Trump isn't responsible for the ~3% inflation he inherited. But it's a problem for him b/c tariffs, maybe tax cuts could keep it above Fed's 2% target. In 1st term, w/ core inflation <2%, tariffs & tax cuts helped Fed meet rather than miss 2% target. My column: www.wsj.com/economy/infl...
Trump's tariffs spell end of postwar consensus of economic cooperation. Next: continuous trade war driven not by alliances and ideology, but the priorities of the day. The winner is the one who can inflict, and withstand, the most economic pain. My latest. www.wsj.com/economy/trad...
If there is any doubt that tariffs are passed through to consumers, the cost of propane to heat my house just went up by the amount of the tariff
... inward, to be satisfied by idle domestic resources. (By contrast, had the US still been at full employment, there would be no idle resources to satsify this tariff-induced demand; you'd get inflation, or a reduction in output elsewhere in the economy).
So another way of saying this (in more conventional terms) is: the U.S. could reduce its indebtedness through fiscal austerity; this would normally lead to underemployment. But it can neutralizes that by raising tariffs, effectively directing some of the demand now satisifed by imports ...
but if you're at full employment (an assumption underlying a lot of trade models), tariffs direct productive resources from one sector to another, so you're less likely to get higher absolute consumption.
I infer that for tariffs to raise overall consumption through the mechanism you describe, i.e. boosting production, the host country would have to be below full employment, i.e. there would have to be idle resources that can be put to use in the new production...
on first read it feels like a frank and logical assessment of China's need to boost demand by shifting income to the household sector. but his policy conclusions - more spending on industrial policy and infrastructure - are really boosting the supply side further
Robert Lighthizer won't join Trump's administration after declining to join the internal battle for a top cabinet level position, WSJ's Brian Schwartz reports. His absence could set back Trump’s ambitions. www.wsj.com/politics/pol...
I agree. My take: If lower inflows are caused by higher U.S. saving/lower investment, rates should fall. But if caused by exogenous decline in demand for dollar as a reserve asset, then marginal buyer of UST becomes more price sensitive and yields (esp term premium) should rise.
Trump's defense of the dollar's reserve currency status is disconsonant because it's a key reason for the demand for US dollar assets that causes our structural trade deficit. (Triffin dilemma, anyone?) Losing that status would mean a lower dollar, higher interest rates, and smaller trade deficit.
Core PCE came in high (as expected). The last mile thesis has gained strength over the last several months as 12-month core PCE is now up 2.8%. You might say that includes outdated, lagged data. But 3-month is also a 2.8% annual rate.
Trump's 2 key economic planks, tax cuts/dereg to bolster growth; and tariffs to reduce trade deficit & bring back factory jobs, are in conflict. Trump can prioritize stronger growth or a smaller trade deficit , but not both. What Treasury pick means for the clash. www.wsj.com/economy/trum...
I'm happy for @jeannasmialek.bsky.social and @jimtankersley.bsky.social but the DC economic policy press corps is taking a real hit here.
www.nytco.com/press/jeanna...
The horizontal bars represent the percentage saying "gotten better" minus the percentage saying "gotten worse." The first bar (for US) is the net answer across all battleground states on the US economy. For the states, it represents the net answer for each state.
Trump inherits a remarkable economy. JP Morgan: "US real GDP currently stands nearly 4%-pts above its pre-pandemic potential path, while the RoW (rest of the world) maintains a greater than 1%-pt negative gap."
I talk with Noel King at Vox about tariffs: what Trump is trying to achieve, what we learned from his first term, how they might be implemented this time, and what the reaction might be. podcasts.apple.com/us/podcast/t...
Did Harris lose because of economics or culture? I argue here economics. In UK, France, Japan, ihflation was #1 issue, like in U.S., and ruling parties in all lost despite changing leaders. My colleague Aaron Zitner makes the competing argument for culture. Read & vote
www.wsj.com/politics/ele...
A few media friends I’ve seen show up recently:
@michaelsantoli.bsky.social
@gregip.bsky.social
@boes.bsky.social
@maxblau.bsky.social
Seems like AI is at the phase right now where we’re getting a huge capex boost as companies figure out how to use it but we largely haven’t seen cost/job cuts due to AI yet, but we’ll get to a point where both the capex growth stops and we’ll get cost/job cuts from AI too.
The CPI-based Ecumenical Underlying Inflation measure was 2.5% in October, up from 2.2% in August and 2.4% in September. This is median of 21 measures. And FWIW, roughly matches my own sense of underlying inflation (in previous months my judgment was higher than this measure).
More of an example than an explanation. I wrote about the divergence here; I think the economic pessimism is referred pain from pessimism about the world in general. www.wsj.com/economy/the-...
Is Globalization in Decline? A New Number Contradicts the Consensus. Instead of looking at the dollar value of trade, focus on how many tons of stuff get shipped how far, by Josh Zumbrun www.wsj.com/economy/glob...
Layoffs remain very low. But for people who are out of work, it's getting harder to find a job. The job-finding rate is roughly back to where it was before the pandemic (which was still a very strong job market). And the average duration of unemployment has drifted up a bit.
This is the streaming equivalent of the potato chip company shrinking the size of the bag but keeping the price the same.
Why Fed chair Powell isn't bothered by what looks like above potential growth: potential has moved up. At least temporarily. "Fed Takes Heart in a Supply-Side Boom" wsj.com/economy/cent...
GDP and jobs are above their prepandemic trend. Inflation is falling, real wages have recovered, real wealth is up. Why so much economic pessimism? Could it be "referred pain"? My latest. www.wsj.com/economy/the-...
Inflation is also higher than before Covid so there's at least a prima facie case that today's level of GDP is above potential, although CBO's own estimates don't show that.
What we talk about when we talk about Long Transitory
Fed chairmen used to lecture Congress and presidents on the deficit. Those days are over. Even as deficits drive up bond yields and roil markets, Powell refuses to offer advice, in contrast to 2020 when he advocated for more stimulus. My column. www.wsj.com/economy/cent...