Some of the reasons, but not the only ones, why our trade deficits are so large is because government expenditures are too high and/or we are not collecting enough taxes.
The international trading system is not perfect, but as we have said so many times, freer trade is better than no trade and tariffs are, typically, the worst solution to trade issues between countries.
We were in the camp that the new administration was using the threat of tariffs as an instrument to negotiate deals with other countries, especially with our largest trading partners, Canada and Mexico.
This week, and according to many, Federal Reserve (Fed) officials jumped onto the uncertainty bandwagon, along with consumers and businesses, waiting for more policy clarity from the Trump administration – and who could blame them with policies in daily flux?
Markets have been overwhelmed lately by the administration’s fast-paced and, many times, highly uncertain tariff measures.
We understand that in the business world the word ‘monetization’ of a service a company provides has become one of the most important words as, if successful, this monetization increases the valuation of that company’s stock price.
Back in May of 2024, we wrote a weekly commentary called: “We Can’t Import Cheap Homes; But We Could Import Cheap EV Cars.” In that weekly we argued that since the U.S. auto industry, does not want to build small cars because it is not competitive, then we should open the lower-end EV automobile industry to imports from China.
As you know, economists are normally criticized and accused of being ‘two-handed.’ This is because when we talk, we typically say, “on the one hand, and on the other hand.” Many argue that we are hedging our bets and lack the spine to take a position. While we disagree with that simplistic view of our job, we can understand why we are accused of being ‘two-handed.’
After more than six months of indicating that it lacked conviction regarding the path of inflation, the Federal Reserve (Fed) seems to have gotten a conviction boost so large that it pushed it to lower the federal funds rate by 50 basis points at the September Federal Open Market Committee (FOMC) meeting.
As a businessman and ex-business owner, the idea of firms ‘hoarding’ workers never made sense. As an economist, the idea of firms hoarding workers never made sense either.
When the Federal Reserve (Fed) cut rates in response to the COVID-19 pandemic, mortgage rates fell below 3% in 2021 and many households refinanced or obtained new loans.
Retail trade sales in the U.S. are reported by distribution channel. For example, gasoline sales are reported through the gasoline stations distribution channel, although those gasoline stations’ sales also include everything else sold at gasoline station convenience stores, i.e., hot dogs, tobacco, sodas, gum, chips, coffee, etc.
We are free trade enthusiasts, in economic terms, even at a time when free trade has been losing some of its aura within the U.S. political system.
To say that inflation data during the first quarter of the year surprised us and the markets is clearly an understatement and by Tuesday of this week, with the higher-than-expected Producer Price Index (PPI) print for April, markets were clearly on edge as they were also potentially expecting a higher reading for the Consumer Price Index (CPI) on Wednesday.
Markets seem to have been basking in the spring sun as they wait for the approaching summer heat, so to speak.
Markets have been very positive this week on better-than-expected inflation numbers. The Consumer Price Index (CPI) printed a better than expected 0.1% in March with the year-over-year rate declining to 5.0% compared to a 6.0% year-over-year rate reported in February of this year.
Chief Economist Eugenio J. Alemán discusses current economic conditions.
