The issue is simple. What percentage of the economy is dependent on tariff goods? The truth, is that the US economy is far more closed than people understand. People genuinely believe that all manufacturing has ceased to exist in the United States all given to China on the altar of woke policy the truth can be further from That statement.
Only about 15% of US GDP is related to foreign trade. Of that amount, slightly more than half is from Canada in Mexico. And half of that is energy. What that means, is that about 7% of US GDP is tariff dependent.
The proof in the pudding, is how little money tariff generates. People think that 30 or 50 billion is a lot it’s not in an economy that has $3 trillion. The impact on the US economy will be less visible but not absent. Inflation hasn’t occurred yet first because tests have hardly started to bite, but more importantly it’s such a small percent of the economy.
Now certain things are critical. The rare earth metals from China were critical. Energy from Canada is critical, but not oil and gas. Electricity from British Columbia, Manitoba, Ontario, and Quebec are critical. The impact of tariffs on steel, aluminum, and copper will create some inflation, aside from aluminum about half the US consumption is important. On the aluminum side is less than the third. However, 100% of American aluminum is dependent on Canadian energy. All metals, are effectively solid-state energy. It’s just much worse for aluminum.
The apparent frameworks that will eventually resolve trade dispute, and divergence with the rest of the world are starting to emerge. It is evident, that there is still deep disagreement about what these frameworks represent. In both the Japanese and the European instance there’s very different understanding of what has been agreed.
on the bright side, and for now, uncertainty seems to be less pressing issue. More pressing, is the new big beautiful bill, it has provisions for withholding taxes that could be implemented as soon as next year. Companies will probably start resuming capital expenditure, now that they have a clear understanding of their cost profiles.
The real dilemma, is how long will all this last until Donald Trump picks a fight again? Personally, I’d be surprised if we make it till Labour Day. Then again, people accuse me of being a pessimistic son of a bitch.
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