Subject: Control Panel: A busy, important week
Last week was busy in the Macroeconomic realm.

1. Tariffs due to apply on August 1.

2. The head of the Bureau of Labor Statistics, economist Dr. Erika McEntarfer, was fired by President Trump after after the bureau posted [a surprisingly dismal jobs report](https://www.wsj.com/economy/jo...). President Trump accused her agency of having [rigged the numbers](https://truthsocial.com/@realD...) to make him look bad; statisticians and economists leapt to her defense and worried that Trump’s move would undermine the integrity of U.S. economic data.

3. The real economy may be slowing although the unemployment rate (U-3) is still low.

4. The Federal Reserve kept the fed funds rate unchanged in the face of rising predicted inflation and an uncertain impact from the tariffs.

Unpacking these in detail

Tariffs
As of August 3, 2025, the U.S. has a complex system of tariffs in place, which includes a baseline tariff on many goods, along with additional country- and product-specific tariffs.

A significant change came with an executive order that established a new tariff regime. A 10% baseline tariff applies to imports from countries with which the U.S. has a trade surplus. For countries with which the U.S. has a trade deficit, the tariff rate is generally 15% or higher, depending on trade agreements or other factors.

Key tariffs and rates include:

Canada: A 35% tariff on many goods, with a 50% tariff on certain steel, aluminum, and copper products. Goods that qualify under the U.S.-Mexico-Canada Agreement (USMCA) are exempt.

China: A 20% tariff is in effect on most goods, with higher rates on certain products like steel, aluminum, and automobiles. There was a 90-day reduction to 10% on some goods, but the overall situation remains subject to change.

India: A 25% tariff on Indian goods, with an additional "penalty" on imports from India due to its trade policies and relationship with certain countries.

European Union (EU): A 15% tariff on most imports.

United Kingdom: A 10% tariff.

Mexico: A 25% tariff on most goods, with higher rates on steel, aluminum, and copper. Mexico was granted a 90-day extension to negotiate a new trade deal.

In addition to these, there are also steep tariffs on a wide range of other countries, with some of the highest rates on imports from Switzerland (39%), Syria (41%), Laos and Myanmar (40%), and Iraq and Serbia (35%). Tariffs on specific products, such as a 50% tariff on copper products, are also in effect across many countries.

It is important to note that these tariffs are in addition to standard import duties and can be further complicated by specific product classifications and trade agreements. Furthermore, the U.S. has also taken action to end the "de minimis" exemption for low-value shipments, which had previously allowed goods under $800 to enter the country duty-free. This will hurt many small businesses in the U.S. and overseas.

While a wide variety of factors complicate U.S. import duties, here is a general overview of the tariffs on some major import categories as of August 3, 2025. It's important to remember that these can be subject to change and may vary based on the specific country of origin, product details, and any applicable trade agreements.

Automobiles and Parts

Passenger Vehicles: A 25% tariff is applied to imported passenger vehicles and light trucks.

Auto Parts: Key automobile parts, such as engines, transmissions, and electrical components, are also subject to a 25% tariff.

USMCA: Goods that are certified as originating from Mexico or Canada under the U.S.-Mexico-Canada Agreement (USMCA) may be exempt from these tariffs.

Steel and Aluminum

Steel and Aluminum: The tariff on steel and aluminum imports is a significant 50%.

Several lawsuits have been filed challenging the legality of tariffs implemented under the current administration, but they are still in progress. The central legal argument revolves around whether the administration has the authority to impose broad tariffs without explicit congressional approval, particularly by using the International Emergency Economic Powers Act (IEEPA). It's important to note that these lawsuits specifically target tariffs imposed using the IEEPA and do not challenge other tariffs, such as those on steel, aluminum, and cars, which were imposed under different legal authorities. Even if the court rules against the administration they will surely appeal which will lead to more uncertainty in the future.

The firing of the head of the Bureau of Labor Statistics (BLS) over a low employment report

https://www.nytimes.com/live/2...

Kevin Hassett, the director of the White House National Economic Council, said, “The president wants his own people there, so that when we see the numbers, they’re more transparent and more reliable.” [end quote]

I think that statement is even scarier than the thought that Trump would fire a respected economist because he didn't like the employment numbers. Trump will be striking at the very core of the statistics that everything from Federal Reserve to TIPS yields are based on. The BLS reports on employment and inflation among many other critical economic data. It's easy to see how this can be politicized in so many ways. Not to mention that understating inflation would directly reduce the payments to Social Security recipients and TIPS interest payments.

It was only a matter of time before Trump picked this low-hanging fruit. Corrupting the economic statistics will fundamentally corrupt the markets. But the only thing Trump cares about is his political standing.


The Economy
https://discussion.fool.com/t/...

Last week’s news shows the hint of stagflation in the employment and inflation numbers.

The July jobs number was lower than expected and the previous two months were revised downward. Now that both the CPI and PCE are in for July the Cleveland Fed’s Inflation Nowcast shows inflation well above their 2% goal and rising.

The options market is now predicting an 80% likelihood of a 0.25% fed funds cut in September. Plus cuts in October and December for a fed funds rate of 3.5% - 4.0% by the end of the year.

If unemployment remains low because fewer people are looking for jobs the situation will be less clear. The unemployment rate only counts people who are actively job seeking.

The overall Labor Force Participation Rate is dropping but the Labor Force Participation Rate - 25-54 Yrs. is holding steady so far.

If the prime-age labor force participation rate falls the unemployment rate could stay the same even if the number actually working drops.

So far it’s looking healthy. If inflation rises and the job picture stays healthy the Fed may not cut the fed funds rate.

And remember that the long-term yields are set by the bond market not by the Fed.

However, the employment situation is gradually deteriorating. The number of people unemployed for at least 27 weeks topped 1.8 million, the highest level since 2017. It's gradually creeping up but is nowhere near recession levels.

The Economy
https://www.ismworld.org/suppl...

Economic activity in the manufacturing sector contracted in July for the fifth consecutive month, following a two-month expansion preceded by 26 straight months of contraction, say the nation's supply executives in the latest Manufacturing ISM® Report On Business®....The New Orders Index contracted for the sixth month in a row following a three-month period of expansion...The Prices Index remained in expansion (or ‘increasing’) territory...Looking at the manufacturing economy, 79 percent of the sector’s gross domestic product (GDP) contracted in July, up from 46 percent in June. Notably, 31 percent of GDP is strongly contracting (registering a composite PMI® of 45 percent or lower), up from 25 percent in June. The share of sector GDP with a PMI® at or below 45 percent is a good metric to gauge overall manufacturing weakness. ... [end quote]

Manufacturing is only about 20% of the U.S. economy but it is the part that the Trump tariffs are meant to stimulate. It's early days but so far that isn't happening. Placing high tariffs on raw materials and semi-finished imported parts is burdening the manufacturers. They will either have to absorb the cost, reducing profits, or pass the increased costs to the customer which will depress demand.

The markets


Trump fired the BLS head on Friday. The markets reacted sharply -- negatively.

All the stock indexes and bullish percent fell. VIX rose though not to panic levels.

The trade was risk-off as Treasury prices rose suddenly in a flight to safety (Treasury yields fell sharply). The Fear & Greed Index fell from Greed to Neutral.

The Chicago Fed’s National Financial Conditions Index (NFCI), which provides a comprehensive weekly update on U.S. financial conditions in money markets, debt and equity markets, and the traditional and “shadow” banking systems, was very loose and became looser. The flood of money underpinning the market is still flowing. The stock market is still in a bubble. Junk bond spreads are very low.

USD fell. Copper plunged while gold rose. Oil, which has been rising, fell. Natgas continued its falling trend.

The METAR for next week is cloudy. There will probably be some volatility but it will probably settle until the direction of the trends caused by these factors become clear.

Wendy


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