Recent polls show voters are unsure about the administration’s trade agenda. This is likely to cast more and more flawed but robust economy Trump inherited in the recession.
Three major US stock indices fell on Friday following new economic data. The market has been judging for several weeks with policy moves and a pile of statements by White House officials. Some of them contradict each other about how much pain consumers expect from a change in the administration.
Consumers have expressed concern. But the risk is that this goes beyond attitudes and infection behavior.
Mark Hamrick, Senior Economic Analyst, Bankrate
The broad S&P 500 index has returned to Earth after Trump won $3 trillion in the weeks since he won the election. Not only did they erase these profits since peaking on February 19, they also lost more than 3.5% since Election Day, sending tremors through 401(k)holder retirement accounts, forcing some financial advisors to play therapists to fascinated clients.
Consumer spending, which strengthens about two-thirds of the US economy, has slowed down, but it has hardly collapsed at the beginning of this year. Retail sales rose modest 0.2% in February, despite households prioritizing essentials over non-essential purchases. New car sales rose 1% in the first quarter, but industry analysts are now afraid of a comeback by car manufacturers and dealers raising prices to offset prices.
Meanwhile, many brands rely on supporting sales to wealthy customers, and industry executives predict that growth will slow down in the future.
This will encourage the Federal Reserve to refrain from reducing borrowing costs. Policymakers weighing the latest data are likely to decide that “we need to pull back the (interest) rate cuts later in the year,” Joe Brusseras, chief economist at the accounting firm RSM, wrote on Friday.
For consumers, that means that 20% North credit card fees are set to stick. The popular 30-year fixed mortgage fees have been eased to a still soft 6.71%, but policy uncertainty threatens recent improvements in the widespread, unruly housing market. And while the 10-year Treasury bond yields have been cooled recently, analysts see it as reflecting growing concerns about the direction of the economy.
“All of these changes have brought the thick fog down,” Richmond’s Federal Reserve President Tom Birkin said in public remarks Thursday. “It’s not everyday. The fog of the ‘hard-predictable’ type. It “has zero vision and attracts hazard type mist and turns it on.”
Corporate anxiety
Tariff worries are also running through the boardroom as executives prepare fresh revenue reports for executives to begin releases around mid-April.
S&P Global Market Intelligence said last week that nearly 900 non-financial companies mentioned tariffs in their recent revenue calls. However, many companies have not yet considered these impacts in their forecasts. This is a retention pattern that “reflects a huge level of uncertainty about when tariffs will be enacted, how long, what speeds, what exceptions will apply, and what retaliation measures will mean.”
Government economists said Thursday that GDP expanded by 2.4% at the end of 2024, slightly higher than expected, with relatively strong consumer spending offsetting the decline in investments. However, productivity is expected to be slower and slower.
The Federal Reserve Bank of Atlanta is currently forecasting a contraction in the first quarter, with many companies saying it is likely that they will increase their orders before they tighten their wallet strings once tariffs are settled. JPMORGAN and KPMG are foreseen GDP to grow by just 1% in the first quarter, with Goldman Sachs downgraded their outlook from the previous 1% to 0.6% after data on Friday.
JPMorgan does not rule out rates “nearly 0%.”
Campaign Promise
The current situation is in contrast to the economic renaissance Trump launched from his first day in office.
He vowed to stumps to begin price reductions “quickly” but the consumer price index has been rattling stubbornly between 2.4% and 3.7% since June 2023. On Friday, the Fed’s preferred inflation meter was hotter than expected at 2.8% in February.
Other economic milestones also look far away.
We have a market that no one has ever seen.
President Donald Trump
Trump has pledged to cut energy costs by half within a year, but oil and gas producers are now worried that instability could cut prices and lead production to throttle to protect margins. The industry has poured tens of millions of dollars into Trump’s reelection, but drillers denounced him in an anonymous investigation released Wednesday. The unknown executive called Trump’s “drill, baby, drill” mantra, “is nothing but the cry of a myth and populist rally,” and said he “is a disaster in the administration a disaster for the commodity market.”
Gas prices are nearly 40 cents cheaper than a year ago, but are beginning to rise seasonally.
Trump has also pledged to “take” jobs and factories in other countries and create “thousands of businesses and trillions of dollars of wealth,” but manufacturing output was contracted last month, with employment levels in other sectors remaining flat.
The administration is within two months of four years, and even explosive policy changes can take time to ripple over the economy. Many Republican priorities, including tax cuts and reductions in safety net programs, are being debated in Washington. And some of the president’s rapid deregulation and efforts to support the government have been suspended or blocked by courts, eliciting attacks by Trump and his allies, and are unhappy with judicial checks of their actions.
“Americans continue to feel the prolonged impact of the four-year economic disaster under Joe Biden,” a White House spokesperson said in a statement Friday. “The Trump administration has focused on cutting Biden’s runaway spending that promoted inflation in the first place, and the decline in energy prices proves that President Trump’s First Generation already provides much needed relief to everyday Americans.”
When he announced his auto tariffs on Wednesday, the president vowed that more growth is turning the corner. He predicted tariff revenues of $600 billion to $1 trillion in “a year from now,” and said, “I’m going to have a market like no one has ever seen.”
“You’ll see it actually be amazing,” Trump said. “And I think you already have it.”