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By Justin Wolfers
Dr. Wolfers is a professor of economics and public policy at the University of Michigan.

These tariffs are going to hurt. A lot. By my calculations, this round of tariffs may be 50 times as painful as the ones Donald Trump instituted in his first term. That means they are going to reshape your life in much more fundamental ways.

To illustrate how, let’s look at a prosaic example: your washing machine. In 2018, Mr. Trump’s relatively modest tariffs caused washing machine prices to rise by nearly $100. As a result, many families elected to stick with their aging machines longer than they otherwise would have. But that choice incurred a new set of costs: late-night thuds from unbalanced loads, wads of scrunched cloth still dripping wet after a cycle and higher energy and water bills.

In other words, the total cost of a tariff isn’t just what comes out of your checking account. The time you spend to rearrange the stuff in your washer is a cost. The time you spend wringing out sopping wet T-shirts is a cost. Tariffs are costly not just because they raise prices but because they force you to make different decisions that will extract a different kind of cost from you over time.

Small tariffs create small problems. Big tariffs create huge ones. Take Mr. Trump’s 25 percent tariff on vehicles, which is expected to raise their prices by roughly $4,000. Many families, like mine, will probably decide not to buy a second car. That creates far bigger problems than an aging washer. Now, we’re constantly juggling how to get our kids to all their activities, and ourselves to work, with only one set of wheels.

And it’s not just cars. These are across-the-board tariffs, so they will distort virtually every purchase you make. In each case you’ll have to stop your baked-in calculations, recalibrate and find a way to make do — perhaps substituting frozen vegetables for fresh vegetables, a less effective medication for a higher-priced import, or corn syrup for sugar. And in each case, you’re worse off.

By the way, tariffs don’t distort just your buying decisions, they also distort what businesses make. Just as tariffs lead you to buy less desirable alternatives, they lead businesses to channel labor and capital into less desirable — that is, less productive — activities.

The tariffs announced on Wednesday are roughly 10 times as high as most other industrialized countries, and higher than the infamous Smoot-Hawley tariffs (of Great Depression fame).

Mr. Trump’s latest tariffs will lead folks to rethink not only whether to replace their washing machine — as they did in 2018 — but also their dryers, refrigerators, stoves, groceries, clothes, cars and even everyday essentials.

Many of the substitutions we’ll make will be quite painful. If a 1 percent tariff leads you to switch from real guacamole to a pea-based alternative, then you really didn’t care about guac all that much. But if it takes a 20 percent tariff to get you to switch, that’s a sure sign that going without the real thing is a serious hardship. And this is why higher tariffs generate a far greater amount of pain. These forces aren’t independent of each other. They interact. Or in math, they multiply, which means their costs rise in the square of the tariff rate. That leads to some pretty painful arithmetic.

The average tariff rate was about 1.5 percent just before Mr. Trump’s election in 2016. He subsequently raised tariffs on steel, aluminum, washing machines, solar panels and many goods from China, but left much of the rest of the economy untouched. All told, by 2019 he roughly doubled the tariff rate, to around 3 percent — and so effectively quadrupled whatever pain the 2016 tariffs were causing. (Yes, two times two is four.).

Joe Biden kept some of these tariffs, but Mr. Trump’s latest round pushes our current rate to around 15 times its 2016 level, and so squaring that, it’s 225 times more painful. That’s more than 50 times as large than the cost of Mr. Trump’s first term tariff increase.

Perhaps voters pulled the lever for Mr. Trump with warm memories of the good economic times. But the reality of his first term is that there was a lot more tariff talk than action. They were barely more than a bump in the road. This time, they’re a mountain. And so the impact will be more like a crash than last time’s comfortable jolt.

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Posted
3 hours ago, Guadaloopy said:

If tariffs are such a great tool, why don't the states levy them on one another?  And if the US were to annex Canada, what would happen to those tariffs?  If they are good now, what magically changes if they become a state?

It's a stupid tool for stupid people to use in the name of brain-dead nationalistic policies.

Well the answer to your first question is that its explicitly unconstitutional.

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Posted
13 minutes ago, Beau Vine said:

 

Imagine the state of the economy being what it is, and corporations being uncertain, and foreign money being pissed the fuck off, and thinking that there is going to be a radical investment in American infrastructure and manufacturing plants and capabilities. And now imagine that's true despite the fact that all the entities I mentioned above knows that could all go away in 4 years in the next round of elections. And then just straight up lying to America. 

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Posted
9 minutes ago, 956 Worldwide said:

Well the answer to your first question is that its explicitly unconstitutional.

That's a half-answer.  Why is it unconstitutional?  It's not explicitly forbidden, but why did the Framers construct the Commerce Clause in a way that implies the dormant Commerce Clause as interpreted by the Supreme Court?

The Constitution implies the dormant Commerce Clause because Madison and Hamilton successfully argued in the Federalist Papers that tariffs would lead to conflict and instability between the states.

 

Posted
22 hours ago, Born to Run said:

You're  cool, but man does this post say a lot about aggy these days.

Yeah, thinking they will be within 10 pts late in the 3rd. Pure delusion 

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Posted (edited)
1 hour ago, Beau Vine said:

 

I imagine that Trump can find some people (think My Pillow dude) who will stand up and say that they will build US factories. Of course none of them will have any money unless Trump gives them a federal loan. Grifters are always the first in line to pull money from the govt when a politician needs help. 

Edited by Nice Guy Eddie
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Posted

"We can partner with them, & with Mexico & Canada & China."

Yes, yes, yes, and NO.  The idea that anyone can ever "partner with China" is laughable and a complete crock of horseshit.

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Posted
19 minutes ago, utee94 said:

"We can partner with them, & with Mexico & Canada & China."

Yes, yes, yes, and NO.  The idea that anyone can ever "partner with China" is laughable and a complete crock of horseshit.

We are partnered with them whether you want to or not - the computer or tablet or phone you typed that on had a lot of components made by Chinese companies.

Let's not kid ourselves, they are willing to use children, and we all know that children are much more adept at assembling small things because of their small fingers.

Posted (edited)
8 minutes ago, atomheartbevo said:

We are partnered with them whether you want to or not - the computer or tablet or phone you typed that on had a lot of components made by Chinese companies.

Let's not kid ourselves, they are willing to use children, and we all know that children are much more adept at assembling small things because of their small fingers.

I'm intimately familiar with Chinese manufacturing.  I've set up global supply chains for a Fortune 5 company there.

We don't "partner" with China.  Nobody can "partner" with China.  You can only submit to China, if you want to do business there or use them as a manufacturing base.

American companies have sold their soul for scores of years, sacrificing themselves in an economic war that China began waging against us over 5 decades ago, and many Americans aren't even aware of to this day.  But even before any of this, American companies had already begun moving some manufacturing out of China.  It took decades to get where we are, and it'll take decades to undo it, but the trend is finally moving in the right direction.

And I'll clarify here that I really like the Chinese people.  This commentary isn't about them.  It's all about the CCP.

Edited by utee94
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Posted (edited)
23 hours ago, Keef said:

The only (colorable) arguments I've heard in favor of them are that Reagan did this shit to Japan over cars and look at all the car manaufacturing in the south now!! and that it is a brush back pitch on other countries tarrifing us disproportionately.

And, that was before offshoring.  Those tariffs were relatively narrow in scope and protected Detroit while it got its shit (relatively) together.  But the Big 3 also subsequently needed bailouts and went bankrupt.

Although pretty transparently protectionist because Japan did nothing wrong trade-wise, an outlier example of how narrow, relatively short-term tariffs can "work."  But, we still protected shitty businesses and business models, and, at least arguably, revived competition post-tariff caused the Big 3 to nearly fail and also actually start to get their shit together.

Edited by TwiceHorn
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Posted
1 hour ago, 956 Worldwide said:

Lets do a little more math with the authors of the the research the White House cited. 

image.thumb.jpeg.3b291bdcc033dc767f960a248bd516d3.jpeg

This really does sound like a Peter Navarro special.  Cloaking simple idiocy in some kind of sophisticated "but I've got a Ph.D.!" shit.

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Posted
49 minutes ago, TwiceHorn said:

This really does sound like a Peter Navarro special.  Cloaking simple idiocy in some kind of sophisticated "but I've got a Ph.D.!" shit.

I only learned yesterday that the economic expert he was always quoting in his books, Ron Vara, was an anagram of Navarro‘s name - and just a completely fictitious person to whom he could attribute brilliant economic thought nuggets. 

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Posted (edited)

the fed needs to start cutting interest rates now or this is going to get very ugly

 

(side note: this might not help because private borrowing rates are more based on expectation of inflation which is going to increase)

Edited by elfenix
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Posted
8 minutes ago, elfenix said:

the fed needs to start cutting interest rates now or this is going to get very ugly

 

(side note: this might not help because private borrowing rates are more based on expectation of inflation which is going to increase)

Based on this article, it doesn't sound like the Fed will be lowering rates any time soon -- unless, of course, Trump somehow got away with firing Powell.

The Fed Isn’t Rushing to Save the Markets This Time
With stocks in a steep decline and tariffs inducing recession jitters, the patience of investors may be tested.

The notion that the Federal Reserve will rush in to rescue investors in a crisis has comforted investors for decades. But in the big market downturn induced by President Trump’s tariffs, no Fed rescue is in sight.

Jerome H. Powell, the Federal Reserve chair, made that clear on Friday. The tariffs are much “larger than expected,” he said, and their immense scale makes it especially important for the central bank to understand their economic effects before taking action.

“It is too soon to say what will be the appropriate path for monetary policy,” he said at a conference in Virginia.

In fact, I’d say, the likelihood of further market declines is much greater than the chance that the Fed will turn the markets around in the immediate future.

What U.S. stock investors have experienced until now is what’s known on Wall Street as a correction — a decline of 10 percent or more from a market peak. The correction doesn’t end, by this common definition, until the markets have turned around and that peak has been surpassed. For days, though, the market momentum has been almost entirely downward. So another dubious distinction is in sight: a bear market, which is a decline of at least 20 percent from a market top. For the S&P 500, which closed at 5,074.08 on Friday, down from its peak of 6,144.15 on Feb. 19, a bear market is already within shouting distance, a scant 2.6 percentage points away.

It would be lovely to be able to say that the stock market bottom is near, or that it has already been reached, Edward Yardeni, a veteran market watcher, said in a conversation on Friday.

“I’ve been pretty good at picking market bottoms, and I’m not shy about calling one when I see one,” he said. “But that usually has happened when the Fed has taken action. And right now, its pretty clear that Powell won’t be doing that.”

The Fed is holding back this time for good reasons. The impact of the sudden new range of tariffs imposed by the president — and the tit-for-tat tariffs announced on Friday by China that are likely to be followed by similar moves from a host of other countries — is far from clear.

But this much is certain. Tariffs are a tax, one that is likely to slow economic growth as well as raise prices. Those effects complicate the task of the Fed, which has a dual mandate: promoting full employment (and economic growth) and holding the rate of inflation down to a reasonable level.

With the Fed still battling inflation after the runaway surge in prices of 2022 and 2023, it is reluctant to lower interest rates when price increases in a range of goods could be just around the corner. And on Friday, the latest jobs report from the government showed that the economy in March remained reasonably strong. Employers added 228,000 jobs for the month, far more than anticipated, and while the unemployment rate rose slightly, to 4.2 percent from 4.1 percent, there were few signs of substantial weakness.

Given that backdrop, Mr. Powell seemed to be signaling that it would take an actual slowdown, with substantial job declines, to justify rate cuts under current circumstances. Consumer confidence has declined, and an Economic Policy Uncertainty Index that is closely watched by economists and business executives has soared. But concrete data isn’t here yet. If they’re not rolled back, the tariffs are likely to take a while to result in widespread layoffs — and without strong evidence of a slowdown, the Fed may be reluctant to act.

Yet the Fed has already come under pressure from President Trump to lower interest rates. This is the “PERFECT time” for a Fed rate cut, he said on the Truth Social media platform on Friday, shortly before Mr. Powell’s speech. Maintaining Fed independence is important in the markets, and there was no indication that this overt presidential pressure had any effect on Mr. Powell’s staunch resolve to bide his time, and to lower interest rates only when and if the Fed decided it was time to do so.

So investors may need to be very patient, and to hope that changes in tariff policy occur rapidly enough in Washington to turn the markets around and, more important, avert a recession. Recessions are typically associated with wide-ranging job losses, and they cause immense hardship in the real world as well as in financial markets.

cont'd:

Spoiler

Recessions usually make bear markets much worse, Ned Davis Research, an independent financial research firm, has found. Bear markets accompanied by recessions had a median duration of 528 calendar days and a market decline of 32.8 percent, the firm has found, using Dow Jones industrial average data since 1900. Bear markets that occurred without recessions had a median duration of 224 days and a decline of 23.3 percent.

“Bear markets are unfortunate whenever they occur, but they tend to be much worse if there’s also a recession,” Ed Clissold, chief U.S. strategist at Ned Davis Research, said in an interview.

Yet the Trump tariffs, which would be the steepest in a century if fully carried out, have already set off a global trade war. The president could reverse himself, remove most of the tariffs and try to undo some of the damage, but there are no signs that he’s planning to do so. In the meantime, the chances of a recession and of further market declines have been growing.

Mr. Yardeni said that while he remained optimistic about the long-term prospects for the United States, fear, confusion and uncertainty over President Trump’s tariff policy make him less positive about the next year. The chances of “stagflation” — a dreaded combination of high inflation and a slowing economy — are now 45 percent in the next 12 months, up from 35 percent one month ago, he said, and that wouldn’t help the stock market.

Goldman Sachs says there’s now a 35 percent chance of a recession in the next year, and late in March it ratcheted down its estimate for the S&P 500, projecting a 5 percent price decline over the next three months. At the start of the year, Goldman was rampantly bullish, forecasting a 16 percent increase in the S&P 500 over the course of 2025. If the market falls much further, Goldman and other market strategists are likely to revise their estimates still lower. JPMorgan has already raised the odds of a global recession this year to 60 percent.

As I’ve pointed out in recent columns, though, bonds have been performing well this year, easing some of the pain for investors, and international stock markets have done better than the U.S. ones, although they, too, have been battered as the reality of a new world of higher tariffs has sunk in. Old-fashioned low-cost diversified investing — I practice it using index funds that track virtually all tradable global markets — has eased some of the pain this year.

But in a full-blown recession and a bear market, few people will be entirely spared. Eventually, markets rebound, and those with long horizons are likely to prosper, regardless of what happens in the next few weeks.

Some market declines are blessedly brief. But in the bear market that started in October 2007, during the great recession of that period, it took more than four years, including dividends, for investors in the S&P 500 to climb back to the peak of their holdings in that index.

Even so, it was worth hanging on, for those who were able to do so.

Since the 2007 market peak, the S&P 500 has had a total return of more than 356 percent, even including the latest market declines. Staying in the market has paid off over the long run, and it’s likely to do so again. But sticking with it, even in times like these, can be tough. You need strength and plenty of patience to be a long-term investor.

 

Posted
4 minutes ago, Sawbonz said:

Demand is going to plummet so inflation may not be a big deal

Right. But as the article suggests, we won't be getting solid numbers from all the stuff they look at for a while. Therefore, no rate drops should be expected anytime soon.

Posted

I’m not seeing much talk regarding tariffs on raw materials. So even if you believe that tariffs will bring back domestic manufacturing, the only way to avoid tariffs is to source every single material that goes into your product domestically. It is impossible to think of a scenario where this economic policy doesn’t increase costs to Americans. 

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Posted
42 minutes ago, elfenix said:

mass layoffs are what i want to avoid

Yeah I don’t see how we avoid that

Trump will never admit he made a mistake. He will ride this all the way down

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Posted
17 hours ago, utee94 said:

I'm intimately familiar with Chinese manufacturing.  I've set up global supply chains for a Fortune 5 company there.

We don't "partner" with China.  Nobody can "partner" with China.  You can only submit to China, if you want to do business there or use them as a manufacturing base.

American companies have sold their soul for scores of years, sacrificing themselves in an economic war that China began waging against us over 5 decades ago, and many Americans aren't even aware of to this day.  But even before any of this, American companies had already begun moving some manufacturing out of China.  It took decades to get where we are, and it'll take decades to undo it, but the trend is finally moving in the right direction.

And I'll clarify here that I really like the Chinese people.  This commentary isn't about them.  It's all about the CCP.

Explain exactly how we are going to "undo it" and how using AI chat bots to develop an across the board tariffs policy based on trade deficits will get us to this mythical place you seem to believe we should go. 

Posted
28 minutes ago, royiv said:

I’m not seeing much talk regarding tariffs on raw materials. So even if you believe that tariffs will bring back domestic manufacturing, the only way to avoid tariffs is to source every single material that goes into your product domestically. It is impossible to think of a scenario where this economic policy doesn’t increase costs to Americans. 

There isn't going to be any significant manufacturing brought back. No companies are going to outlay the expense to scale up domestic manufacturing for shit we haven't made for decades. The only way it happens is if the federal government pays for the infrastructure build to do it, then you have a situation where the government is paying and controlling the means of production. 

Hello Communism! 

What a crock of shit this whole thing is. All that's going to happen is we all get screwed on prices until Trump either relents or gets impeached/assassinated. Then the race will begin to put the bb's back into a box that was already destroyed. This is the beginning of the end of the US being the center of the global economy. 

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Posted
There isn't going to be any significant manufacturing brought back. No companies are going to outlay the expense to scale up domestic manufacturing for shit we haven't made for decades. The only way it happens is if the federal government pays for the infrastructure build to do it, then you have a situation where the government is paying and controlling the means of production. 
Hello Communism! 
What a crock of shit this whole thing is. All that's going to happen is we all get screwed on prices until Trump either relents or gets impeached/assassinated. Then the race will begin to put the bb's back into a box that was already destroyed. This is the beginning of the end of the US being the center of the global economy. 

Correct.
If a foreign power was doing to us what Trump is doing, we’d already be at war.
Posted (edited)
18 hours ago, utee94 said:

You can only submit to China, if you want to do business there or use them as a manufacturing base.

Dude, there is no submit in this equation, it's just the second half of that sentence, plain and simple. We want cheap shit and China wants money. It's one of the most simple transactions in history and no one pulled the wool over anyone's eyes to do it.

 

ETA: To be clear I'm someone who has gone to crazy lengths to consume only the barest minimum of Chinese made goods for the better part of 25 years now. But to couch this as sly old China fleecing the rubes of American business and populace is the most absurd nonsense that gets trotted out with tiring regularity. The US made this choice willingly.

Edited by G650
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Posted
3 hours ago, Hermanator said:

Explain exactly how we are going to "undo it" and how using AI chat bots to develop an across the board tariffs policy based on trade deficits will get us to this mythical place you seem to believe we should go. 

"Undo it" means unwinding our dependence on Chinese manufacturing.  It has nothing to do with AI chat bots.  And it's already happening for numerous tech companies in industries like computer and consumer electronics manufacturing.  China is no longer a low cost manufacturing nation for many of the goods that American companies originally offshored there over the past few decades.   So now it's not even low cost manufacturing that's holding several of our industries there, in many cases it's simply inertia.  But as US companies work to move manufacturing out of China for their own reasons, it's possible that the increased tariffs on Chinese-manufactured goods will hasten those moves. Still,  like I said, it took decades to get there, and it'll take decades to untangle it all.

2 hours ago, G650 said:

Dude, there is no submit in this equation, it's just the second half of that sentence, plain and simple. We want cheap shit and China wants money. It's one of the most simple transactions in history and no one pulled the wool over anyone's eyes to do it.

 

ETA: To be clear I'm someone who has gone to crazy lengths to consume only the barest minimum of Chinese made goods for the better part of 25 years now. But to couch this as sly old China fleecing the rubes of American business and populace is the most absurd nonsense that gets trotted out with tiring regularity. The US made this choice willingly.

As I stated above, China is no longer a low cost manufacturing nation for many of the goods that American companies have offshored there over the past few decades.   And also like I said above, American companies are already making moves to unwind.  The supply chain issues highlighted during the pandemic were somewhat of a wake-up call to many American companies, but also the fact that China's just a real pain in the ass to do business with, and if they're not the lowest cost manufacturer, then there's no need to bother with it.  Add increased tariffs on top and it looks even less appetizing to continue manufacturing there.

I don't expect manufacturing jobs in textiles or shoes to return to the USA, but there's plenty of opportunity for high tech to do so.  It's already in process for many companies.

This has all been discussed at length on the China thread, which is probably a better place for this discussion, since the tariff thread isn't specific to China.

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Posted

Extricating ourselves from trade with China is a good thing, almost no question there.  And tariffs probably play a role in that.  But, again, it's more like the CHIPs Act than this.

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Posted
5 hours ago, bolverk said:

Based on this article, it doesn't sound like the Fed will be lowering rates any time soon -- unless, of course, Trump somehow got away with firing Powell.

The Fed Isn’t Rushing to Save the Markets This Time
With stocks in a steep decline and tariffs inducing recession jitters, the patience of investors may be tested.

The notion that the Federal Reserve will rush in to rescue investors in a crisis has comforted investors for decades. But in the big market downturn induced by President Trump’s tariffs, no Fed rescue is in sight.

Jerome H. Powell, the Federal Reserve chair, made that clear on Friday. The tariffs are much “larger than expected,” he said, and their immense scale makes it especially important for the central bank to understand their economic effects before taking action.

“It is too soon to say what will be the appropriate path for monetary policy,” he said at a conference in Virginia.

In fact, I’d say, the likelihood of further market declines is much greater than the chance that the Fed will turn the markets around in the immediate future.

What U.S. stock investors have experienced until now is what’s known on Wall Street as a correction — a decline of 10 percent or more from a market peak. The correction doesn’t end, by this common definition, until the markets have turned around and that peak has been surpassed. For days, though, the market momentum has been almost entirely downward. So another dubious distinction is in sight: a bear market, which is a decline of at least 20 percent from a market top. For the S&P 500, which closed at 5,074.08 on Friday, down from its peak of 6,144.15 on Feb. 19, a bear market is already within shouting distance, a scant 2.6 percentage points away.

It would be lovely to be able to say that the stock market bottom is near, or that it has already been reached, Edward Yardeni, a veteran market watcher, said in a conversation on Friday.

“I’ve been pretty good at picking market bottoms, and I’m not shy about calling one when I see one,” he said. “But that usually has happened when the Fed has taken action. And right now, its pretty clear that Powell won’t be doing that.”

The Fed is holding back this time for good reasons. The impact of the sudden new range of tariffs imposed by the president — and the tit-for-tat tariffs announced on Friday by China that are likely to be followed by similar moves from a host of other countries — is far from clear.

But this much is certain. Tariffs are a tax, one that is likely to slow economic growth as well as raise prices. Those effects complicate the task of the Fed, which has a dual mandate: promoting full employment (and economic growth) and holding the rate of inflation down to a reasonable level.

With the Fed still battling inflation after the runaway surge in prices of 2022 and 2023, it is reluctant to lower interest rates when price increases in a range of goods could be just around the corner. And on Friday, the latest jobs report from the government showed that the economy in March remained reasonably strong. Employers added 228,000 jobs for the month, far more than anticipated, and while the unemployment rate rose slightly, to 4.2 percent from 4.1 percent, there were few signs of substantial weakness.

Given that backdrop, Mr. Powell seemed to be signaling that it would take an actual slowdown, with substantial job declines, to justify rate cuts under current circumstances. Consumer confidence has declined, and an Economic Policy Uncertainty Index that is closely watched by economists and business executives has soared. But concrete data isn’t here yet. If they’re not rolled back, the tariffs are likely to take a while to result in widespread layoffs — and without strong evidence of a slowdown, the Fed may be reluctant to act.

Yet the Fed has already come under pressure from President Trump to lower interest rates. This is the “PERFECT time” for a Fed rate cut, he said on the Truth Social media platform on Friday, shortly before Mr. Powell’s speech. Maintaining Fed independence is important in the markets, and there was no indication that this overt presidential pressure had any effect on Mr. Powell’s staunch resolve to bide his time, and to lower interest rates only when and if the Fed decided it was time to do so.

So investors may need to be very patient, and to hope that changes in tariff policy occur rapidly enough in Washington to turn the markets around and, more important, avert a recession. Recessions are typically associated with wide-ranging job losses, and they cause immense hardship in the real world as well as in financial markets.

cont'd:

  Reveal hidden contents

Recessions usually make bear markets much worse, Ned Davis Research, an independent financial research firm, has found. Bear markets accompanied by recessions had a median duration of 528 calendar days and a market decline of 32.8 percent, the firm has found, using Dow Jones industrial average data since 1900. Bear markets that occurred without recessions had a median duration of 224 days and a decline of 23.3 percent.

“Bear markets are unfortunate whenever they occur, but they tend to be much worse if there’s also a recession,” Ed Clissold, chief U.S. strategist at Ned Davis Research, said in an interview.

Yet the Trump tariffs, which would be the steepest in a century if fully carried out, have already set off a global trade war. The president could reverse himself, remove most of the tariffs and try to undo some of the damage, but there are no signs that he’s planning to do so. In the meantime, the chances of a recession and of further market declines have been growing.

Mr. Yardeni said that while he remained optimistic about the long-term prospects for the United States, fear, confusion and uncertainty over President Trump’s tariff policy make him less positive about the next year. The chances of “stagflation” — a dreaded combination of high inflation and a slowing economy — are now 45 percent in the next 12 months, up from 35 percent one month ago, he said, and that wouldn’t help the stock market.

Goldman Sachs says there’s now a 35 percent chance of a recession in the next year, and late in March it ratcheted down its estimate for the S&P 500, projecting a 5 percent price decline over the next three months. At the start of the year, Goldman was rampantly bullish, forecasting a 16 percent increase in the S&P 500 over the course of 2025. If the market falls much further, Goldman and other market strategists are likely to revise their estimates still lower. JPMorgan has already raised the odds of a global recession this year to 60 percent.

As I’ve pointed out in recent columns, though, bonds have been performing well this year, easing some of the pain for investors, and international stock markets have done better than the U.S. ones, although they, too, have been battered as the reality of a new world of higher tariffs has sunk in. Old-fashioned low-cost diversified investing — I practice it using index funds that track virtually all tradable global markets — has eased some of the pain this year.

But in a full-blown recession and a bear market, few people will be entirely spared. Eventually, markets rebound, and those with long horizons are likely to prosper, regardless of what happens in the next few weeks.

Some market declines are blessedly brief. But in the bear market that started in October 2007, during the great recession of that period, it took more than four years, including dividends, for investors in the S&P 500 to climb back to the peak of their holdings in that index.

Even so, it was worth hanging on, for those who were able to do so.

Since the 2007 market peak, the S&P 500 has had a total return of more than 356 percent, even including the latest market declines. Staying in the market has paid off over the long run, and it’s likely to do so again. But sticking with it, even in times like these, can be tough. You need strength and plenty of patience to be a long-term investor.

 

Not really clear on how lowering interest rates would help in this situation.

Can someone with more knowledge on the matter explain? 

Posted
2 minutes ago, DixonHur said:

Not really clear on how lowering interest rates would help in this situation.

Can someone with more knowledge on the matter explain? 

Well one way would be to attract money back into the equity market and away from bonds and interest-based investments.

Lowering rates is also thought to stimulate capital intensive activity, but that effect on the stock market is probably more "psychological" than anything else, giving companies more "growthy" events to make investors spooge over.

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Posted
49 minutes ago, utee94 said:

"Undo it" means unwinding our dependence on Chinese manufacturing.  It has nothing to do with AI chat bots.  And it's already happening for numerous tech companies in industries like computer and consumer electronics manufacturing.  China is no longer a low cost manufacturing nation for many of the goods that American companies originally offshored there over the past few decades.   So now it's not even low cost manufacturing that's holding several of our industries there, in many cases it's simply inertia.  But as US companies work to move manufacturing out of China for their own reasons, it's possible that the increased tariffs on Chinese-manufactured goods will hasten those moves. Still,  like I said, it took decades to get there, and it'll take decades to untangle it all.

As I stated above, China is no longer a low cost manufacturing nation for many of the goods that American companies have offshored there over the past few decades.   And also like I said above, American companies are already making moves to unwind.  The supply chain issues highlighted during the pandemic were somewhat of a wake-up call to many American companies, but also the fact that China's just a real pain in the ass to do business with, and if they're not the lowest cost manufacturer, then there's no need to bother with it.  Add increased tariffs on top and it looks even less appetizing to continue manufacturing there.

I don't expect manufacturing jobs in textiles or shoes to return to the USA, but there's plenty of opportunity for high tech to do so.  It's already in process for many companies.

This has all been discussed at length on the China thread, which is probably a better place for this discussion, since the tariff thread isn't specific to China.

I don't disagree with any of that, I disagree with the characterization of how we got there in the first place.

 

Robots are going to replace cheap labor for most things anyway outside sweatshop work.

Posted
4 hours ago, utee94 said:

"Undo it" means unwinding our dependence on Chinese manufacturing.  It has nothing to do with AI chat bots.  And it's already happening for numerous tech companies in industries like computer and consumer electronics manufacturing.  China is no longer a low cost manufacturing nation for many of the goods that American companies originally offshored there over the past few decades.   So now it's not even low cost manufacturing that's holding several of our industries there, in many cases it's simply inertia.  But as US companies work to move manufacturing out of China for their own reasons, it's possible that the increased tariffs on Chinese-manufactured goods will hasten those moves. Still,  like I said, it took decades to get there, and it'll take decades to untangle it all.

As I stated above, China is no longer a low cost manufacturing nation for many of the goods that American companies have offshored there over the past few decades.   And also like I said above, American companies are already making moves to unwind.  The supply chain issues highlighted during the pandemic were somewhat of a wake-up call to many American companies, but also the fact that China's just a real pain in the ass to do business with, and if they're not the lowest cost manufacturer, then there's no need to bother with it.  Add increased tariffs on top and it looks even less appetizing to continue manufacturing there.

I don't expect manufacturing jobs in textiles or shoes to return to the USA, but there's plenty of opportunity for high tech to do so.  It's already in process for many companies.

This has all been discussed at length on the China thread, which is probably a better place for this discussion, since the tariff thread isn't specific to China.

And the way to do that is indiscriminately tariff bombing the world?

Nothing you said has any relation to the insanity of this situation. You want to disassociate from China? Slowly start making deals with other nations with the capabilities to produce goods to diversity the baskets. Whatever can be produced in the US would have to be slowly brought back over time with necessary Investment in infrastructure financed by whoever feels that risk is worth it. 

Declaring economic war on the world is not the answer. To any question. 

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