I’m going on Fox News today (Saturday, 8/23) with Jon Scott for my first foray on the “major” version of the channel. Here’s my talking points in response to the prompts that I was given.
Stock Market and Interest Rates/Powell
I think at this point, investors are looking for anything that resembles “good news.”
Most of the talk that’s happened thus far has been pretty negative, if not outright harmful toward growth.
Powell is downplaying risks of inflation and also emphasized that, in his estimation, the labor market exhibits some “curious” softness.
This checks out with what we’re seeing in the broader trends. The stated unemployment rate is low, but the labor force participation rate is falling and the number of jobs being added has slowed down considerably.
It seems like both labor demand and labor supply are shrinking and at about the same rate, which explains basically everything going on right now.
This could mean that the Fed is going to lower rates at their September meeting, which does have investors pretty excited.
The challenge here is two-fold, though:
First, the inflation rate does seem to be trending upward or, at the very least, not coming down like we would have expected. Cutting rates runs the serious risk of pushing inflation back above 3%
Second, what does this say about Fed independence? Is it being undermined in some way? In other words, is Powell being political right now to try to appease Trump and get him to back off his attacks on Fed board members?
So really, the Fed is caught between a rock and a hard place here.
They have evidence that suggests they should cut rates (the curiously soft labor market) and they have evidence that they should actually raise rates (the persistently above-two-percent inflation rate).
That they’ve elected thus far to hold rates steady probably reflects their desire to have a little bit of both, hoping that things would, at some level, work themselves out.
Coping with Tariffs
The CBO projected that the tariffs, under current projections, will reduce the federal deficit by $4 trillion over the next ten years.
Their next scheduled release of purely economic data is September 12.
This is a big figure, sure, but we need to put it into context.
Our current national debt is $37.2 trillion. Over the next ten years, it was previously projected to grow to about $57 trillion total. Their new projections have it growing to $53 trillion.
This is a step in the right direction, sure, but let’s not forget that almost every president gets a CBO score that says they’ll reduce the deficit at some point during their term only to see it never actually materialize.
Here’s Obama, for example. And here’s what actually happened.
Here’s what I think is the most alarming statistic: tariff rates in the US on basically everything have gone up substantially.
The original claim was that we were going to use tariffs strategically as a bargaining chip. Scott Bessent said that tariffs would be a loaded gun on the table that was rarely used.
That hasn’t panned out and we haven’t really gotten any deals that resulted in lower tariff rates than we had on January 19th. The EU is an exception, sure, but their tariff rates on us were incredibly low to begin with that eliminating them probably won’t have much of an effect.
Current Economic Impacts of Tariffs
The PPI ticked upward by 0.9% month over month, signaling that tariffs are starting to show up as a part of producer costs.
This makes sense and is something both Trump and Bessent pointed out was happening months ago - recall that Trump threatened Walmart if they did not “eat the tariff” and Bessent said that companies were absorbing the tariff through reduced profit just a few weeks ago.
Interestingly, this is all showing up in the data when tariffs have really only just begun to go into effect. Recall that most of them were paused until just a few weeks ago.
Canada dropping most of their retaliatory tariffs is not surprising, their economy is tied pretty heavily to ours and they, frankly, need us.
They are about a $2 trillion per year economy with 61% of their exports going to the US and 45% of their imports coming from the US, both of which we are their number one partner on.
BUT. We need them, too, especially for automotive manufacturing right here in Michigan. And I can tell you now that we’ve experienced loss after loss in our manufacturing sector over the past 8 months, which doesn’t exactly bode well for the rest of the American manufacturing sector.
Other Talking Points
Keep in mind that we currently have several court cases pending on the constitutionality of the tariffs under IEEPA.
Thus far, it looks like the courts are not buying the arguments that the President’s legal team have put forth.
It even led to a somewhat deranged and somewhat unhinged letter portending disastrous and calamitous effects if the courts do not uphold the president’s power to use tariffs in this way.
The simple fact is that Trump is doing a lot that is pro-business.
Cutting regulations, easing burdens, and focusing on energy dominance are all excellent tasks. If he doubled down on his efforts in these areas, we’d experience a booming and thriving economy the likes of which few have ever seen.
But these tariffs keep biting us. And we need to see them come to an end fast.