Economic Data Tracker – 
Some tariffs delayed, some not – consumers worried, markets not

Economic Data Tracker

February 7, 2025

Our weekly view on the economy including rationale on GDP, jobs report, and Fed policy decisions.

Trend watch

After burning for three weeks, the California wildfires are now fully contained. Therefore, for the first time in 2025, there isn’t a major weather event somewhere in the United States.

Now, like several other parts of the U.S., the focus shifts to rebuilding. However, the rebuilding effort is a slow process. Interstate 40 at the Tennessee/North Carolina border, which was damaged by Hurricane Helene, remains closed and isn’t expected to reopen until later this spring. The Francis Scott Key Bridge might be operational by the fall of 2028. Alas, the town of Paradise, California, which was devasted by the Camp Fire in 2018, still isn’t fully rebuilt. 

Our take

Earlier this week, the U.S. announced sweeping tariff increases on Canada, Mexico, and China – the U.S.’s three largest trading partners – that were slated to start on February 4. Those for Canada and Mexico were immediately delayed. While we are doubtful that the tariffs on Canada and Mexico will be long lasting, if enacted at all, these actions inject uncertainty into supply chains and pricing for many companies across North America. An escalation of tariffs leading to prolonged uncertainty and price shocks, specifically from crude oil, increase risks of a U.S. slowdown, although overall recession risk remains low currently.

Meanwhile, the China tariffs have begun, slapping 10% on Chinese imports. In response, China imposed targeted tariffs on U.S.-made goods. For instance, China levied a 15% tariff on coal and liquefied natural gas products, while U.S. crude oil, agricultural machinery and large-engine cars are now hit with a 10% tariff.

Additionally, China announced export controls on key minerals – such as tungsten, tellurium, and bismuth – used to make modern high-tech products. Those are on top of existing export controls for critical minerals such as gallium, germanium, graphite, which were ratcheted up again in December. Gallium and germanium are used in the production of semiconductor chips, while graphite is a must-have material to make electric vehicle batteries and graphite electrodes are needed for modern steelmaking.

Furthermore, China notified several prominent U.S. companies, including Google, PVH Group (owners of brands Calvin Klein and Tommy Hilfiger), and biotech firm Illumina, that each were on notice for investigations and possible sanctions. This is likely the start of a much longer process of reconfiguring global trade alliances.

Yet, as we mentioned last week, stocks and bonds have been surprisingly resilient in the face of tariffs and trade issues. 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. Investors also got some validation with the January jobs report and the PMI data that the U.S. economy remains solid.

Meanwhile, ordinary consumers ARE very concerned as we show on slide 10 with consumer confidence and inflation expectations. Consumers are acutely aware of the impact of inflation and – after several years of rapid price gains for most goods and services – most remain skittish. 

But both things – the U.S. economy remains solid, and folks remain skittish about inflation in the face of tariffs and trade wars – can be true at the same time. 

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 (Fed) has paused further rate cuts to digest incoming data and reassess conditions, which we feel is warranted given the uncertainty. 

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