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Tariffs, Real Yield Watch, Rising Rents
Resal Money ^ | Peter Boockvar

Posted on 03/04/2025 7:47:25 AM PST by Miami Rebel

Real yield watch/For Powell, May '26 can't come soon enough/US$ action/Other good stuff

I'm sure you'll be seeing these stats all day but will mention it here just in case. In 2024, the US imported about $413b worth of goods from Canada, $505b from Mexico and $440b from China, including iPhone. From what I've seen so far, in terms of retaliation against the US, it looks like the American farmer has been specifically targeted again with tariffs on US soybeans, sorghum, pork, beef, chicken, wheat, corn and cotton too by China. The US farmer by the way also imports about 85% of their potash needs from Canada which just got 25% more expensive. They were targeted too in the Trump 1.0 tariffs in 2018 and 2019 that led to a financial package given to them. As the US consumer still has PTSD from the 2022 inflation spike, even higher food prices are going to come quickly as they are VERY short cycle items. In three weeks, Canadian tariffs will come on its imports of US cars, trucks, steel and aluminum.

I'm hopeful, as we all are, that these Canadian and Mexico tariffs are quickly removed in some sort of announced 'deal.'

The interest rate drop across the yield curve is, I believe, a stagflationary response to the tariffs and the expected slowing growth. And with regards to the Fed and the about-2 ½ 25 bps of rate cuts now priced in this year, how can they have any confidence on anything? Imagine if they start cutting but then tariffs are taken off right after? What happens if they start cutting as the tariffs stay on and the dollar weakens in response and no longer becomes a mitigating factor for US importers? What happens if they do nothing and economic growth continues to weaken? Will we just see a repeat of 2019 when they starting cutting rates because inflation was then tame? Jay Powell, I'm sure May 2026 can't come soon enough for you.

Now with respect to the dollar, which is now even more important to watch, especially against the countries we slap tariffs on. In the academic textbook, the country putting on the tariffs should see a stronger currency (on the belief that its trade deficit will shrink) that would offset the cost of the tariff which importers are logistically paying to the Customs Bureau. What happens if the dollar, after its post election rally, now starts to weaken because foreigners decide to take their money home? What if foreign ownership of the Mag 7 shrinks and that money is taken home, something I mentioned a few weeks ago? Then we end up eating more of the tariffs in terms of higher costs.

The US dollar index, heavy with euro and yen which regions have yet to be tariffed, is today trading at its weakest level since December 9th 2024. The Canadian dollar is still trading near its lowest level since the March 2020 Covid shutdowns however and 2016 before that but keep a watch on it from here as it's up today. The peso is weaker today at the lowest level since August 2022 vs the US dollar. The offshore Chinese yuan is stronger today by .4% and obviously something to watch too.

US vehicle sales in February totaled 16mm at a seasonally adjusted annualized rate. The estimate was 16.14mm and that compares with 15.81mm in February 2024 (which had the extra Leap Yr day) and vs 16.56mm in February 2020. That we are still selling less cars than 5 years ago I'll argue will continue to keep used car prices elevated.

Target slightly beat the comp estimates with a 1.5% gain. They said, "Comp sales trends in Apparel and Hardlines accelerated by nearly four percentage points as compared to the third quarter." They saw particular strength in toys and electronics, in addition to apparel and beauty too.

They had this warning for Q1 though, "In light of ongoing consumer uncertainty and a small decline in February Net Sales, combined with tariff uncertainty and the expected timing of certain costs within the fiscal year, the Company expects to see meaningful y/o/y profit pressure in its first quarter relative to the remainder of the year."

"During February, we saw record performance around Valentine's Day. However, our topline performance for the month was soft, as uncharacteristically cold weather across the US affected apparel sales, and declining consumer confidence impacted our discretionary assortment overall."

From Best Buy:

"As we enter FY26, we believe consumer behavior will be largely similar to last year - remaining resilient - but still dealing with high inflation that is driving expenses up across their lives, making them value focused and thoughtful about big ticket purchases. And, at the same time, we continue to see a consumer that is willing to spend on high price point products when they need to or when there is technology innovation." They forecast comp growth this fiscal year of 0-2%.

The visual and musical experience of a concert at the Sphere is unforgettable and I highly recommend making a trip to Las Vegas to see it. This was from their earnings call yesterday:

"In Las Vegas, the Sphere Experience saw improvements in sell through and stronger sequential results in the December quarter."

"We also continue to see interest from a diverse set of artists who want to play the Sphere. Our first country artist Kenny Chesney begins a 15 show run in May and the Backstreet Boys will start an 18 show residency this summer."

Apartment List released its February new lease data and rents rose .3% m/o/m after 6 straight months of declines. They are still down .4% y/o/y "but is slowly inching back toward positive territory." New rents are up 20% over the past 4 years.

The supply side continues to keep a lid on rents, particularly in the sunbelt where rents are falling the most in Austin and Raleigh but also in a non sunbelt state, Denver. The vacancy rate rose to 6.9%, the highest since at least this data was first kept in 2017.

As I've been arguing, enjoy the rent decline while it's here because it's not going to last. Apartment List agrees and said, "With the supply wave now getting past its peak, it appears that the era of declining rents could be nearing its end."

South Korea's February manufacturing PMI fell to 49.9 from 50.3. S&P Global said "The outlook for the coming months appears uncertain, as firms recorded the steepest decline in employment levels since July 2022, along with a renewed decrease in outstanding business. Confidence regarding the upcoming year was also relatively weak."

Also of note, "there was a further steep increase in input prices for South Korean manufacturers. Higher raw material prices were noted, and unfavorable exchange rate fluctuations also contributed to cost burdens."

With tariffs and the possibility of more flying all around the world's manufacturers, I don't see how anyone has much visibility right now for 2025.


TOPICS: Business/Economy
KEYWORDS: economy; tariffs
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His insights are spot-on.

If you agree that President Trump inherited a weak economy, you'd probably have to agree also that the tariff jolt will probably lead to a recession in the latter quarters of this year.

1 posted on 03/04/2025 7:47:25 AM PST by Miami Rebel
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To: Miami Rebel

That’ll teach us. We should have just let the grift keep going forever and kept getting screwed by other countries tariffing our goods with no reciprocation. /s


2 posted on 03/04/2025 7:50:52 AM PST by Magic Fingers (Political correctness mutates in order to remain virulent.)
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To: Miami Rebel

Both Canada and Mexico have had tariffs on our goods for many years.


3 posted on 03/04/2025 7:51:21 AM PST by kaktuskid
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To: Miami Rebel
Miami Rebel = Globalist Free Traitor™

Probably a Democrat....

4 posted on 03/04/2025 7:51:45 AM PST by central_va (I won't be reconstructed and I do not give a damn...)
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To: Miami Rebel
Tariffs can have several benefits, depending on the context and how they are implemented. Here are a few key advantages:
  1. Protecting Domestic Industries: Tariffs can help protect local industries from foreign competition by making imported goods more expensive. This can give domestic companies a better chance to grow and thrive.
  2. Generating Government Revenue: Tariffs can be a source of revenue for governments. The money collected from tariffs can be used to fund public services and infrastructure projects.
  3. Reducing Trade Deficits: By making imported goods more expensive, tariffs can encourage consumers to buy domestic products, which can help reduce a country's trade deficit.
  4. Encouraging Fair Trade Practices: Tariffs can be used as a tool to encourage fair trade practices by penalizing countries that engage in unfair trade practices, such as dumping products at below-market prices or providing excessive subsidies to their industries.
  5. Protecting National Security: In some cases, tariffs can be used to protect industries that are vital to national security, such as defense and technology sectors.

5 posted on 03/04/2025 7:53:18 AM PST by central_va (I won't be reconstructed and I do not give a damn...)
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To: kaktuskid

“Both Canada and Mexico have had tariffs on our goods for many years.”

What exactly was the purpose of USMCA? Were its provisions unenforceable?


6 posted on 03/04/2025 7:53:45 AM PST by Miami Rebel (pro-)
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To: kaktuskid

Tariffs are only bad if we do it.


7 posted on 03/04/2025 7:53:53 AM PST by central_va (I won't be reconstructed and I do not give a damn...)
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To: Miami Rebel
Globalist like you have turned the USA into a developing nation. Deindustrialization is national security threat and so are all of you Free Traitors™.
8 posted on 03/04/2025 7:56:18 AM PST by central_va (I won't be reconstructed and I do not give a damn...)
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To: central_va

Theglobalists on WallStreet are having a tantrum. How dear the US not play Uncle sucker.


9 posted on 03/04/2025 7:57:03 AM PST by cowboyusa (YESHUA IS KING 0F AMERICA, AND HE WILL HAVE oNO OTHER GODS BEFORE HIM!)
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To: Miami Rebel
Miami Rebel Since Mar 23, 2023

Free Traitor™ newbee.

10 posted on 03/04/2025 7:57:19 AM PST by central_va (I won't be reconstructed and I do not give a damn...)
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To: Miami Rebel
The GDP numbers will come down if government spending comes down.

Lot's of tut-tutting about the stock market reaction yesterday.

The bottom line is that many US companies have made higher profits through vicious labor arbitrage by outsourcing production and using legal and illegal immigration to drive down wages in the US.

That will come to an end, and the rentier class return on capital will fall as labor's share of national income rises.

Foreign companies see the writing on the wall and realize they need to invest in US production to access the US market. We need to return to US production to raise wages.

If all of this causes causes temporary economic disruptions, tough.

11 posted on 03/04/2025 7:57:35 AM PST by pierrem15 ("Massacrez-les, car le seigneur connait les siens" )
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To: central_va

Re: 10 - grow up.


12 posted on 03/04/2025 7:58:13 AM PST by Fury
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To: cowboyusa
How dare the Canuks and Mehicans impose retaliatory tariffs? It thought tariffs were bad? How dare they subject their citizens to onerous import tariffs on US goods? I am shocked!!!
13 posted on 03/04/2025 7:59:43 AM PST by central_va (I won't be reconstructed and I do not give a damn...)
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To: Fury

Re 12: Get a brain and a thicker skin.


14 posted on 03/04/2025 8:00:24 AM PST by central_va (I won't be reconstructed and I do not give a damn...)
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To: central_va

All of these might be true, but the fact is that trade disruption necessarily reduces domestic industrial activity and job creation.

As to “generating government revenue,” that revenue generation is offset by higher costs to the consumer.


15 posted on 03/04/2025 8:06:22 AM PST by Miami Rebel (pro-)
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To: central_va

LOL. Just hoping for reasoned discussion.

Sounds like that gives way to petulant name calling.


16 posted on 03/04/2025 8:06:56 AM PST by Fury
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To: Miami Rebel
but the fact is that trade disruption necessarily reduces domestic industrial activity and job creation.

LOL, It does the opposite.

17 posted on 03/04/2025 8:08:41 AM PST by central_va (I won't be reconstructed and I do not give a damn...)
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To: Miami Rebel

Didn’t Biden void or change it when he got in? He undid numerous improvements Trump started.


18 posted on 03/04/2025 8:08:49 AM PST by b4me (Pray, and let God change you. He knows better than you or anyone else, who He made you to be.)
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To: Miami Rebel
More government revenue lowers the amount needed to borrow to pay the debt interest and lowers interest rates overall. It also strengthens the US dollar.
19 posted on 03/04/2025 8:10:50 AM PST by central_va (I won't be reconstructed and I do not give a damn...)
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To: Miami Rebel
No nation ever imported, retailed and borrowed their way to prosperity.

We are a nation of producers. Consuming is downstream from producting.

20 posted on 03/04/2025 8:12:20 AM PST by central_va (I won't be reconstructed and I do not give a damn...)
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