ECONOMY WATCH

In the week ending March 15, the advance figure for seasonally adjusted initial claims was 223,000, an increase of 2,000 from the previous week’s revised level. The previous week’s level was revised up by 1,000 from 220,000 to 221,000. The 4-week moving average was 227,000, an increase of 750 from the previous week’s revised average. The previous week’s average was revised up by 250 from 226,000 to 226,250.

As shown before, there is a mini seasonality in the seasonally adjusted claims. Nothing to write home about just yet, but the 4-w m.a. is up 7.2% YoY and is up 4.2% from its mid-March 2023 level.

In the past 2 years, total employment growth (black) slowed from +3.2% YoY to +1.2%, only held positive by education, health care and government employment. In the past 12 months, private employment growth edged back into positive territory but education, health care and government employment has been slowing rapidly, from +4.0% to +2.7%.

From the latest S&P Global US Business Outlook, a tri-annual survey of manufacturers and service providers that was conducted February 10-26, before the latest round of tariff changes were due into effect in early March.

• Many survey respondents are concerned that tariffs will lead to higher prices and could disrupt supply chains.
• Amid concerns that the application of tariffs will raise prices and lead to supply constraints, a greater proportion of firms are expecting an increase in their non-staff costs. The respective net balance rose to +29% in February, up from +26% and its highest level since October 2022.
• US companies anticipate raising their output prices to a firmer degree when compared to last October. The output prices net balance rose to +34%, up from +26% and a one-year high. Again, it was manufacturers (+46%) that anticipated the greater rate of inflation when compared to service providers (+32%).
• Considering these various price trends, the outlook for profitability was little changed in February. The respective net balance for profits came in at +18%, compared to +17% last October. That is well below the series average and points to subdued profitability growth in the year ahead.
• On business investment, US companies are somewhat downbeat when assessing the outlook for capital expenditure, with a net balance of +4% down sharply since last October’s +12% and an eight-year low.

The Philly Fed Manufacturing Survey declined from 18.1 to 12.5 in March, its second consecutive decrease. Importantly, the new orders index fell 13 points to 8.7. Yet, the employment index increased from 5.3 to 19.7, its highest reading since October 2022.

The prices paid index increased 8 points to 48.3, its fourth consecutive increase and highest reading since July 2022.

Looking ahead over the next three months, 64% of the firms expect the impact of uncertainty to worsen over the next three months, and 44% expect supply chain impacts to worsen.

The share of firms expecting higher total capital spending this year (23%) slightly exceeded the share expecting lower spending (20%), and 57% expect spending to be the same. When this question was last asked in October, over 51% of the firms had expected higher spending, 21% had expected lower spending, and 27% had expected the same spending for 2025 relative to 2024.

The diffusion index for future general activity fell 22 points to 5.6 in March, its lowest reading since January 2024.

The future new orders index dropped 31 points to 2.3, its lowest reading since May 2023.

US Existing-Home Sales Top Estimates, Rebound From Bad Weather

Sales of previously owned homes in the US unexpectedly bounced back in February, spurred by a greater supply of houses and improved weather heading into the crucial spring period.

Contract closings increased 4.2% to an annualized rate of 4.26 million in February, according to National Association of Realtors figures released Thursday. The figure exceeded all estimates in a Bloomberg survey of economists.

The supply of previously owned homes jumped 17% from a year ago to 1.24 million, the most for any February since 2020. Even so, the median sales price increased 3.8% from a year ago to $398,400 — a record for the month — extending a run of year-over-year price gains dating back to mid-2023.

Wolf Richter has a better analysis …

Sales of existing homes – single-family houses, townhouses, condos, and co-ops – that closed in February fell by 5.2% from the abysmally low levels a year ago to 257,000 deals, not seasonally adjusted, down by 27% from February 2022 when home sales began their free-fall after prices had spiked to ridiculous levels, thereby crushing demand.

The blue lines connect the Februarys.

… but he should have taken into account that 2024 was a leap year. On a per day basis, existing home sales were down 1.8% YoY.

Anyway, why should we care. The housing market is still totally depressed as Ed Yardeni illustrates. Note the recent decline in pending sales.

Bank of Canada unveils new playbook as Trump’s tariff threats create mayhem

The Bank of Canada is adjusting how it conducts monetary policy to navigate the massive uncertainty caused by U.S. President Donald Trump’s erratic tariff threats, Governor Tiff Macklem said Thursday.

In a speech in Calgary, Mr. Macklem said the central bank will focus on minimizing risks when setting interest rates, rather than trying to figure out an optimal path for monetary policy based on muddy economic forecasts.

“If we were to guess where the economy is heading and make policy to optimize that outcome, we’d risk getting it wrong. Our actions could be ineffective or even make the outcome worse,” Mr. Macklem said, noting that U.S. tariff policy is in flux and the effect of a trade war on inflation and economic growth in Canada remains highly uncertain.

“We need to set policy that minimizes the risk. That means being less forward-looking than normal until the situation is clearer. And it may mean acting quickly when things crystallize. We need to be flexible and adaptable,” he said. (…)

“We know that some prices will rise when the tariffs hit – that’s not something monetary policy can stop. What monetary policy can – and must – do is prevent those initial, direct price increases from spreading,” Mr. Macklem said. “Simply put, we need to make sure that a tariff problem doesn’t become an inflation problem.”

The U.S. President’s aggressive use of tariffs has created a “new economic crisis” for Canada, Mr. Macklem told the audience at an event hosted by Calgary Economic Development. However, it’s far from clear how the trade war with the U.S. will play out. (…)

This back-and-forth and pervasive uncertainty means it’s almost impossible to do economic forecasting, Mr. Macklem said. “It’s very hard for any of us on Governing Council to have high conviction about the most likely outcome. Several outcomes can all look plausible.” (…)

But if high and broad-based tariffs are applied and remain in place for an extended period of time, “that could very well lead to a recession,” Mr. Macklem said in a press conference after the speech. (…)

“The more inflationary the impact, the less scope monetary policy has to support the economy. Instead, it needs to put more focus on anchoring inflation expectations, which risk drifting up when inflation rises more and more quickly,” Mr. Macklem said. (…)

“An environment where the Bank of Canada is going to put more weight on realized data and less weight on forward-looking impacts from trade policy is an unambiguously hawkish shift in the current context,” Andrew Kelvin, head of Canadian and global rates strategy at Toronto-Dominion Bank wrote in a note to clients following the speech.

“Ultimately, we believe that the damage wrought by trade disruptions will warrant additional easing this year, and we are going to continue to hold our 2 per cent terminal rate forecast for July. Certainly though, between the February CPI data, the March BoC interest-rate announcement, and today’s speech, the odds of a pause somewhere along the way to 2 per cent does seem to be rising,” Mr. Kelvin said. (…)

Wednesday, reviving the infamous pandemic transitory team, Jay Powell told us that the FOMC will be more attentive to downside risks to growth versus upside risks to inflation. While the BoC will be less forward-looking, i.e. more data dependent, the Fed will be looking through a “transitory” spike in inflation due to higher tariffs.

The Fed, and Trump team, are hoping that consumers will also see through “transitory inflation” and keep spending. They may actually get stagflation. Good luck with that.

I have previously documented the McKinley tariff period (Fear). In 2016, the Cato Institute, using Alan Reynolds 1979 article about the Great Crash, chronicled the Smoot-Hawley tariff era. Things are far more complex than many think. History does rhyme…

Many scholars have long agreed that the Smoot-Hawley tariff had disastrous economic effects, but most of them have felt that it could not have caused the stock market collapse of October 1929, since the tariff was not signed into law until the following June. Today we know that market participants do not wait for a major law to pass, but instead try to anticipate whether or not it will pass and what its effects will be.

Consider the following sequence of events:

The Smoot-Hawley tariff passes the House on May 28, 1929. Stock prices in New York (1926=100) drop from 196 in March to 191 in June. On June 19, Republicans on the Senate Finance Committee meet to rewrite the bill. Hoping for improvement, the market rallies, but industrial production peaks in July, and dips very slightly through September. Stocks rise to 216 by September, hit­ting their peak on the third of the month. The full Senate Finance Committee goes to work on the tariff the following day, moving it to the Senate floor later in the month.

On October 21, the Senate rejects, 64 to 10, a move to limit tariff increases to agriculture. “A weakening of the Democratic-Progressive Coalition was evidenced on October 23,” notes the Commercial and Financial Chronicle. In this first test vote, 16 members of the anti-tariff coalition switch sides and vote to double the tariff on calcium carbide from Canada.

Stocks collapse in the last hour of trading; the following morning is christened Black Thursday.

On October 28, a delegation of senators appeals to President Hoover to help push a tariff bill through quickly (which he does on the 31st). The Chronicle headlines news about broker loans on the same day: “Recall of Foreign Money Grows Heavier-All Europe Withdrawing Capital.” The following day is stalemate. Stocks begin to rally after November 14, rising steadily from 145 in November to 171 in April. Industrial production stops falling and hovers around the December level through March.

On March 24, 1930, the Senate passes the Smoot-Hawley tariff, 222 to 153. Debate now centers on whether or not President Hoover will veto. Still, stocks drop 11 points, to 160, in May. On June 17, 1930, despite the vigorous protests of a thousand economists, Hoover signs the bill into law, noting that it fulfills a campaign promise he had made, and stocks drop to 140 in July.

The Commercial and Financial Chronicle dated June 21, 1930 led off with the major events of the week –“the signing by the President of the Smoot-Hawley tariff bill” and “a renewed violent collapse of the stock market.”

Without ever quite linking the two events, the Chronicle did observe that “if the foreigner cannot sell his goods to us he cannot obtain the wherewithal to buy our goods.” Other sections noted that international stocks were particularly hard hit, that 35 nations had vigorously protested the tariff and threatened retaliation, and that Canada and other nations had already hiked their own tariffs “in view of the likelihood of such legislation in the United States.”

It may be hard to realize how international trade could have so much impact on the domestic economy. For years, in explaining income movements in the Thirties, attention has instead been focused on federal spending and deficits. Yet on the face of it, trade was far more important: exports fell from $7 billion in 1929 to $2.5 billion in 1932; federal spending was only $2.6 billion in 1929 and $3.2 billion in 1932. In 1929, exports accounted for nearly seven percent of our national production, and a much larger share of the production of goods (as opposed to services). Trade also accounted for 15 to 17 percent of farm income in 1926–29, and farm exports were slashed to a third of their 1929 level by 1933.

Even these numbers, however, understate the significance of trade. Critical portions of the U.S. production process can be crippled by a high tax on imported materials. Other key industries are heavily dependent on exports. Disruptions in trade patterns then ripple throughout the economy. A tariff on linseed oil hurt the U.S. paint industry, a tariff on tungsten hurt steel, a tariff on casein hurt paper, a tariff on mica hurt electrical equipment, and so on.

Over eight hundred things used in making automobiles were taxed by Smoot-Hawley. There were five hundred U.S. plants employing sixty thousand people to make cheap clothing out of imported wool rags; the tariff on wool rags rose by 140 per cent.

Foreign countries were flattened by higher U.S. tariffs on things like olive oil (Italy), sugar and cigars (Cuba), silk (Japan), wheat and butter (Canada). The impoverishment of foreign producers reduced their purchases of, say, U.S. cotton, thus bankrupting both farmers and the farmers’ banks.

It should be obvious that an effective limit on imports also reduces exports. Without the dollars obtained by selling here, foreign countries could not afford to buy our goods (or to repay their debts).

From 1929 to 1932, U.S. imports from Germany fell by $181 million; U.S. exports to Germany fell by $277 million. Americans also had little use for foreign currency, since foreign goods were subject to prohibitive tariffs, so the dollar was artificially costly in terms of other currencies. That too depressed our exports, which turned out to be particularly devastating to farmers-the group that was supposed to benefit from the tariffs.

There had already been some damage done (particularly to farm exports) by the tariff legislation of 1921 and 1922. As Princeton historian Arthur Link points out, however, “its only important changes were increased protection for aluminum, chemical products, and agricultural commodities.” Smoot-Hawley broadened the list to include 3,218 items (including sauerkraut), and 887 tariffs were sharply in­creased, on everything from Brazil nuts to strychnine. Clocks had faced a tariff of 45 percent; Smoot-Hawley raised that to 55 percent, plus up to $4.50 apiece. Tariffs on corn, butter, and unimproved wools were roughly doubled. A shrinking list of tariff-free goods no longer included “junk,” though leeches and skeletons were still exempt. (…)

A number of seemingly separate explanations of the Great Crash fit together quite well once the importance of anticipated tariffs is acknowledged. Charles Kindleberger, in Manias, Panics, and Crashes, describes some structural collapse in the financial system: “Lending on import, for example, seems to have come to a complete stop.” But refusal to finance imports makes perfect sense if lenders were correctly anticipating steep tariffs ahead. There were early cancellations of import orders in 1929 that likewise reflected rational expectations, and import prices were among the first to fall. (…)

The market suffered continual policy assaults after 1930. In early April of 1932, the Commercial and Financial Chronicle reports “the market fell into a complete collapse . . . owing to the approval by the House of Representatives of an increased tax on stock sales.”

The Dow bottomed on July 8, when (as the Chronicle of the following day reported) there had been some good news –the Tariff Commission had trimmed 18 tariffs, and a House subcommittee was looking into ways to cut taxes by eliminating duplication with states.

On Tuesday, September 19, candidate Roosevelt called the tariff “the road to ruin” and pledged to negotiate reductions in tariffs as soon as he took office. The following Saturday, the Chronicle was astounded that the “market again sharply reversed its course, and on Wednesday prices suddenly surged upward in a most sensational fashion.”

MAXIMUM TRANSPARENCY

Via the NYT:

The Trump administration scrambled to minimize fallout on Thursday after exposing personal information, including Social Security numbers, of hundreds of congressional staff members, intelligence researchers and even an ambassador when releasing files pertaining to the death of President John F. Kennedy.

The exposure of personal details, as well as long-guarded secrets about Cold War spycraft, came as a result of the National Archives uploading 64,000 pages of documents related — some very tangentially — to Kennedy’s 1963 assassination.

White House officials acknowledged on Thursday that it was only after the papers were made public that they began combing through them for exposed details.

Normally, personal information like names, Social Security numbers and home addresses are scrubbed from declassified files.

Mr. Trump’s eagerness to make the files public without redactions, fulfilling a promise he has made since his first campaign, caused the private information to be exposed.

“President Trump delivered on his promise of maximum transparency,” Karoline Leavitt, the White House press secretary, said in an email.

His national security team was stunned and forced to scramble after the president announced on Monday that he would release the Kennedy documents with only 24 hours’ notice.

Tulsi Gabbard, the director of National Intelligence, championed the untouched pages. “President Trump is ushering in a new era of maximum transparency,” she wrote in an X post on Tuesday, adding, “Promises made, promises kept.”

A former lawyer for the Trump campaign, Joseph diGenova, 80, was among the people whose personal data was revealed to the public, according to The Washington Post. “It’s absolutely outrageous,” Mr. diGenova, a frequent and ardent supporter of the president, told the newspaper, adding, “It’s like a first-grade, elementary-level rule of security to redact things like that.”

The same Karoline Leavitt said on March 11: “Tariffs are a tax cut for the American people”

During a White House press briefing on March 11, 2025, Press Secretary Karoline Leavitt stated that “Tariffs are a tax cut for the American people”. This statement came during a tense exchange with Associated Press reporter Josh Boak, who challenged her characterization of tariffs.

When Boak questioned her understanding of tariffs, saying “I’m sorry, have you ever paid a tariff? Because I have. They don’t get charged on foreign companies. They get charged on the importers,” Leavitt responded by calling his question “insulting” and said she regretted giving a question to the Associated Press.

I am sure she does…

Fed Projections See an Economy Dramatically Reset by Trump’s Election Not long ago, Federal Reserve officials presumed that 2025 would simply be about getting to the soft landing

(…) The latest projections point to the prospect that tariffs covering a swath of goods and materials will send up prices while sapping investment, sentiment and growth, at least in the short run. 

“We now have inflation coming in from an exogenous source, but the underlying inflationary picture before that was basically 2½% inflation, 2% growth and 4% unemployment,” said Fed Chair Jerome Powell on Wednesday.

Officials projected weaker growth, higher unemployment and higher inflation than they had anticipated in December. Moreover, nearly all officials judged that if their forecasts were to be proven wrong, it would be in the direction of even softer growth, more joblessness and firmer price growth. 

A combination of stagnant growth and higher prices, sometimes called stagflation, could make it harder for the Fed to cut interest rates this year to pre-empt any slowdown. (…)

Stocks rallied because a majority of officials penciled in two rate cuts for this year, the same as in December. Powell held out, with low conviction, the prospect that “tariff inflation” might not demand any meaningful change in the Fed’s interest-rate posture. (…)

The number of officials who penciled in fewer cuts compared with December went up. And Powell conceded that a “highly uncertain environment” led some officials to simply not fuss over big changes to the rate outlook. “There is a level of inertia where you just say, maybe I’ll stay where I am,” he said. (…)

On Wednesday, Powell allowed for the possibility that such a “transitory” diagnosis could be appropriate “in the case of tariff inflation.” (…)

“You have to figure out how much is transitory and how much is likely to be perpetuated by these second-round effects, and there is no clean way of doing that.”

Officials could be hard-pressed to declare price increases from tariffs as temporary if they set in motion a reordering of global production processes that takes years to play out. (…)

“You’re basically saying, ‘Look, we have a potential inflation problem here. We’re going to be focused on that, and when we get more evidence about what’s happening on the growth side, we’re willing to react at that point—and not before,’” she said. “No one would like to have to do it that way. But it may be that in this environment, that’s what they’re going to have to do.”

Policy makers now expect GDP growth of 1.7% this year, down from the 2.1% they estimated in December, and they think their preferred measure of core inflation will hover at 2.8% instead of 2.5% as they predicted three months ago.

Bloomberg:

Powell Downplays Growing Risks, Sees Tariff Impact as Transitory

“As I’ve mentioned, it can be the case that it’s appropriate sometimes to look through inflation if it’s going to go away quickly without action by us, if it’s transitory,” Powell said.

He called that scenario the “base case,” but then hedged, saying officials “really can’t know” if the effect will be temporary. (…)

Asked about sagging sentiment from businesses and consumers, Powell said “hard data” show the economy is still solid. The Fed chief also went on to express confidence that long-run inflation expectations remain well anchored, despite a series of readings from a University of Michigan survey calling that into question. The most recent report showed consumers expect prices to rise at an annual rate of 3.9% over the next five to 10 years, the highest in more than three decades.

Yet Powell largely dismissed the data, calling it “an outlier” more than once. (…)

He also did not seem to care of Tuesday’s Empire State surveys. Demand and expectations in both manufacturing and services were down big time with rising prices.

Here’s another one by the Atlanta Fed:

Business Inflation Expectations Increased to 2.5 Percent

The Fed Is Clueless, Too. And That’s OK

“Never be embarrassed to admit ignorance,” I was told on my first day of work as a journalist. “It’s the first rule of journalism.” I’ve never forgotten that, and the same applies to central bankers, as the Federal Reserve’s Jerome Powell made clear when he repeatedly told the press that he didn’t know what was going to happen with US trade policy, or what effect it would have on the economy. (…)

Markets also liked his response to a question about the sharp rise in consumer inflation expectations recently flagged by the University of Michigan’s regular survey, which he dismissed as an “outlier.” That implies A) that the Fed isn’t too worried about rising inflation expectations yet, and B) that they haven’t been looking at all the available surveys:

Whether this was willful denial or a belief that tariffs are confusing the issue so much that surveys can’t be trusted, it bolstered the market’s growing confidence that the Fed will cut rates at least twice this year — probably three times. The implicit path for fed funds predicted by the futures market (according to Bloomberg’s trusty World Interest Rate Probabilities function) has shifted significantly since Trump’s inauguration:

(…) Meanwhile, the dot plot, in which each committee member predicts the future course of the fed funds rate, shows a Fed losing confidence in cuts. Using my customary lo-fi approach of cutting and pasting from the press release using Paint, this is how the projections changed between December and March for interest rates at the end of this year:

(…) the number who expect to cut further has dropped to two from five, while those expecting only one cut or none has doubled from four to eight. The mean expected end-2025 rate has risen from 3.63% to 4.0%. Effectively, that’s 1½ cuts that the governors now think they won’t make — even as the market still pencils in 3.63%. In this case, the mean seems plainly more useful than the median. The committee still expects to cut twice, but the risks have emphatically moved to cutting less rather than more. (…)

These central bankers are honestly admitting to rising uncertainty and risks of stagflation, while implicitly promising to try not to break the economy. It’s hard to see this as a significant turning point that should bring people into risk assets. 

One final point for the administration: Tariffs may be a useful tool in negotiations, but threats aren’t costless. Amping up the uncertainty has the real-world consequence of deterring people from taking risks. There are limits to how far trade policy can continue to be conducted this way.

• Here are the median numbers as presented in the Fed’s summary, with arrows added by FT’s Unhedged. There is a word for this sort of thing, and it is a bad word: stagflation.

Ed Yardeni:

Federal Reserve Chair Jerome Powell used the word “uncertainty” 16 times in his press conference today. We sympathize. At the outset, it’s impossible to know what tariffs will be imposed by the US on April 2., on which countries, and for how long. When the specifics are revealed, it will still be difficult to forecast their impact on economic growth and inflation in the US and around the world. Another known unknown is the response of America’s trading partners to reciprocal tariffs. Will they lead to negotiated reciprocal reductions in tariffs or to escalating retaliatory tariffs? (…)

In his presser today, Powell repeatedly said that the Fed was in no hurry to lower rates. To us, the operative word is “lower,” suggesting that monetary policy continues to have a dovish bent. While we remain in the none-and-done camp for the rest of the year, we acknowledge that the FFR would be lowered readily if the unemployment rate started to increase quickly. The FOMC’s median projection is that the unemployment rate will finish the year at 4.4%, up from 4.3% in last December’s projection. (…)

Investors are glad to know that the Fed Put remains on standby if needed to support the economy. (…)

Nearly all FOMC participants agreed that the unemployment rate and GDP growth will probably get worse. (…)

A real possibility is that the Fed might not be willing to cut interest rates at all if inflation expectations become unanchored. Consumers’ inflation expectations have been rising recently, and the Atlanta Fed’s measure of business inflation expectations rose from 2.0% in December to 2.5% today. Import price inflation, which doesn’t include tariffs, also increased in February.

The bond market is signaling that inflation from tariffs is likely to be transitory. We agree because unit labor costs inflation, which is the underlying source of inflation in a services economy like ours, should remain contained around 2.0% if productivity growth remains strong, as we expect.

Yes, we’ll get the Fed put if the economy weakens, which seems to be most people’s base case.

But what if inflation is not transitory? How will the Fed deal with stagflation, slowing growth and rising inflation?

Fiera Capital has now made “Inflation Revival” its main scenario with a 55% probability. “Stagflation” is scenario 2 with 25% odds. That’s 80% probability that inflation is 3.0% and above.

And shouldn’t we discount productivity growth for a while given the chaos in supply chains? Read this NYT Boeing story.

TARIFFS WATCH: In the Real World

Trump’s Tariffs Could Deal a Blow to Boeing and the Aerospace Industry

Boeing is the kind of manufacturer — one that exports billions of dollars of goods — that President Trump says he wants to protect and nurture.

But his tariffs could have the opposite effect on the company’s suppliers. (…)

Duties on aluminum and steel, two of the most important raw materials used in aircraft, are expected to raise manufacturing costs. But the industry is far more concerned by tariffs that take effect on goods from Canada and Mexico next month, which could disrupt the highly integrated North American supply chain.

“These tariffs are particularly fraught for an industry like aerospace that has been duty-free for decades,” said Bruce Hirsh, a trade policy expert at Capitol Counsel, a lobbying firm in Washington, which has aerospace clients. “Parts are coming from everywhere.”

Aerospace experts say the industry is an example of U.S. manufacturing prowess. It offers well-paying jobs and has produced one of the largest trade surpluses of any industry for years. Aerospace is expected to export about $125 billion this year, according to IBISWorld, second only to oil and gas. (…)

After months of turmoil, including a nearly two-month strike, Boeing has steadily increased production of the Max, its best-selling jet, and other planes. But the tariffs could hurt the companies that supply it and other aerospace manufacturers. Aluminum makes up about three-fourths of the contents of the Max. Steel accounts for a much smaller but still substantial share.

The direct effects of the tariffs on Boeing will be limited, Brian West, the company’s chief financial officer, said at an investor conference on Wednesday. The company has a lot of inventory on hand and the company’s spending is already overwhelmingly concentrated in the United States. In addition, a rise in metal prices would amount to a less than 1 percent increase in the costs of making planes, he said.

But the tariffs could take a toll on companies further down the aerospace supply chain, which have struggled for years with material and labor shortages.

“What we do worry about is availability of parts because this is a broad complicated supply chain and people have different levels of exposure to it,” Mr. West said.

In all, the tariffs could raise costs for the aerospace industry by about $5 billion annually, said Kevin Michaels, a managing director of AeroDynamic Advisory, a consulting firm. A vast majority of that would come from the tariff on goods from Canada and Mexico. And the threat of a trade war would only compound the consequences.

“Not only are the country tariffs bigger, but countries can retaliate,” Mr. Michaels said. “And, boy, is Canada mad.” (…)

Parts of Boeing’s 787 and 777 jets are built in Canada, which is also home to CAE, a leading manufacturer of flight simulators. Pratt & Whitney makes engines for helicopters and other aircraft in Quebec.

Mexico is also home to many suppliers, big and small. Collins Aerospace, Honeywell Aerospace and GE Aerospace design or produce components for commercial and business jets there.

If tariffs are imposed, analysts said, moving that production to the United States would be difficult, if not impossible.

“That’s going to take an awful long time to happen, if in fact it ever does,” Jerrold Lundquist, an industry consultant, said. “There’s fundamental economics as to why that supply chain is distributed in the first place. It’s usually labor costs, but also material availability and things like that.”

The industry operates on long time horizons — planes take years to design and months to make and are typically used for decades — so decisions to move operations are not made lightly. There aren’t enough skilled aerospace workers in the United States, and suppliers have struggled for years to hire enough workers.

In a report to Congress in November, a coalition representing the industry, workers and safety experts concluded that the “aerospace supply chain is vulnerable to labor shortages, obstacles in critical materials and the health of supporting infrastructure.”

Even the threat of an escalation in trade tensions is hurting aerospace manufacturers, industry experts said.

“The strategic decisions in a lot of cases are frozen as a result of this,” Mr. Michaels said.

• Copper price hits $10,000 on US tariff fears

That is the LME price. “New York copper traders are also paying a record premium over the price in London to buy copper, as they try to secure supply ahead of possible US tariffs.” (…)

CONSUMER WATCH

Data from the Fed shows that households’ ability to come up with $2,000 for an emergency expense within the next month is at the lowest level since the survey started in Q4 of 2015. Taking into account that the CPI level today is 35% higher than in 2015, the situation is even worse.

Sources: SCE, Federal Reserve Bank of New York, Haver Analytics, Apollo Chief Economist

Florida Explores Ditching Property Tax as Home Prices Soar State lawmakers have filed a raft of bills aimed at reducing property taxes—or gutting them altogether

(…) The property-tax system is among the top issues under discussion in the legislative session that began this month. The attempted overhaul represents one of the most serious efforts ever. A full repeal would be the first such move in the nation. 

Florida’s lawmakers have filed dozens of bills on the issue, ranging from proposals to end property taxes to smaller tweaks to give targeted help to homeowners. (…)

Revolts against property taxes have erupted elsewhere in recent months as homeowners’ tax bills have risen alongside home values. Property values in the U.S. increased 27%, adjusted for inflation, between January 2020 and July 2024, according to the Tax Foundation, a think tank. (…)

A number of states including Wyoming, Kansas and Montana are weighing significant property-tax limitations, he said. In November, voters in North Dakota rejected a ballot measure that would have eliminated property taxes. (…)

Florida’s effective property-tax rate ranked 28th nationally in 2023, according to an analysis by the Tax Foundation. But as real-estate values have surged, the total amount levied has roughly doubled over the past decade, reaching more than $55 billion in the 2024-25 fiscal year, according to a recent presentation by Azhar Khan, staff director of the Florida Senate’s finance and tax committee. (…)

Among the legislative bills filed for the current session in Tallahassee are several that would increase exemptions that reduce the taxable value of a property. Included would be the homestead exemption, which applies to a home used as a primary residence. (…)

In Florida, which has no personal income tax, property taxes play a significant role in paying for schools, police, parks and other services. They account for 18% of county revenue, 17% of municipal revenue and 50% to 60% of school-district revenue, according to a recent report by the Florida Policy Institute, a nonprofit focused on economic mobility. If property taxes were eliminated, the sales tax would have to be at least doubled, to 12%, to make up for the lost revenue, the report said. (…)

In his State of the State speech, DeSantis ruled out raising any state taxes to replace property taxes. He later suggested that getting rid of waste and excessive spending by local governments would reduce the amount of revenue they need. (…)