Update 886 – Trump Levies to Hit Aug. 7
Stock Trade Ban Gains; Big Jobs Retreat
New tariff rates are set to go into effect in seven days following an Executive Order signed by Donald Trump yesterday. The new rates range from 10-41 percent, way above the historical average, but countries still have one week to try to reach a better deal with the Trump administration. Trump’s tariffs have already begun settling into the economy, with new data released this week showing significant cooling in the labor market over the past three months and inflation rising in June.
A strong bill banning stock trading by members of Congress, the President, and the Vice President passed out of the Senate Homeland Security and Governmental Affairs Committee this week, with bipartisan support. Also this week, the Senate Banking Committee voted to advance the first major piece of housing legislation in over a decade.
Good weekends all…
Best,
Dana
Headline
Liberation Day Deadline Arrives
Today is the day…again. Trump’s signature “Liberation Day” tariffs, first imposed on April 2, have sowed chaos and confusion into the stock market and the global economy for months as countries and business leaders await Trump’s final decision on tariff rates for America’s trading partners. Hours ahead of the midnight deadline for new tariff rates to take effect, the President signed an Executive Order that pushed the deadline, again, to August 7 and set rates that range between 10 and 41 percent for dozens of countries which have not yet secured a deal with the Trump administration. This new deadline provides even more time for countries to try to secure a deal. Countries not listed in his EO will face a standard 10 percent tariff.
Source: Reuters
Deals Announced and Tariff Rates Set
Some countries have been able to secure trade deals with the Trump administration ahead of the deadline. Those countries, or trading blocs, include the European Union and South Korea. For countries like Canada and Brazil, the President unilaterally set new tariff rates, while Mexico was granted an extra 90-day extension to secure a deal.
European Union
This week, the European Union secured a framework agreement with the United States to avoid a 30 percent duty that would have been implemented today without the deal. The bloc will now face a 15 percent tariff rate. That 15 percent tariff rate also applies to cars and car parts, which currently face a 25 percent duty under a separate sectoral tariff. Some strategic goods – including aircraft and aircraft parts, some chemicals, and certain agricultural products – are spared from the 15 percent tariff and will return to pre-January duty levels. While steel, aluminum, and copper goods will not enjoy a reprieve, the E.U. and the U.S. will continue to work to establish “tariff rate quotas” on these key products.
The European Union also committed to purchasing $750 billion worth of liquified natural gas and other energy products over the next three years. Although the investment provisions, including another $600 billion investment in U.S. industry, are being hailed as a major win for the Trump administration, they do not include any enforcement mechanisms. The European Commission expresses the agreement by saying, “EU companies have expressed interest in investing at least $600 billion in various sectors in the US by 2029,” while the White House fact sheet’s language is more firm, “The EU will invest $600 billion.” The European Union cannot force companies within its member states to invest in the U.S., and the bloc cannot invest itself.
South Korea
On Thursday, South Korea also secured a trade deal with the United States to avoid a 25 percent tariff rate on August 1. Instead, it will face a 15 percent tariff, and just as in the deal with the European Union, autos and auto parts will also face a 15 percent tariff. South Korea also committed to $350 billion in investments in the U.S. and to purchase $100 billion in liquefied natural gas.
Canada
On Thursday, the President announced a new rate of 35 percent for our northern neighbor, an increase from the original 25 percent. However, 90 percent of Canadian goods are exempted from this tariff as they fall under the USMCA agreement. The President cited fentanyl crossings into the U.S. as justification for this higher duty.
Mexico
On Thursday, President Trump announced that Mexico would be granted a 90-day extension to continue to iron out a trade deal. Mexico is the United States’ largest trading partner, and President Claudia Sheinbaum has managed to keep a relatively calm relationship with the President, given how chaotic his threats have been since he took office. During this delay, Mexico will face a 25 percent tariff rate, with goods covered under USMCA being exempt.
Brazil
The President is also wielding his tariff powers over, admittedly, political issues. Brazil will now face a 50 percent tariff along with targeted sanctions on a Supreme Court justice over the criminal proceedings for former President Jair Bolsonaro. President Trump claims his friend and close ally, who is accused of an attempted coup after losing the Presidential election in 2022, is subject to political persecution. Some goods have been granted exceptions to the tariffs, such as orange juice, energy products, and civil aircraft.
Other Developments
74K Jobs Added to U.S. Economy in July; May, June Job Gains Revised Down by 258K
Total nonfarm payroll employment rose by 73,000 jobs in July, and job gains in May and June were revised down by a combined 258,000 jobs, according to the July jobs report released by the Bureau of Labor Statistics this morning. The three months ending in July showed the weakest job growth since the onset of the pandemic in 2020, as the labor market is notably softening under the weight of the Trump administration’s economic policies, particularly its increased tariffs.
Revisions to job gains in May and June were notably larger than normal. Job growth in May was revised down from +144,000 to +19,000 jobs, 125,000 lower than previously reported. Job growth in June was revised down from +147,000 to +14,000 jobs, 133,000 lower than previously reported. Employment in May and June combined is 258,000 lower than previously reported, showing that job gains over the past three months have been far weaker than previously estimated.
Last month, the largest job gains came in:
- Health care (+55,000 jobs)
- Social assistance (+18,000 jobs)
Federal government employment declined, with 12,000 jobs being lost in July. 84,000 jobs have been lost in this sector since reaching a peak in January.
The unemployment rate ticked up slightly to 4.2 percent last month from 4.1 percent in June. The unemployment rate remains low and has remained fairly consistent between 4.0 and 4.2 percent since May 2024.
Today’s report indicates that the labor market has been softening by more than previously estimated over recent months as businesses and consumers adjust to the rapidly shifting economic environment. The Federal Reserve has been hesitant to lower interest rates over this year as inflation has begun to rise, but cooling in the job market puts the Fed’s dual mandate of stable prices and maximum employment in tension. Continued labor market weakening ahead of the Fed’s next interest rate decision could push committee officials to cut rates by 25 basis points, but continued rising inflation ahead of the decision could conversely incline officials to hold rates steady. Fed Chair Powell has not hinted at whether the Fed’s rate-setting committee would cut rates at its next meeting in September, but has committed to taking a data-dependent approach.
Trump’s Tariffs Push Inflation Up to 2.6% in June
The Trump administration’s tariffs have begun pushing prices higher, particularly in tariff-sensitive sectors throughout the economy. Prices rose 2.6 percent over the twelve months ending in June as measured by the Federal Reserve’s preferred measure of inflation, the personal consumption expenditures (PCE) price index. This is the highest annualized increase in PCE prices since February, according to the June PCE report released by the Bureau of Economic Analysis yesterday morning.
Core PCE prices – which strip out food and energy prices – rose 2.8 percent over the twelve months ending in June, consistent with the rise in core PCE prices over the twelve months ending in May.
On a monthly basis, headline PCE rose by 0.3 percent last month after rising by 0.2 percent on a monthly basis in each of the two months prior. Prices of goods in several tariff-sensitive sectors rose over the month, with prices of furnishings and other household goods rising by 1.3 percent and prices of recreational goods, which include some electronics, rising 0.9 percent in June. Over the month, food prices also rose by 0.3 percent, and energy prices rose by 0.9 percent in June.
The new data shows that inflation is rising due to the Trump administration’s sweeping tariffs, which are still settling into the economy. This rise in inflation threatens to upend years of progress, just as inflation was nearing the Federal Reserve’s two percent target. A further rise may lead the Federal Reserve to hold interest rates steady at its next meeting in September, despite growing pressure from President Trump to dramatically cut rates and dissent among two Fed Governors who opted for the Fed to cut rates by 25 basis points at its meeting earlier this week. The Fed’s rate-setting committee, the Federal Open Market Committee (FOMC), will meet next on September 16 and 17.
Committee OKs Bill to Ban Cong. Stock Trading
The Halting Ownership and Non-Ethical Stock Transactions Act (HONEST) Act, legislation banning Congressional stock trading, was advanced out of the Senate Committee on Homeland Security and Governmental Affairs in an 8-7 vote on Wednesday. The bill, led by Senators Gary Peters (D-MI) and Josh Hawley (R-MO), and passed with the support of every Democrat on the Committee.
The bill bans Members of Congress, the President, the Vice President, and their spouses and dependent children from holding, buying, or selling stocks. The text of the bill was amended to closely reflect that of the Ending Trading and Holdings in Congressional Stocks (ETHICS) Act, which was passed out of the committee last Congress and has been endorsed by 20/20 Vision. We encourage a vote on the bill on the floor of the Senate.
The Senate Banking Committee Unites to Advance Major Housing Legislation
On Tuesday, the Senate Banking Committee voted unanimously to advance the Renewing Opportunity in the American Dream (ROAD) to Housing Act of 2025. The bill was co-written by Chair Tim Scott (R-SC) and Ranking Member Elizabeth Warren (D-MA), and represents the culmination of the Senate Banking Committee’s efforts to put forward a major, bipartisan bill on housing, an issue that has become all the more pressing as housing prices have continued to climb. Senator Warren emphasized the bipartisan nature of the bill in her statement on the bill, saying, “For years, the American people have called on their elected officials to act to reduce housing costs. The Scott-Warren legislation represents what is possible when both parties put families ahead of politics. It’s a significant step in the right direction.”
The ROAD to Housing Act is over 300 pages long, and would address policy issues ranging from zoning laws to federal homelessness programs. To name a few:
- Sec. 203 would direct HUD to create and publish guidelines and best practices for state and local governments to reform their zoning and land-use policies.
- Sec. 204 would create a program to provide loans for home repairs and modifications, aiding in home preservation.
- Sec. 301 would finally remove the permanent chassis requirement for manufactured housing, a provision long demanded by housing advocates.
- Sec. 505 would reform federal homelessness programs in several important ways, including giving these programs consistent funding.
In addition to support from both parties, the bill has garnered widespread approval from housing industry groups and affordable housing advocates. With a rare level of across-the-board support, the main question now is whether Senate GOP leadership sees fit to strike while the iron is hot and move to push it through the chamber. While appropriations will obviously take priority until the budget battle is resolved, how the housing bill will rank compared to other pressing legislative priorities remains to be seen.