Economic Data Tracker – 
All tariffs all the time, but markets aren’t tariff-ied

Trend watch

Wildfires have ravaged the west coast, with hotspots stretching as far north as southern Oregon and all the way down to San Diego County, rippling into the activity-based data (slides 5 and 6). For instance, the Kastle Back to Work Barometer Index, which measures anonymized building access data, shows that Los Angeles has been impacted, falling to a reading of 37 compared to 2024 average of 45. 

Our take

After a flurry of Executive Orders in his first week, President Trump is looking to fulfill his promise to impose tariffs to balance trade and get other non-trade issues resolved. In most cases, the threat of tariffs has been effective recently in getting leaders to acquiesce to a resolution.

That was the outcome last weekend with Colombia over a non-trade issue. By the way, the largest U.S. import from Colombia is crude oil and  refined petroleum products at roughly $6 billion in value, followed by coffee and cut flowers, which are well under $2 billion each.

Now, the White House is threatening to impose 25% tariffs on Canada and Mexico, perhaps as soon as February 1^st, though some news reports have them coming on March 1^st. Similarly, these tariff threats are over non-trade issues. Also, Canada’s largest exports to the U.S. are crude oil and natural gas, while vehicles and auto parts are the largest goods from Mexico. There is also the murky legality of whether tariffs are allowed under the United States-Mexico-Canada Agreement (USMCA), which Trump signed in early 2020.

But unlike Colombia, Canada and Mexico rank as our first and second largest trading partners. The White House is also threatening to hike tariffs by an additional 10% on China, which is our third largest trading partner. Each have promised in kind retaliations. These developments have many people very concerned about tariffs and, specifically, tariffs on our largest and closest trading partners.

As an aside, the United States is the largest exporter of crude oil in the world. However, the U.S. is also the second largest importer of crude oil in the world, behind China, because of quirky refining capabilities.

Yet, stocks and bonds to date have been surprisingly resilient in the face of these threats. Furthermore, commodities have also shrugged off some of these concerns. (Each are gyrating for other reasons, but seemingly not tariffs.)

Our take is that markets don’t believe that these tariffs will be enacted, or that if they are – they would be very temporary. On a short-term basis, this suggests a degree of complacency, as both President Trump and high-ranking White House officials have stated that the tariffs aren’t a bluff.

Bottom line

Uncertainty regarding the impacts from expected policy changes by the new presidential administration and Congress are a growing near-term headwind for the economy. That is complicated by the razor-thin majorities in Congress and continued political dysfunction on Capitol Hill. That has contributed to the recent bouts of volatility in financial markets, which we expect will continue for the foreseeable future. Yet, the U.S. economy remains resilient, and we believe solid growth will endure. At this point, the Federal Reserve has paused further rate cuts to digest incoming data and reassess conditions, which we feel is warranted given the uncertainty.