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The market spiked today on word that we've reached an agreement to back off tariffs on Chinese goods for 90 days, to 30%, down from 145%. China will be putting 10% on US imports, down from 125%.

From what I read earlier, 30% is probably low enough that a lot of trade will resume, which is an improvement over the near embargo levels of tariffs we had on them before. So, a positive reaction from the stock market is to be expected.

However, are 30% tariffs on Chinese goods really a cause for celebration? That amount has got to be disruptive for a lot of businesses on both sides of the pond. It's a ~50% increase over the 19.3% tariffs that were in place under Biden.

With large disruptions all over the country also occurring due to cuts to government staff and services, I feel like we're still on a runway toward a recession. Am I reading it wrong?

I feel like we're still on a runway toward a recession.

Give it 3-5 months, then we will know. Key point: Spankee got his butt kicked by Xi. Spankee backed out because he has no cards to play.

"However, are 30% tariffs on Chinese goods really a cause for celebration? That amount has got to be disruptive for a lot of businesses on both sides of the pond. It's a ~50% increase over the 19.3% tariffs that were in place under Biden.

With large disruptions all over the country also occurring due to cuts to government staff and services, I feel like we're still on a runway toward a recession. Am I reading it wrong?"
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I have the exact same questions. How are tariffs not inflationary ? Per all of the stories during the run up to the election last November, a not-insignificant swath of Americans were
bemoaning how inflation was killing them. 30% tariffs make that worse, not better. Trump
was elected on his promise to bring prices down, but 30% tariffs sure are not going to
do that.

As far as the Market, does the adage " the market hates uncertainty " still apply ? Because the tariffs with all nations targeted by Trump are on less than 90 days pause, are they not ? I totally get that Wall Street thinks this is just Trump being Trump, but the uncertainty sure has not gone away. I am 2/3 short term fixed income, still have 1/3 in stocks ( approximately ). I am not in any hurry to get my stock allocation back up. If I miss out on gains, oh well, am doing just fine as is, at least for a few years. I am well aware of how inflation ravages a retiree's buying power, so I had always planned on being in stocks with 5-7 years of IRA withdrawals in fixed income. I'll get back to that, but I need to see proof that Trump can be reined in. Congress sure isn't showing any resistance to him.

Our country also suffers from large groups who have no clue what others think and feel - or even how widespread ideas which others might think absurd and dangerous might really be. Our media is split between one group who maintains a bizzarro assortment of mistruths - which are supported by much of our national leadership and another group who may be only reporting the truth, but frequently omits facts that they feel would give credibility to the news reported by the first group.

This sets up a "who do you trust" scenario for each citizen with the "bully pulpit" placing its thumb on the scale on one side and an assorted group of uncharismatic political hacks trying to sit on the other while maintaining a "holier than thou" attitude.

Regardless of what we were taught in school, most politicians of both parties attained their ranks though a lust for power and, if at all possible, use that post to make as much money as they can. Taking actions which tend to help most Americans are only taken during times of extremis or by chance when it appears to the protagonists that it will give their political tribe some advantage over the other. The reason for the apparent difference in ethics between the two parties at this point of time has more to do with the massive level of braggadocio by the leader of one of the parties indicating in public how he, and his family, will benefit compared to the other party who at least tries to disguise its own greed as good governance (thinking of a NJ just-former senator).

Putting ethics aside as well as negotiating style (openly blackmailing and strongarming EVERYONE is rarely a SOP for most politicians) aside, our current attention is fixated on economic gyrations which contradict the first chapter of nearly every economics book. While I hope everything works out, the economy has just had a load of variables simultaneously cranked away from normal and it's anybody's guess what the mid-term results will be.

Frankly, a huge political/economic risk is that infighting between incompatible factions of the Republican party will negatively impact the ability of the US government to smoothly function - exacerbated by the fairly substantial reductions in government employees and a new cabinet of helpers chosen from Central Casting, coupled to the assumption that everything will continue to function flawlessly.

There once was a farmer who mistakenly dropped some sawdust into his horse's oat. He was concerned when the horse ate the mixture, but the horse seemed happy. Since sawdust is cheaper than oats, every day, the farmer mixed a bit higher percentage of sawdust into the horse's food - and the horse was very happy. And then, one day, the horse dropped dead.

Jeff

what we are seeing appears to be a heavy volatility skew towards a voting machine than a weighing machine, possibly spurred by participant behavior and feedback\momentum.
index funds have not thwarted this, as they are also tools in daily trading by both retail and institutions. what is unclear is how much trading of passive vehicles is going on in retail retirement, accustomed to constant inflows for american equity.

short term news appears exponentially over-weighted and more so on a relative basis.
daily\weekly\monthly moves 'matter' more than divergent long term views of 'everything will work out for buy&hold' versus 'the gop never had, nor will have, a viable economic strategy they can execute'.

regarding the longer term, many credible analysts have stated a technical recession is baked on, given the record number of soft indicators.
yes, there is a reason to be skeptical, given many such employed claimed the same 2020-2024.

I have the exact same questions. How are tariffs not inflationary ?

Well, they're certainly *stupid*. But I have to admit that there are situations or worldviews in which it's not inflationary. If you work at it.

First, textbook analysis suggest that a country introducing tariffs will see its currency rise. (we may not be in the textbook situation, but bear with me...). This reduces the cost of imports measured in local currency. It is conceivable that the quantities can work out that the two cancel, and end-user prices in the nominal currency of the tariff country don't change. (In fact, this is (perhaps coincidentally, possibly not) approximately what happened in the rounds of US tariffs 8 years ago). Of course, this is in the situation that the currency rose, so the prices have still actually risen in terms of global purchasing power, but it doesn't show up on the local price tags.

Alternatively, it depends on your definition of inflation. Imagine the price of left-handed widgets goes up because the main factory making them just burned down, but no other prices change. Since the price of left handed widgets is included in that country's CPI, the average price across all goods just went up. Is that inflation? To me, no, it isn't, since the most meaningful (to an investor) meaning for the term is "general purpose purchasing power", or monetary inflation: the portion which is not specific to any one product or service...how much of the world's stuff could a unit of currency buy? This is sometimes called "common inflation", and the most recent method for measuring it is the Fed's "MCT Inflation" metric, which has incidentally been rising a tiny bit for a few months now.
So...if a country sees a few specific goods rise in price (the imported ones), but the currency stays flat and still buys as much globally traded "stuff" as it always did, I would argue that in the most meaningful sense that there has been no monetary inflation. Just some idiosyncratic price changes.

FWIW, the MCT inflation page. https://www.newyorkfed.org/research/policy/mct#--:...
Click on the graph and you get a detailed version that lets you see all the numbers. The most recent one, for March, is the first reading over 3% in a while, up from the lows under 2.5% last June. To oversimplify, this is the reasoning: imagine that the one year inflation rate of every product category is the sum of a single global "monetary" inflation number, plus a price change specific to that product or service. So, for 50 categories, you get 50 category-specific numbers and 1 global number for any given one-year interval. These can be estimated by doing a regression across the whole time series. The MCT inflation figure is the common one: the amount of overall inflation common across categories, ignoring product- or service-specific shocks.
One interesting thing is that MCT inflation never went negative during the pandemic.

Jim

I feel like we're still on a runway toward a recession. Am I reading it wrong?

We haven't had a real recession in 15+ years (the COVID recession wasn't business cycle induced, it was externally induced). And so many people seem to believe that we have "cured" recessions forever by using fed policy (by manipulating rates and by quantitative measures) and fiscal policy (by massive spending). As we've seen, those types of policies may avoid recession, but they bring us further into a debt spiral. Seems odd to me that so many are willing to trade recession for debt spiral, both are bad, but one is temporary and the other is permanent.

"But I have to admit that there are situations or worldviews in which it's not inflationary. If you work at it."

I'm looking at inflation as an American consumer would, not how an economist would look at it. All I heard from MAGA during the Biden years was that they are getting killed when they go to the grocery store, or to the gas station. Many also claimed that they were priced out of the housing market. From that perspective, if tariffs are raised on imports, groceries and other goods will go up in price. This is inflation, to the lay person. Now, all of a sudden, when Trump is in power, MAGA seems to not have the same fear of inflation hitting their wallet. They, in unison, say BS like Trust Trump, trust the process. I have zero trust in Trump, and the last couple of days have shown that not even Trump trusts the tariff process.

I rolled money into stocks today, bought IJR and IJH in taxable and IRA.
I am heavy on short term fixed income, have T-bills and CD's maturing monthly.
I will be easing back in, don't care if I miss out on any short term gains.
Trump has still let the genie out of the bottle in regards to the global economy and
trade barriers, so there will be some repercussions from the tariff episode he subjected
us all to. And he will almost certainly do more stupid stuff in the next 3 years, lol.

From what I've seen, the Markets and the other nations of the World have called Trump's
bluff, and kind of slapped him around. Of course, he spouts his usual nonsense about
blah, blah, blah, great victory, MAGA ! But he is showing himself to be spineless,
which is a good thing.

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