Will tariffs boost inflation and depress the US and global economies? Will inflation be transitory or persistent? Will the economy remain surprisingly resilient, at least for the next few months? Will consumers retrench after they go on a tariff-beating buying binge? Will robust capital spending related to onshoring offset weakness related to Trump's Tariff Turmoil (TTT)? Will China and the US escalate their trade war? Who will blink first: Xi or Trump? Will China invade Taiwan? How will the Fed respond to the stagflationary forces unleashed by TTT?
While we are all struggling to answer these questions, the uncertainty is weighing on the economy and on US stock prices. In the latest related news, a group of five small businesses sued President Donald Trump on Monday, seeking to block the new tariffs he has imposed on foreign imports in recent weeks. The lawsuit claims that Trump illegally usurped Congress's power to levy tariffs by declaring that trade deficits with other countries constitute an emergency. Today, China ordered its airlines not to take any further deliveries of Boeing jets. United Airlines is planning to cut flights starting this summer to match disappointing domestic travel demand, although its bookings for more expensive international flights remain strong.
The latest US "soft data" economic indicators, which are based on surveys, are weak:
(1) According to the Federal Reserve Bank of New York, consumers' expected inflation rate over the year ahead rose to 3.6% during March (chart). As a result, consumers' assessment of their financial situation is eroding.
