chief economist Rikard Bandebo tells Bloomberg. (ADG)
• A little-noticed Trump administration move will decrease the minimum wage for federal contractors, rolling back a boost that helped hundreds of thousands of workers. The Labor Department [last Thursday]said it would no longer enforce the $17.75 per hour minimum wage for federal contractors set in an executive order from President Biden. The wage move affects employees of companies that contract with the federal government, such as janitors and food service workers. The reversal puts back in place a minimum wage of $13.30 per hour, set in an executive order from President Obama and left mostly intact by the first Trump administration. (Axios)
• The share of consumers who expect unemployment to rise over the next year surged to 66% in March, the highest level in a decade, per University of Michigan data analyzed by Bank of America Institute.

Data: University of Michigan survey of consumers via Bank of America Institute. Chart: Axios Visuals