The IMF downgraded the US growth outlook on Tuesday.
I mention this not because anyone cares about the Fund’s forecasts (no one does), but rather in the context of the broader macro-market shift away from “US exceptionalism.”
As discussed in this week’s macro preview, the IMF’s spring meetings in Washington are playing out in the long, dark shadow of Donald Trump’s efforts to overhaul a global system which in many ways is exemplified by the Fund.
The growth-inflation mix tipped by the new outlook is decidedly less favorable. The US economy’s seen expanding 1.8% this year versus 2.7% previous, and inflation’s seen running a full percentage point above the Fed’s target.
That underscores the Fed’s own concerns, as communicated last week by Jerome Powell who, to Trump’s deep chagrin, said the trade war threatens to move the Fed away from both its employment goal and its price stability mandate.
Those remarks, from Powell, set up a rapidly escalating showdown between the White House and the central bank which may well crescendo in an attempt to remove Powell before his term expires next year.
Look, I could carry on all day — and regular readers will attest that when it comes to me carrying on, “all day” isn’t an exaggeration — about this, but it comes down to one simple chart. This one:
That’s the average US tariff rate, and it’s not a coincidence that it’s the only chart the IMF saw fit to place in the executive summary of the Fund’s new outlook.
That rate was between 2% and 3% when Trump took office. Depending on how things pan out, it could settle near 25% by summer, a 10-fold increase.
Trump’s taking us back 100 years in terms of trade policy and if he’s not careful, he’s going make depressions Great again, proper noun.
“Since the release of the January 2025 WEO Update, a series of new tariff measures by the United States and countermeasures by its trading partners have been announced and implemented, ending up in near-universal US tariffs on April 2 and bringing effective tariff rates to levels not seen in a century,” the IMF said.
“This on its own is a major negative shock to growth [but] the unpredictability with which these measures have been unfolding also has a negative impact on economic activity and the outlook,” the Fund went on. “[This] makes it more difficult than usual to make assumptions that would constitute a basis for an internally consistent and timely set of projections.”
There you go. End of story.
At least we’ve got a competent leader in charge of the DoD in case of actual war, right?
The fact that this economic clown show isn’t even the most embarrassing example of this administration’s bad decision-making says more than you ever could (although I hope you keep saying what needs to be said for many years to come).
American exceptionalism, indeed.
Tape just reacted positively to a Bessent quote saying China tariff ‘situation’ unsustainable. I suppose once you remove the chickens head, it flops around for half a minute before being ready to pluck and roast.
If you take a gander at the overnight futures chart, it highly suggests that Bessent’s message was made known to some people well in advance. As appeared likely on the 90 day postponement announcement. Or maybe they were just lucky!
This is exactly why I just hold. It isn’t fun to live through all the nonsense and volatility, but there is no way I could have timed the past 4 months.
Bessent: “The current trade war is unsustainable. We are not doing anything about it and have no plan to fix it.”
Markets: “Hurray!!!”
The Morrill Tariffs were first voted in the pre-Civil War with 92 Republican Senators in fvor – (Morill was from Vermont) This funded the north and screwed the South. Also built the grat Northern universities and got the whole Union gobernment behind it. Morrill was a political star.
It was signed by a Democratic President- Buchanan- because he was from PA and was in favor of protectionism. Vote in Senate was 25-14 pretty much along party lines. Republicans in house voted for it 89-2.
Sorry, I got my tariffs tangled – like Navarro, I guess!