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

FLASH PMIs

Eurozone output continues to rise as manufacturing returns to growth

The seasonally adjusted HCOB Flash Eurozone Composite PMI Output Index ticked up to 50.4 in March from 50.2 in February, signalling a third successive marginal monthly expansion in business activity across the euro area. Although only slight, the latest rise was the fastest since last August.

The overall increase in output reflected growth across both manufacturing and services. Service providers posted a rise in activity for the fourth month running, albeit with the pace of expansion easing to the weakest in this sequence. Meanwhile, manufacturing production returned to growth, rising for the first time in two years and to the greatest extent since May 2022.

Growth was sustained in Germany during March, in part thanks to a renewed expansion in manufacturing output. The overall rise was the fastest in ten months. On the other hand, business activity in France decreased for the seventh month running, albeit with the pace of contraction easing from that seen in February. Meanwhile, a further solid increase in output was recorded in the rest of the Eurozone, extending the current sequence of growth to 15 months.

While overall business activity rose for the third month running, companies continued to see new orders decline at the end of the opening quarter of the year. New business in the Eurozone has now fallen in each of the past ten months, with the pace of reduction little-changed since February. New orders were down across both manufacturing and services, although the drop in the former was the least marked in the current sequence of contraction that spans almost three years. New export orders also decreased. The pace of decline was unchanged from the previous month and the joint-weakest since May 2022

With output continuing to grow, Eurozone companies brought an end to a period of job shedding stretching back to August 2024. Staffing levels were broadly unchanged in March amid a faster rise in services employment and softer reduction in workforce numbers at manufacturers. The stable picture for employment overall was recorded despite further falls in staffing levels across the euro area’s two largest economies, Germany and France. The rest of the Eurozone posted a solid expansion in workforce numbers, and one that was the most pronounced since June last year.

With firms holding employment broadly steady in March, they were able to keep on top of workloads and deplete outstanding business. Backlogs of work have now decreased on a monthly basis throughout the past two years. The latest fall was solid and the fastest in four months

The rate of input cost inflation softened in March, ending a five-month sequence in which the pace of increase had quickened. The latest rise was the weakest since November last year and slower than the series average. The slowdown in inflation was centred on the service sector, although here the rise was still sharp. Manufacturing input costs increased at a relatively muted pace, but one that was the most marked since last August.

Selling prices also increased at a slower pace at the end of the first quarter, with the pace of inflation the weakest in the year-to-date. Services charge inflation eased, while manufacturing output prices increased for the first time in seven months. Germany posted a softer rise in charges during March, while rates of inflation in France and the rest of the Eurozone were unchanged from February

Signs of recovery in the euro area’s manufacturing sector led to a less pronounced scaling back of purchasing activity during March. The latest fall in input buying was solid, but the weakest since August 2022. Further reductions in stocks of both purchases and finished goods were registered. Meanwhile, suppliers’ delivery times shortened for the second month running and to the greatest extent in nine months

Business confidence dipped for the second successive month in March and remained subdued relative to the series average. Confidence regarding the 12-month outlook for business activity was the lowest since last November amid waning optimism in both manufacturing and services. French companies were pessimistic about the prospects for growth, but German firms were more bullish than in February. Strong confidence was again recorded in the rest of the euro area, albeit with sentiment easing from the previous survey period

Commenting on the flash PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:

“Just in time with the beginning of spring we may see the first green shoots in manufacturing. While we should not be carried away by a single data point, it is noteworthy that manufacturers expanded their output for the first time since March 2023. It’s also encouraging, that the index output has risen for three months straight. This is complemented by a much softer fall in new orders and employment.

One could pour some cold water on this development arguing that it’s the temporary tariff-related import boom from the US which has driven the improvement in manufacturing. However, given the will of Europe, to invest heavily in defense and infrastructure – in Germany a corresponding historical fiscal package has been approved only last week – hope for a more sustained recovery seems well founded.

“The price development in the services sector, which is very much under scrutiny of the ECB, will be well received by the doves of the monetary authority. Both input costs and selling prices are rising at a slower pace compared to recent months. Lower input cost inflation points to less pressure from wages which are a key ingredient of input costs in the labour intensive services sector.

Meanwhile, in manufacturing, price increases for both selling and purchasing remain moderate, helped along by declining energy costs. However, there are still plenty of risks on the ECB’s radar, like potential retaliation tariffs from the US, measures to curb goods coming from China, and higher food prices spurred by extreme weather. These factors, coupled with overall uncertainty, make some ECB members hesitant to cut rates too aggressively.

“Interestingly, Germany outperformed its key European trading partner France in March in both manufacturing output and services activity. Still, if we zoom out and look over the past two years, France’s industry has only contracted by about 1% since early 2023, while Germany’s has dropped by roughly 8%. In this respect, Germany has a lot of catching up potential.

“Business expectations are well below average in the services sector and at average in manufacturing, which is of small wonder given the challenges companies are faced with amid the challenges around tariffs, geopolitical tensions and uncertainties surrounding monetary policy.

There is some likelihood, that Europe seizes the opportunity and shows more unity with respect to reforms, defense spending, and completing the capital market union, to name a few things. This could send a clear message that Europe’s position as a key business hub is set to strengthen in the years ahead.”

Japan: Business activity declines for first time in five months

The March Flash PMI data indicated that Japanese firms had a disappointing end to Q1, with private sector business activity falling for the first time since last October.

Underlying data showed that this was partly due to a fresh fall in service sector activity, while manufacturing output declined at the quickest pace for a year.

The reduction in overall activity coincided with a slight drop in composite new business, with firms noting that strong inflationary pressure had dampened sales and made some customers hesitant to commit to orders.

Growth of new business slowed notably at services companies and fell solidly at goods producers. New export orders increased slightly at the composite level, however, as a strong rise at services companies offset a further drop in foreign demand for manufactured goods.

The survey also signalled that cost pressures remained elevated in March, with overall input costs rising sharply across both monitored sectors, leading to a solid rise in selling prices.

Strong inflation, coupled with concerns over labour shortages, an ageing population, subdued client spending and increased uncertainty over the international trade environment dampened optimism around the outlook. Notably, overall confidence regarding future business activity dipped to the lowest since August 2020 at the end of the first quarter.

The important U.S. flash PMI is out later today.

White House Narrows April 2 Tariffs Tariffs on industrial sectors like cars and microchips are no longer expected to be announced on that date

President Trump has declared his April 2 deadline to be “Liberation Day” for the U.S., when he will put in place so-called reciprocal tariffs that seek to equalize U.S. tariffs with the duties charged by trading partners, as well as tariffs on sectors like automobiles, pharmaceuticals and semiconductors he repeatedly said would be enacted on that day.

Those sector-specific tariffs, however, are now not likely to be announced on April 2, said an administration official, who said the White House is still planning to unveil the reciprocal tariff action on that day, though planning remains fluid. (…)

The focus of the reciprocal action now looks to be more targeted than originally thought, according to people with knowledge of the planning, though it will still hit countries that account for most of the U.S.’s imports.

The administration is now focusing on applying tariffs to about 15% of nations with persistent trade imbalances with the U.S.—a so-called “dirty 15,” as Treasury Secretary Scott Bessent put it last week. Those nations, which Bessent said account for most of the U.S.’s foreign trade, will be especially hard-hit with higher tariffs, said people with knowledge of the matter, though other nations could be given more modest tariffs as well. (…)

Nonetheless, the administration’s plan for April 2 could raise tariffs on the U.S.’s most significant trading partners to levels not seen in decades, and people with knowledge of the planning said that targeted nations can expect to receive significantly higher tariffs.

Trump’s team could make tariffs effective almost immediately on April 2 using the president’s emergency economic authority, said people familiar with the discussions, emphasizing that final decisions haven’t been made. That would be a shift from February, when a White House official said a report outlining reciprocal tariffs could be released that day but imposition would come later. (…)

Trump told oil executives last week during a meeting at the White House that he didn’t want to grant exceptions on tariffs, according to a person who attended the meeting, but said he would consider occasional ones.

When one attendee asked about steel and aluminum exemptions, Trump wouldn’t commit to any, this person said. When U.S. Trade Representative Jamieson Greer spoke to the oil executives, he said he wasn’t interested in doing exemptions because they felt like they granted too many in the first Trump administration. Commerce Secretary Howard Lutnick also told the oil-industry executives that he didn’t expect exemptions, the attendee said.

A White House official disputed that description of the meeting, saying tariffs didn’t come up. (…)

Companies are also just desperate for clarity. One Fortune 500 CEO said April 2 can’t get here fast enough.

Trump previously gave automakers a temporary reprieve from tariffs on Canada and Mexico, before pausing those levies more broadly for all products that comply with the USMCA trade agreement. But on Friday, he lamented that people had criticized him for backing down, and hinted that his approach to tariffs could shift in the coming days and weeks.

Once you give exemptions for one company, “you have to do that for all,” Trump said, adding that “the word flexibility is an important word. Sometimes there’s flexibility, there’ll be flexibility.”

• “April 2nd is going to be liberation day for America. We’ve been ripped off by every country in the world, friend and foe,” Trump said in the Oval Office Friday.
• “I think markets need to change their expectations, because it’s not everybody that cheats us on trade, it’s just a few countries and those countries are going to be seeing some tariffs.” (Kevin Hassett, Trump’s National Economic Council director)
• “it’s roughly 15% of countries that are the worst offenders.” (Treasury Secretary Scott Bessent)

Bloomberg’s comprehensive chart of U.S. tariffs imposed, threatened & suspended:

• Carmakers rush to ship vehicles to US ahead of new round of April tariffs Carmakers rush to ship vehicles to US ahead of new round of April tariffs Vessels have been directed to Asia and Europe to carry ‘thousands’ more cars to America than usual

Dealing With Social Security Is Heading From Bad to Worse The agency that administers benefits is cutting staff and restricting services as part of a Department of Government Efficiency review

The federal agency that administers Social Security benefits is facing a customer-service mess.

The Social Security Administration is cutting staff, restricting what recipients can do over the phone and closing some local field offices that help people in person. The number of retirees claiming benefits has risen in recent years as baby boomers age.

Few federal agencies reach as far into Americans’ lives as the Social Security Administration, which delivers a monthly check to some 70 million people. Many fear that the changes, part of President Trump’s push to overhaul the federal government through the Department of Government Efficiency, are eroding confidence in the nearly 90-year-old program.

Agency officials have acknowledged that because of a planned reduction in services over the phone, there will be longer wait and processing times. An estimated 75,000 to 85,000 additional visitors a week could show up at local field offices, according to an internal memo sent by Doris Diaz, the acting deputy commissioner for operations. (…)

Social Security has a reputation as the “third rail“ of American politics, a benefit to which elected officials make cuts at the risk of their own re-election. President Trump has vowed not to cut benefits. But he and DOGE’s leader, Elon Musk, have made unfounded claims of widespread fraud in the program. (…)

• ‘Real America’ Won’t Mind If They Miss a Social Security Check—Lutnick

Only a “fraudster” would care if they miss a Social Security check, Commerce Secretary Howard Lutnick said in a new interview this week.

Lutnick discussed how he believes Americans would respond to going a month without a Social Security check during an interview on the podcast All-In with Chamath, Jason, Sacks & Friedberg.

During the appearance, Lutnick said the average American, using his mother-in-law as an example, would not complain about not receiving their checks for a month but that someone who was hacking the system would do so.

“Let’s say Social Security didn’t send out their checks this months. My mother-in-law is 94, she wouldn’t call up and complain. She just wouldn’t. She would think something got messed up and she’d get it next month,” he said. “A fraudster always makes the loudest noise, screaming, yelling and complaining.”

Lutnick said the “easiest way to find a fraudster is to stop payments and listen” for “whoever screams.” Most recipients trust the government and would understand if they didn’t receive the check, he said.

BTW: More than 70 million Americans receive Social Security checks, including most people over age 65, people with permanent disabilities and survivors of deceased workers. Many of the program’s recipients depend on the checks as their sole source of income.

EARNINGS WATCH

With all the uncertainty on prices, demand and margins, analysts are getting more cautious, but only cautiously. Growth rates are being ratcheted down by assumed lower margins while estimated revenue growth rates are maintained.

Analysts have kept 2025 revenues essentially unchanged between Feb.14 (lower bar) and now. How they are factoring in tariffs, known or unknown, and demand is a crucial unknown when most economists are reducing their GDP growth forecasts. Is higher inflation merely offsetting weaker real revenues?

We know that more than 50% of U.S. households are struggling. Will the other half keep spending merrily given the rising uncertainty(ies) and weakening wealth effect?

For now, bottom up EPS are still seen rising 10.7% in 2025 to $269.91 from their current trailing $245.39.

Investors Who Were All In on U.S. Stocks Are Starting to Look Elsewhere American exceptionalism was this year’s big trade. Now some are hedging their bets.

(…) Just two months after JPMorgan Chase declared American exceptionalism “the broad and dominant” investing theme of 2025, ordinary investors across the world are looking elsewhere. Instead of riding the wave of U.S. outperformance, they are parsing the potential implications of tariff wars and major shifts in U.S. foreign policy. And for much of this volatile stretch, markets in China and Europe outpaced expectations. (…)

Trump’s America-first agenda will force European businesses to become more aggressive. (…)

In the first two months of the year, investors added more than $2 billion more than they pulled from U.S.-based exchange-traded funds that invest predominantly in European stocks, according to Morningstar. That marks a sharp reversal from the second half of 2024, when over $8.5 billion leaked from those same funds. Meanwhile, the pace of flows into U.S. equity ETFs was slower in the first two months of 2025 than in the last two months of 2024.

So far this year, the S&P 500 lost 3.6%, while the Europe Stoxx 600 gained 8.3%. (…)

Some worry that keeping all of their eggs in an American basket might no longer be the way to go. (…)

Markets around the world are trading at near-record discounts to the U.S.; the price-to-corporate-earnings ratio of companies in the Stoxx Europe 600 over the past year is around 18.7, while it is 24.6 for the S&P 500, according to Dow Jones Market Data. The Hang Seng Index’s ratio is less than 13. (…)

“You’ve got 27 countries in the EU,” he said. “You’ve got 27 different cultures and languages and retirement ages. I think the U.S. will always outperform Europe. But during certain periods, like right now, we’re going to see little pockets of opportunity.”

TECHNICALS WATCH

The S&P 500 index is below its 200-day average (and over 50% of constituents below their respective 200dma). Paul Tudor Jones has been attributed as saying: “Nothing good happens below the 200-day moving average.” (Callum Thomas)

But the 200dma (5749) is still risin… though both the 50dma and the 100dma (5933) are declining.

Source:  MarketCharts

The S&P 500 is now down 1.5% below its 200-day moving average. In the past, corrections were often associated with 5%-10% declines below this average. Bear markets tended to bottom when the index was more than 20% below its 200-dma. (ed Yardeni)

• The 13/34-Week Exponential Moving Average must be watched:

Source: Stockcharts.com (via Steve Blumenthal)

Recession or not?

Source:  The Daily Shot

Cheap or not?

Do these matter or not?

Source: Financial Times

• With New Decree, Trump Seeks to Cow the Legal Profession A presidential memorandum aimed at lawyers everywhere struck a menacing tone.

The memorandum directs the heads of the Justice and Homeland Security Departments to “seek sanctions against attorneys and law firms who engage in frivolous, unreasonable and vexatious litigation against the United States” or in matters that come before federal agencies. (…)

Mr. Trump’s memo “attacks the very foundations of our legal system by threatening and intimidating litigants who aim to hold our government accountable to the law and the Constitution.” (…)

Since being sworn into office he has targeted three firms, but the new memo seems to threaten similar punishment for any lawyer or firm who raises his ire. (…)

Trump’s attacks on law firms, and Paul Weiss’s decision to cut a deal rather than fight it out in court, have sent shock waves through the legal community. The sweeping nature of the president’s latest demand comes as he has also stepped up his public attacks on judges and the very notion that the courts can tell him what to do or not do.

The executive branch “should neither fear nor punish those who challenge it and should not be the arbiter of what is frivolous — there are protections in place to address that,” Ms. Gupta said. (…)

Mr. Trump’s Friday night memo, titled “Preventing Abuses of the Legal System and the Federal Court,” complains that lawyers have long engaged in unethical conduct in opposing him, or opposing deportations. The memo also suggests that the Trump administration will make disciplinary referrals against lawyers who pursue cases without merit “particularly in cases that implicate national security, homeland security, public safety, or election integrity.” (…)

• FCC’s Carr Threatens to Block M&A for Companies With DEI Using merger reviews as a way to stop companies from pursuing DEI initiatives is a new tactic

The US Federal Communications Commission is prepared to block mergers and acquisition proposals from companies that promote “invidious” DEI policies, according to chairman Brendan Carr. (…)

In addition to considering a company’s hiring practices, Carr said the commission may evaluate other aspects of its business, including supplier diversity efforts and programming choices. (…)