Tariffs & Trade: US Economy's Market Shift

📆This Week’s Topic

This week we’ll be addressing change in the US Economy that could majorly affect consumers. Due to President Trump’s tariffs, global trade is greatly affected, consumers are hesitant to spend, and entire sectors are slowing down. In addition, Trump’s mass deportation of migrant workers has greatly shrunk the workforce.

💳 Cause & Effect

President Trump’s “tariff war”, which goes back to 2018, midway through Trump’s first presidency, spiked at a sky-high 134% in early April, before lowering to the still high 51% by early May, and settling down to 15% as of mid-June. Tariffs basically raise the price of imported goods. For instance, Steel and Aluminium have a 50% tariff, meaning that if it’s imported, it’ll cost an extra fifty percent. As of early May, the price consumers paid hadn’t changed much. But since then retailers such as Walmart and Costco have raised their prices, tech giants Apple and Samsung have done the same, and some automotive companies such as Ford and Subaru have followed suit. That’s only to name a few, but those are prime examples of rising prices by big name companies. For smaller businesses, they might not be able to cope with higher goods costs, and might be forced either to lay off workers or go out of business.

📊 Statistics

Speaking of job loss, Trump’s mass deportation actions have gotten rid of a notable part of the workforce: migrant workers. For only the fourth time in 60 months, the Service Sector’s PMI dropped below 50%. Be it only by one and a half percent (The PMI is currently resting at 48.5 percent, a 1.4% drop from May), it still shows how costly the removal of migrant workers can be for the US economy, as they form a decent part of both the services sector and especially the manufacturing sector. This isn’t to say that migrant workers make up the entire workforce, but they do form a large enough part of it to make a impact. The New Order’s index has dropped even further than that and is now sitting at about 46 points, an almost 6 point drop from April.

⛱ Consumer Effect

I think we can agree that most consumers don’t want to pay an extra cost on their goods, and with larger purchases that increase can seem enormous. The US Economy is fueled by it’s consumers, and if everyone is suddenly hesitant to buy goods, that can lead to higher and higher prices, job loss, business closures, and in the worst case scenario a recession or depression.

🏢Business Effect

While labor shortages still plague companies, business owners must be more cautious with their ventures, because as Joe Lanni of Thunderdome Restaurant Group says, “You can go from making a little bit of money to losing a lot of money very quickly, because it’s very, very hard to manage labor, food costs and service in a sales environment that does not support the operation.” Now, the biggest problem for people such as Mr. Lanni is an ever changing market, where the price of goods can change weekly, and labor can be hard to find.

⏳ Final Summary

The US economy has been stressed and it will only continue to do so, affecting businesses and consumers due to the instability caused by higher costs for goods and labor, and the root cause of Trump’s Tariffs.

🙏Thank You & Important Information

As always, thank you so much for reading this edition of Friday Finance. We hope you are enjoying Friday Finance. If you have an idea, a comment, or anything else you want to say on the sidebar (or at the bottom for website) there is a comment button/section to share your opinion. Have a great weekend, and see you next time!

Grayson Stein & Jacob Gans

Friday Finance