The implementation of President Trump’s new “reciprocal” tariffs begins today, reigniting discussions among economists regarding the potential for increased inflation, albeit possibly short-lived. This forecast will face scrutiny with the upcoming July consumer price index (CPI) data, set to be released on Tuesday, August 12.
Trump’s newly announced tariffs are effective immediately, impacting imports from numerous countries. Currently, most imports face a baseline duty of 10%, resulting in an overall average effective tariff rate exceeding 17%—the highest level recorded since 1935.
Market sentiment is overwhelmingly in favor of a Federal Reserve interest rate cut during the upcoming policy meeting on September 17. However, a significant question remains: Will the forthcoming consumer inflation updates sway the Fed’s decision to maintain rates or potentially increase them?
The US services sector remained stagnant in July, according to the ISM Services Index. The survey revealed that the sector, which constitutes a significant portion of the US economy, dropped to a near-neutral reading last month. Conversely, a different survey indicated a stronger performance in the services sector, noting that “growth gained momentum in the US service sector during July,” as reported by the S&P Global US Services Index.
Though the headlines may suggest an impending US recession, examining a wide range of macroeconomic indicators still leaves room for debate.
US factory orders declined sharply in June. Orders have decreased in two of the last three months, with new orders contracting by 4.8% from May. Excluding the often-volatile transportation sector, orders did rise by 0.4%.
The bond market increasingly appears to be focusing on the economic slowdown over concerns regarding tariff-induced inflation. These two risk factors have kept the US 10-year yield fluctuating within a range in recent weeks as investors assess the relative significance of each threat. Following Friday’s unexpectedly poor payroll data for July and substantial downward adjustments for prior months, Treasuries raised in value, resulting in a noticeable drop in yields. This suggests that investor sentiment is prioritizing a slower economy as the primary influence on bond behavior.
US hiring saw a modest rebound in July, recovering slightly after two months of minimal growth. The 73,000 increase in nonfarm payrolls last month fell short of predictions, raising concerns about a potentially slowing labor market. “This report doesn’t look good. Previous months’ figures have been notably revised downward amid a stagnating labor market,” said Brian Jacobsen, Chief Economist at Annex Wealth Management. “Last year, the Fed made a mistake by not cutting rates in July, leading to a catch-up cut at their next meeting. They might need to adopt a similar strategy this year.”
● The Progress Trap: The Modern Left and the False Authority of History
Ben Cobley
Summary via publisher (Polity)
The concept of progress, a central tenet of Western civilization, has garnered global attention. Spanning from Marxism through neoliberalism to modern identity politics, it creates a narrative suggesting that improvement is possible and that history is on our side. However, this notion also constructs a form of authority that is both fictitious and disingenuous, based on a belief in an uncertain and unknowable future. In The Progress Trap, Ben Cobley critiques this progressive ideology as an assertion of power, which often leads to a disregard for the old—people, cultures, and environments—in favor of change and innovation.
Recently, President Trump announced new tariffs affecting multiple nations, signaling a revival of the trade-war approach he originally proposed in April. The announcement led to declines in global stock markets, despite the fact that all major asset classes have recorded gains for the year as of July 31. With the administration’s renewed aggressiveness in trade policy, the short-term outlook for risk assets is once again subject to the unpredictable consequences of policy changes.
In these challenging economic times, tariffs and their repercussions are once again taking center stage in discussions about inflation and the broader market. As the situation unfolds, the economic indicators and data released in the coming weeks will shape our understanding of the long-term impacts of these policies.
In conclusion, as we analyze President Trump’s new tariff measures and their immediate effects on inflation and the economy, the importance of staying informed about incoming economic data cannot be overstated. With uncertainties ahead, ongoing scrutiny of financial indicators will prove vital in navigating these turbulent waters.
