I continue to see Tariff Derangement Syndrome emanating from foreign media, which seem eager to blame the Trump Administration for all their problems, especially the media in Britain, Canada, France, Germany and Mexico, which are in the midst of recessions. Up to 130 countries are now negotiating new trade agreements that should remove most trade barriers, but the European press still see the “sky falling.”
True to Ed’s theory, the Commerce Department announced on Thursday that durable goods orders soared 9.2% in March, the largest surge in durable goods orders since July 2024. It also appears that most of the reciprocal trade barriers will be eliminated soon.
Here are the most important market news items and what this news means:
- After meeting with executives from leading retailers, like Home Depot, Target and Walmart, one of President Trump’s objectives is to try to avoid “empty shelves” in stores, since that would be a powerful image that his opposition could use against him. So, do not be surprised if President Trump adjusts the tariffs on Chinese goods.
- European Central Bank (ECB) officials are hinting that more key interest rate cuts are coming, which will increase the pressure on the Fed to cut key interest rates in May. This week’s payroll report and unemployment rate are expected to also put pressure on the Fed, since the DOGE cuts should show up in the April payroll data. The Bank of Canada should also be cutting key interest rates at its next meeting. The wildcard in the global interest rate collapse remains China, since currency devaluation rumblings persist because China’s interest rates have collapsed and cannot go much lower.
- Many companies, like General Motors and UPS, are suspending guidance due to economic uncertainty. The lack of guidance is not a positive development, so the dispersion of analyst estimates is expected to be wider than normal. I should add that UPS announced that it would lay off 20,000 workers due to the loss of Amazon business.
- The Commerce Department reported on Tuesday that the trade deficit soared 9.6% in March to $162 billion, so there have been three consecutive months of the dumping of goods on America to try to beat tariffs. Wholesale inventories have risen 0.5% in the past two months, so as inventories build, they will most likely be discounted to move goods, which is deflationary. The soaring trade deficit, plus the dumping of gold in America via Comex, means that it is almost certain the first quarter GDP estimate will be negative.
- If the Fed is looking for reasons to cut key interest rates in May, weak consumer confidence is one of the reasons. The Conference Board announced on Tuesday that its consumer confidence index for April plunged to 86 in April, down from 93.9 in March. The present situation component slipped to 133.5 in April, down from 134.4 in March. The expectations component plunged to 54.4 in April, down from 66.9 in March, and is now at the lowest level since October 2011. This is the fifth consecutive decline in consumer confidence and frankly bodes poorly due to the expectations component.
- Kevin Warsh, a former Federal Reserve governor who is expected to be the leading candidate to replace Fed Chairman Jerome Powell in 2026, continues to criticize the Fed. Recently, Warsh said central banks (1) talk too much, (2) get too involved in social issues of the day, and (3) let lawmakers not pay for their excessive spending. Warsh said, “A strategic reset is necessary to mitigate losses of credibility, changes in standing and, most important, worse economic outcomes for our fellow citizens.”
- Canadian Prime Minister Mark Carney’s Liberal Party won 43.5% of the vote and 155 seats, while the Conservative Party received 41.4% of the vote and 144 seats in Parliament. Pierre Poilievre said Canadians had voted for a “razor-thin minority government, a virtual tie.” Alberta and Saskatchewan overwhelmingly voted for the Conservative Party, since they will suffer from Prime Minister Carney’s Net Zero goal by 2050. Canadian provinces have a lot of autonomy, so it will be interesting to see how they get along with Ottawa in the upcoming years. Alberta must sell most of its crude oil to the U.S. due to a lack of Canadian pipelines. Saskatchewan can use rail to ship its agricultural goods, but the Net Zero initiative to eliminate chemical fertilizers, like potash, remains highly contentious.
- Treasury Secretary Scott Bessent said the tariff standoff with China cannot be sustained by both sides and that the world’s two largest economies will have to find ways to de-escalate. Bessent said that this de-escalation will come in the very near future.
Overall, Treasury Secretary Bessent, who has become the spokesperson regarding the tariffs, reiterated that China will suffer much more than the US and will blink first. He also pointed out that retail trading has been very light since the tariffs were announced and that the volatility was primarily institutional in nature, inferring that the public wasn’t as concerned about the impact of tariffs as Wall Street was. Given the continuing recovery we’re seeing, it appears that Wall Street is becoming less concerned as well.
