Tag: Trumponomics Watch
Trumponomics Already Taking Toll on U.S. Economy
From the New York Times:
“The United States economy is starting to show signs of strain as President Trump’s abrupt moves to shrink federal spending, lay off government workers and impose tariffs on America’s largest trading partners rattle businesses and reverberate across states and cities.”
“Funding freezes and firings of federal workers combined with the prospect of costly trade wars are souring consumer sentiment, raising inflation expectations and stalling business investment plans, according to recent economic surveys.”
“Local economies are also bracing for a sudden withdrawal of fiscal support, forcing officials to contemplate tax increases or municipal bond offerings to stabilize their budgets. While Mr. Trump has acknowledged that his policies could bring some initial pain, the early warning signs suggest that his blunt approach could come with more ominous risks to the economy.”
Trumponomics: Inflation Is Rising
3%
U.S. inflation rose to 3% in January, strengthening the case for the Federal Reserve to extend a pause on interest rate cuts, reported the New York Times. The Consumer Price Index jumped more than expected, data from the Bureau of Labor Statistics showed on Wednesday, rising 0.5% from December in what was the fastest monthly increase since August 2023. Last month, the annual pace was 2.9%. “Core” C.P.I., which more closely reflects underlying inflation by removing volatile food and energy prices, also showed little improvement. It rose 0.4% from December or 3.3% on a year-over-year basis, both higher than economists expected. The monthly increase in core prices was the highest since April 2023.
Trumponomics: Eggflation Continues to Escalate
$7.30
The cost of eggs continues to hit record highs in the US, with data from the USDA showing wholesale prices above $7.30 for a dozen large white eggs (see data here; click on “Egg Markets Overview”). The figure is up from around $5 at the beginning of the year and almost three times as much year over year.
Trump Tax Cuts to Cost Up to $11.2 Trillion
$5–$11.2 trillion
“President Donald Trump’s tax cut wish list would cost would the federal government between $5 trillion and $11.2 trillion in lost revenue over the next decade, according to a new analysis from a budget watchdog group,” Bloomberg reports.
Trumponomics Watch: Trump’s Tariffs Are Terrible
“Stock futures fell and oil prices rose Sunday after the U.S. imposed sweeping tariffs on imports from major trading partners, jolting Wall Street’s outlook for the American economy,” the Wall Street Journal reports. “Futures linked to the tech-heavy Nasdaq Composite led the declines, falling by more than 2%, while the S&P 500 slipped by 1.6%. Dow Jones Industrial Average futures slid by about 1.1%, or around 500 points.”
The Dow Jones Industrial Average shed 421 points, or 1%, to 44,123 in early morning trading. The broad-based S&P 500 lost 1.5%, while the tech-heavy Nasdaq composite index tumbled 1.8%.
On Saturday, Mr. Trump signed an executive order that imposes 25% tariffs on imports from Canada and Mexico, while adding an additional 10% levy on goods from China. Hours later, Canada responded with retaliatory tariffs of its own, while Mexico said it was also planning to issue tariffs on the U.S. as well, adding to the potential fallout from a trade war with two of the U.S.’ closest trading partners.
Mr. Trump’s announcement prompted some economists to project that the stiff new tariffs could dampen U.S. economic growth and cause an increase in job losses.
“This development came sooner than we anticipated in our baseline forecast and will lead us to downgrade our 2025 global forecast,” Oxford Economics wrote in a Feb. 3 research note. “The latest set of tariffs will lead to weaker GDP growth, higher unemployment, higher interest rates, and higher inflation this year in Canada, Mexico, and the U.S. than in our January baseline forecast.”
Mass Deportations Threaten U.S. Economy
From CNBC:
“A labor market boosted by immigration after the Covid pandemic faces a threat from President-elect Donald Trump’s plan for mass deportation of undocumented immigrants.”
“Foreign-born workers have been taking open positions in sectors from construction and agriculture to technology and health care, fields where hiring companies have struggled to find domestic labor. Immigrant workers made up 18.6% of the workforce last year, a new record, according to Bureau of Labor Statistics data.”
“The timing and scope of Trump’s plan remains to be seen, but companies and economists are trying to figure out how much the deportations could hurt the U.S. economy.”
Federal Debt Could Spike Trump’s Big Economic Promises
The Associated Press: Donald Trump has big plans for the economy — and a big debt problem that will be a hurdle to delivering on them.
Trump has bold ideas on tax cuts, tariffs and other programs, but high interest rates and the price of repaying the federal government’s existing debt could limit what he’s able to do.
Not only is the federal debt at roughly $36 trillion, but the spike in inflation after the coronavirus pandemic has pushed up the government’s borrowing costs such that debt service next year will easily exceed spending on national security.
The higher cost of servicing the debt gives Trump less room to maneuver with the federal budget as he seeks income tax cuts. It’s also a political challenge because higher interest rates have made it costlier for many Americans to buy a home or new automobile. And the issue of high costs helped Trump reclaim the presidency in November’s election.
“It’s clear the current amount of debt is putting upward pressure on interest rates, including mortgage rates for instance,” said Shai Akabas, executive director of the economic policy program at the Bipartisan Policy Center. “The cost of housing and groceries is going to be increasingly felt by households in a way that are going to adversely affect our economic prospects in the future.”
Trumponomics Watch: Trump’s Policies Already Clouding Mortgage Rates
“Donald Trump’s election win is clouding the outlook for mortgage rates even before he gets back to the White House,” the Associated Press reports. “The president-elect campaigned on a promise to make homeownership more affordable by lowering mortgage rates through policies aimed at knocking out inflation. But his proposed economic agenda could potentially set the stage for mortgage rates to move higher.”
