Trade Progress
President Donald Trump just unleashed a bold move on Truth Social, announcing new tariffs, and here is what you should know:
1. Announces 100% tariff on pharmaceuticals
2. Announces 50% tariff on kitchen cabinets
3. Announces 50% tariff on bathroom vanities and associated products
4. Announces 30% tariff on upholstered furniture
5. Announces 25% tariff on heavy trucks
6. Continues to press the Federal Reserve to lower interest rates to 2%.
***These taxes will take effect on October 1st.
All of these are raising doubts about the return of the trade war, and yet the market has not fully digested it. This could be a sign that the market is still waiting for further confirmation or that it has already become accustomed to it.
Government Shutdown
However, there are things to take into consideration, such as a possible government shutdown on October 1st that could worsen the already weakened labor market conditions. This only occurs when an agreement won’t be reached, meaning if Congress has not passed the 12 required appropriations bills to fund discretionary spending before the deadline, then a government shutdown will kick off, and lay off plan will also follow.
US economy
Another interesting fact is that the US economic health seems to unexpectedly perform relatively too well, while pricing has dropped to 2.1% for the second quarter, indicating resilient consumer spending and growing economic activities. This could fade out the concerns over the labor problem a little bit, especially when the jobless have slightly dropped to 218K this week. And yet, this also shifted focus on the inflation back if the economy continues to be robust.
This positive, strong data, along with recent uncertain direction from the FED’s rate cut, has eased the odds of a rate cut this year, while pushing the gold down after the announcement.
Overall, the current situation is showing a mixed picture: one shows the resurgence in the inflation problem from resilient economic growth, while another is raising the stakes for the layoffs problem and trade war that could impact the economy.
Other information:
- President Donald Trump signed an executive order to facilitate the sale of China-based TikTok to a group of U.S. investors, which is worth $14 billion, as per Vance.
- Trump also urged Turkey’s President Erdogan to stop purchasing Russian oil in exchange for potential sanctions lifted, the bans on the sale of F-35 fighter jets to Turkey, as well as the purchase of other fighter and Boeing aircraft.
