Summary
- So far the impacts have been contained and benign.
- Tariff proceeds hit a record.
- Limited fallout on inflation, growth and consumers.
- No change in on-shore investment or manufacturing jobs.
- China emerged as a notable loser: both its economy and exports to the U.S. have been hurt.
- Impositions continue to evolve, and their full effects are still unfolding.
- These developments reinforce our data-driven investment approach.
It’s been (almost) six months since Liberation Day, when President Trump announced staggering, broad-based tariffs that shocked the financial markets. We take a look at how things have played out so far.
Highest Average U.S. Tariff Rate Since WWII
After the initial chaos and rounds of negotiation, the average tariff rate eased from Liberation Day levels, yet it still stands at the highest level since World War II.
Additional tariffs continue to be introduced, leaving the situation fluid.
Historical Hauls
Tariff proceeds spiked. From April to August, net customs duties totaled $129 billion, compared to $38 billion over the same period last year.
Economy Holds Ground
Inflation saw a small uptick; Real growth remains stable.
Q3 GDP is expected to grow at an annualized rate of 3.9%.
Stocks Rally
Since Liberation Day, the NASDAQ has gained 44%, emerging markets 35%, the S&P 500 31%, and developed markets 27%. Over the trailing 1-yr, these indexes have advanced 12–24% and are all at their highest levels.
However, the impacts among tariff-exposed stocks have been uneven:
most Canadian stocks rose, while U.S. stocks have barely returned to their January levels, and European stocks remain underwater.
No Output Losses in Manufacturing and Agriculture
Forecasted manufacturing and agriculture growth losses from tariffs by in some earlier studies, including Peterson's, have yet to surface.
No Job Gains in Manufacturing Either
President Trump touted tariffs as a way to bring manufacturing jobs back, while his opponents argued they would cost jobs. To date, there is no clear winner in this debate.
Tariffs Haven't Spurred Investments
Q2 saw no increase in domestic investment year-over-year.
Consumers Are In Good Shape
Levies have yet to hit consumers’ pockets.
Q2 GDP and consumption just got revised up yesterday and real disposable income grew 3.1% in the quarter, giving Americans more spending power.
China's Export Share Slips
China’s share in U.S. imports has declined significantly,
while shares from other major exporting countries remain stable.
Chinese Economy Hurt
There are unrelated structural changes in the Chinese economy, but tariffs have no doubt contributed to slowing China’s economic growth.
Final Thoughts
Tariff impacts have been limited and benign, but continue to evolve and unfold. The past six months may have caught some market observers off guard. The developments reinforce our data-driven investment approach: respond to substantiated changes, not to initial hype.