Expect significant new tariffs on Chinese imports and moderate levies on goods from other nations , as President-elect Donald Trump rolls out his protectionist agenda. However, with his preference for chaotic policymaking and sudden shifts , there’s uncertainty on how soon these import taxes will actually hit. Dubbed “ Tariff Man ,” Trump aims to use tariffs both strategically and tactically . He’s mentioned taxing all Chinese goods up to 60% and potentially setting 10%-20% tariffs on imports globally , but details on these plans remain vague . Key players within Trump’s team are divided: Robert Lighthizer , a staunch tariff advocate, sees permanent duties as crucial to balance US trade , while others, like billionaires John Paulson and Scott Bessent , view tariffs as temporary leverage. Trump’s previous administration had mixed feelings, especially on national security-related trade limits , which he sometimes dismissed, favoring an “open for business” approach. High-profile busin
US consumer spending rose slightly less than anticipated in August, indicating a potential moderation in economic growth for the third quarter. However, economic expansion remains likely, as the goods trade deficit narrowed by the largest margin in nearly two years, according to data from the Commerce Department.
Consumer spending, which makes up more than two-thirds of US economic activity, increased by 0.2% in August, following a 0.5% rise in July. Economists had expected a 0.3% increase. The spending was mainly driven by services, such as housing, healthcare, and recreation, with a decline in goods spending, especially in motor vehicles and parts. Despite these declines, higher incomes and savings are supporting consumer spending through the rest of the year.
Inflation, measured by the Personal Consumption Expenditures (PCE) price index, rose by 0.1% in August, in line with forecasts, marking the smallest annual increase since February 2021. Over the 12 months through August, the PCE price index increased 2.2%, down from 2.5% in July. Core inflation, which excludes food and energy, rose 2.7% year-on-year, just above the Federal Reserve's 2% inflation target.
Despite the moderate rise in inflation and spending, economists do not believe the data will push the Federal Reserve towards a more aggressive 50 basis-point rate cut in November. Investors had hoped for another significant reduction in interest rates, but current expectations have shifted towards two 25 basis-point cuts in November and December, according to Olu Sonola, head of US economic research at Fitch Ratings.
Meanwhile, the goods trade deficit contracted by 8.3% in August, dropping by US$8.6 billion to US$94.3 billion, the largest decline since November 2022. This reduction was driven by a 1.6% fall in imports and a 2.4% increase in exports, adding to expectations of economic growth for the third quarter.
Overall, the data suggests that US economic growth remains strong, with third-quarter GDP growth estimates around 2.9%. The economy had expanded at a 3.0% rate in the second quarter of 2024.
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