Trump Tariffs
On Sunday, Treasury Secretary Scott Bessent dismissed the idea that tariffs will cause a recession. "I see no reason that we have to price in a recession," Bessent said on Meet The Press. He said he wasn't worried about last week's stock market sell-off last week. "The market consistently underestimates Donald Trump."
He said that many over 50 countries are seeking trade negotiations.
However, top trade adviser Peter Navarro dismissed Vietnam's offer to cut U.S. tariffs to zero. "This is not a negotiation. This is a national emergency based on a trade deficit that's gotten out of control because of cheating," Navarro told Fox News Sunday. He cited non-tariff barriers. Navarro and Trump have generally equated trade surpluses as proof of cheating.
President Trump's 10% baseline tariffs on all trading partners started Saturday, with the much-higher bilateral rates for most partners beginning April 9.
Trump announced the massive tariff hikes on Wednesday, pushing average U.S. rates to the highest in a century. Those and other Trump tariffs will have a massive impact on the economy and prices, significantly raising the risk of recession or stagflation.
China announced major retaliation vs. the U.S. on Friday. However, Trump said Vietnam is willing to cut its tariffs to zero, which buoyed apparel stocks on Friday. But Trump's latest tariff hikes are based off other countries' trade surpluses, not their duties on U.S. goods.
Fed Chief Jerome Powell said Friday that he still wants more "clarity" about Trump tariffs' impact on growth and inflation, which may be greater than perhaps previously expected. He stressed that he doesn't think the Fed needs to be in a "hurry" to respond, suggesting no rate cut at the May 7 meeting.
JPMorgan now expects the U.S. to fall into recession in 2025 due to Trump tariff impacts. Chief U.S. economist Michael Feroli, in a late Friday note to clients, forecast a 0.3% GDP decline in Q4 vs. a year earlier, down from a prior target of 1.3% growth. Full-year core PCE inflation is now seen hitting 4.4%.
Feroli still sees the Fed resuming rate cuts in June, but now expects moves at each meeting after that through January, to a 2.75%-3% target range.
