Donald Trump and his economic advisers are said to feel vindicated. Bilateral trade deals are rolling in and, in the main, on more favourable terms for the US.
Tariff revenue is soaring. Financial markets are fluctuating near record highs and predictions that inflation would soar have not yet materialised.
Is this the quiet before the storm or is Trump’s tariff plan, which nearly every mainstream economist says is destined to fail, succeeding?
In truth no one knows but every data point is being picked over for clues.
The latest job figures from the US for July were weak and contained downward revisions from a previously announced levels, suggesting companies might “already been pre-emptively slowing their hiring amid the uncertainty created by months of tariff threats and pauses from the White House”, according to one report.
US inflation, meanwhile, accelerated to 2.7 per cent in June without a commensurate increase in consumer spending, suggesting higher import prices from tariffs maybe fuelling prices.
Federal Reserve chairman Jerome Powell has so far resisted lowering interest rates like the European Central Bank because of the US’s strong labour market and the upside risks to inflation from tariffs, much to Trump’s annoyance.
Though concerning, the economic data don’t exactly point to a big pivot in underlying performance and aren’t likely to spook the White House just yet. But they do represent turbulence and remember much of the tariff impact has yet to play out.
There’s a lag time before higher prices get passed on to businesses and consumers because of front-loading and other dynamics.
Trump’s first term in office did feature tariff threats but ones that met resistance from within the White House and which were eventually moderated.
This time, it’s different. Easy wins in trade negotiations with Britain, Europe and Japan has emboldened the president.
Explaining the EU’s quick capitulation, one insider said Germany, after enduring a gruelling energy price shock, “wanted stability and didn’t care what the price”.
The average effective tariff rate on US imports is now at its highest level in nearly a century.
Will it send the US economy into reverse or will Trump and Maga operatives muddle through?
