Trump’s trade tantrum leaves American economy needing more

Sitting next to Bahrain Crown Prince Salman bin Hamad bin Isa Al Khalifa who stared ahead awkwardly President Donald Trump carried on with one of his wandering soliloquies in front of reporters on July in the Oval Office With his typical bravado Trump emphasized his suspiciously instant positive effect on the U S market telling the media Everyone would say we are the hottest country anywhere in the world We were a dead country a year ago and now we have the hottest country Two weeks later after the release of the latest gross domestic product readings Trump continued his blitz messaging campaign on Truth Social Q GDP JUST OUT WAY BETTER THAN EXPECTED Yet despite his unrivaled self-promotional marketing skills the president has left multiple wondering whether we really are better off than a year ago Since Trump s so-called Liberation Day on April plenty of economists have revised their GDP expansion estimates downward for the years ahead and kept them well below the U S historical average even after the president s much-ballyhooed commerce deals have been disclosed GDP increase came in strong for the quarter but only after contracting by one-half of a percentage point in the prior three-month period leading to an financial market that grew by a meager on an annualized basis Trump s sporadic tariff policies are to blame for the volatile first half of the year and his erratic announcements have earned him the sobriquet TACO Trump as in Trump Inevitably Chickens Out He continued this practice on Thursday when he reported he was postponing raising tariffs on Mexico for days He also raised tariffs on Canada ahead of an arbitrary midnight deadline In the longer term the tariffs leave projections looking weaker all around Development estimates for are coming in at compared to in Since Trump s so-called Liberation Day on April countless economists have revised their GDP progress estimates downward for the years ahead and kept them well below the U S historical average even after the president s much-ballyhooed commerce deals have been publicized Particular argue that a little economic pain is necessary as Trump cleans up the mess left by former President Joe Biden pointing to large budget deficits regulatory overreach and industrial initiative interference Unfortunately the projected budget deficit is expected to be even worse than it was a year ago and the One Big Beautiful Bill Act has only made the -year debt outlook more ominous While the previous regulatory regime froze nearly all mergers and acquisitions deal flow championed pro-union labor laws and increased environmental protections the new one requires veiled monetary and non-monetary contributions mandates ideological concessions and directs predatory harassment towards disfavored parties If the Biden administration can be blamed for picking favorite industries what about the Trump administration s sectoral tariffs and generous posture toward cryptocurrencies and fossil fuels Admittedly Trump s bullying tactics may provide a few temporary cosmetic benefits to the U S as he threatened far worse than he executed Still the harm to America s credibility and its relations with international partners is far more costly over the long run The use of tariffs against countries such as Brazil and Canada to advance personal political agendas certainly looks like an abuse of power Such actions might be acceptable in authoritarian regimes but not in democratic countries These moves are just another example of the president overcoming lines previously never considered His invocation of wartime powers through the International Crisis Economic Powers Act of to employ various of his tariffs has rightly been called into question by federal courts However damage from the Trump tariffs extends beyond international relations and basic concerns about the federal ruling body subtly interfering in the free field Tariffs have fundamentally disrupted markets leaving businesses vulnerable to the double threat of uncertainty and cost inflation Related As the Tariff Man Trump is creating the Second Gilded Age Certainty does not appear to be coming anytime soon for business leaders Of the more than countries affected by the tariffs only nine deals have been publicized And any possibility of a long-term deal with China Mexico and Canada the U S s largest bargain partners continues to evade the administration Despite financial markets oddly rallying to all-time highs on the news of transaction deals that increase effective tariff rates by more than fivefold it is worth noting that the announcements are only frameworks of a deal Several of the critical details remain to be agreed upon For instance the proposed pact with the European Union still requires both sides to draft a legally binding document In addition members of the bloc must reach consensus to approve the legal text a process that often takes years Notably absent from the framework was the future of the contested digital services tax on U S tech companies Other aspects of the contract deals are also less firm than markets may like to believe The billion capital by the European Union is entirely a collection of soft pledges or vague frameworks by European companies The billion venture commitment from Japan was rapidly touted by the administration but soon became a source of concern among countless after each side offered different accounts of the commitment Direct tariffs on steel aluminum automobiles automobile parts and copper with more expected on pharmaceuticals timber lumber and semiconductors disincentivize rise and commitment in the very industries that Trump is attempting to attract Several have significantly reduced their expected advancement in fixed capital outlay Moreover they put U S companies at a competitive disadvantage against their international rivals The majority glaring example is the disparity in tariff rates between foreign and domestic auto manufacturers Transaction deals with Germany Japan and South Korea now place their automakers at an advantage for all cars imported into the U S Even though a greater share of their cars are made in America Ford General Motors and Stellantis are paying a full percentage points more than the likes of Mercedes-Benz Toyota and Kia The Big Three U S automakers expect to pay almost billion collectively in additional costs due to tariffs Want more sharp takes on politics Sign up for our free newsletter Standing Room Only written by Amanda Marcotte now also a weekly show on YouTube or wherever you get your podcasts This punishment of American automakers is hardly making our trading partners pay to the advantage of U S consumers and workers Other industries with iconic American brands like Dow American Airlines Nike Gap and Procter Gamble have also announced the steep prices paid as a consequence of the Trump tariffs A large number of of those companies are now being penalized by the same president who pushed them during his first term to diversify their supply chains away from China and into other countries Largest part have not yet passed on the costs to consumers but tight margins will ultimately require them to do so once they have a better understanding of the tariff costs and drawdown on inventories Economists from J P Morgan and Goldman Sachs expect that move to occur in the second half of the year Specific industries however do not have time to wait to adjust prices As Trump continues to chide Federal Reserve Chairman Jerome Powell on rate cuts and their impact on home prices the president forgets to mention that he necessities Powell to help him offset the costs of building a home because of his tariffs According to the April NAHB Wells Fargo Housing Territory Index suppliers promptly increased prices by more than in response to Trump s tariffs The average cost increase per home was expected to be Ultimately the bulk companies substantially impacted by the tariffs will need to share the cost burden with consumers The average direct cost to consumer households is approximately according to estimates Other costs are more indirect such as a slowdown in hiring plans particularly among small businesses The actual effects of Trump s economic agenda are becoming more evident in the latest economic reading A marked slowdown in private business capital and consumer spending occurred with increase dropping to from last quarter But both figures are still lower than the seen under Biden s final quarter in office We need your help to stay independent Subscribe in the present day to advocacy Salon s progressive journalism As with any news story artificial intelligence has and will continue to be an essential factor in the economic trajectory For Trump this mechanism has been his saving grace The business activity has been buoyed by the trillions of dollars invested in the AI arms race along with early productivity gains from its applications While Trump may consider himself lucky American exuberance can only look past so much Over time more businesses and consumers will start to realize how much better off they would be without the tariffs Treasury Secretary Scott Bessent and Special Arrangement Representative Jamieson Greer are sophisticated professionals with no bravado or threats When they have stepped in after initial assaults they have shown keen recognition of the economic sensitivities and have played a moderating role in the Trump administration But the unconventional Trump negotiating style is not anchored in building long-term trust Rather it relies on beginning with a punch in the nose so that an outstretched hand offering little but not a slap is received with relief As skilled professionals like Bessent and Greer step in they mop up the blood rather than adding a one-two punch follow-up like Commerce Secretary Howard Lutnick But their efforts to clean up in Trump s wake are often too little too late for our allies who are tired of being abused While America s relationships with them remain strained our adversaries are making consequential inroads Read more about this topic Trump s mass deportations are hurting local economies Why do MAGA faithful backing Trump even if his big beautiful bill will likely hurt plenty of of them Trump s superpower is no longer working The post Trump s arrangement tantrum leaves American financial system needing more appeared first on Salon com