Make America Uncertain Again

Daily update

The Federal Reserve’s Beige Book has biases. The businesses that provide anecdotal evidence will have an agenda, and the Fed economists who edit the anecdotes into coherence understand the economics of trade. Nonetheless, the latest edition used “uncertainty” 80 times—more than twice the references during the pandemic or the global financial crisis. Erratic policies are having an economic impact, and that seems to have penetrated partisan media bubbles.
“Tariff” was mentioned 107 times. US President Trump denied reports that auto part taxes would be cut. Investigations have begun for additional taxes on foreign trucks—though with the slump in road freight, the effect may be blunted. Media reports suggest taxes on US consumers of goods from China may be cut to 50-65%. That still implies about a 25% consumer price increase for imported consumer goods.
Bank of England governor Bailey stressed downside risks to economic growth from erratic policy and trade taxes. ECB president Lagarde emphasized the disinflation impact of tariffs (outside of the US).
Today’s German ifo and UK CBI business sentiment surveys are likely to reflect exaggerated horror at the trade outlook. US March durable goods orders data might reflect panic buying ahead of anticipated trade taxes, but this effect will likely fade very soon.