Friday File: Runoff, Cloud Competition and Shifting Growth Expectations

The latest tariff deadline has hit, with President Trump’s announcements of another new slate of tariff numbers yesterday, and confirmation that these new tariffs, which seem to be a minimum of 15% for pretty much everybody, combined with some punitive tariffs for specific countries (50% for Brazil, 30% for China, 39% for Switzerland, etc.), all now actually going into effect next week… along with a continued push of “we’re ready to negotiate” to set new trade agreements.

I have no idea how much of this will end up being real, and how much is negotiating bluster, but one outcome of this now four-month process (so far) of introducing and then removing and delaying and negotiating tariff rates, while keeping everyone guessing and mostly pushing the goalposts further away when deadlines are hit, is that the impact on the economy is coming slower than everyone feared back in April… and investors to some degree have stopped worrying about the tariffs, either because of the Trump Always Chickens Out (TACO) narrative  or just because the talk hasn’t led to a big economic impact yet (it has for a few specific companies, and for a lot of small private companies, but not yet for the stock market as a whole), which lets us keep whistling along, hoping that there won’t be a meaningful economic impact.  That still feels like complacency to me, I don’t think you can bring this kind of tumult to large parts of the workforce and institute new 15-50% taxes on a host of products and expect there not to be a meaningful impact on GDP growth, employment, or inflation, and we started to see some of that impact come through with the surprisingly bad employment numbers this morning (which included huge downward revisions for payrolls for the past couple months, indicating that 258,000 fewer people got jobs in April and May than was previously estimated — making this three-month period of jobs growth the weakest we’ve seen since the pandemic, which might make the Fed reconsider the idea of some stimulative rate cutting, though the unemployment rate remains low).

But maybe it will work out, we’ll see — I feel more worried than hopeful about this tumultuous time of geopolitical posturing and economic reset, but I will be delighted if we come out the other side with limited bruising.  I have enough hedging in place to feel …