Liberation Day II is coming on August 1. President Donald Trump has stated that it won't be postponed, unlike Liberation Day I, which was initially scheduled for April 2 but was postponed to July 9 and then to August 1. According to a July 10 Reuters report, Trump is considering raising his 10% base tariff to 15% or 20% on most trading partners by that deadline. That would be consistent with our view that he would like to get this issue behind him so that he can focus on campaigning for Republicans running in next year's congressional elections.
Meanwhile, Trump may be dialing down his almost daily rants about Fed Chair Jerome Powell, calling on him to either lower interest rates or resign. He has threatened to fire Powell. Yesterday, he moderated his stance, saying, "I don't rule out anything, but I think it's highly unlikely unless he has to leave for fraud." There has been no evidence of fraud, and the Fed has pushed back on criticism of its handling of the renovation of its headquarters building.
Today's economic indicators confirm the resilience of the US economy:
Meanwhile, today's economic indicators confirm the resilience of the US economy:
(1) Retail sales. Retail sales rose a better-than-expected 0.6% in June, after two consecutive months of spending declines, a 0.1% pullback in April, and a 0.9% drop in May. June's increase included a 1.2% gain in sales of autos and auto parts. Spending expanded across most major categories, including clothing and personal care. Excluding automotive products, sales increased 0.5%. The control group rose 0.4% (chart).
The Atlanta Fed's GDPNow tracking model's estimate of Q2 real GDP growth was lowered from 1.7% (saar) to 1.5%. The real GDP growth estimate was reduced from 2.7% to 2.4% for the current quarter. The economy has continued to grow despite fears that it would fall into a recession as a result of Trump's Tariff Tumult (TTT).
