Posted on 04/25/2025 9:26:20 PM PDT by SeekAndFind
The bottom line is Jerome Powell has screwed up.
No, that’s not from President Trump. That comes from legendary investor Louis Navellier.
In yesterday’s Special Market Podcast in Growth Investor, Louis weighed in on President Trump’s attacks on Federal Reserve Chairman Jerome Powell:
The latest criticism is, President Trump wants to get rid of Jerome Powell. Ok, well, unfortunately, I have to agree with him because Powell is fighting a mythical inflation that hasn’t occurred yet.
We’re not going to have more tariffs other than the Chinese tariffs because everybody is caving. Everybody is meeting with the administration; everybody is dropping their barriers. So, we are going to have freer trade when it is all said and done…
In the meantime, you’ve got two months in a row of declining consumer prices. So, you have deflation. You have wholesale prices collapsing 0.4%, you have crude oil prices near the lowest level in four years.
And they are worried about inflation?
So, there is something wrong with Chairman Powell.
I suspect the “something wrong” is Powell being haunted by his characterization of inflation as “transitory” back in 2021. That inaccurate call opened the door to the worst inflation in four decades as well as merciless attacks on his judgement.
My hunch is that Powell is gun-shy about cutting rates today despite the cool inflation data Louis flagged because he doesn’t want to risk going into the history books as Arthur Burns 2.0. For readers less familiar, Burns was the Federal Reserve Chairman whose loose policies opened the door to the inflationary 1970s.
What if deals don’t materialize?
I’m all for the trade deals that Louis referenced. But it’s been nearly three weeks since “Liberation Day” and no deals have been announced.
Here’s how our hypergrowth expert Luke Lango characterized it in yesterday’s Daily Notes from his service Innovation Investor:
Almost two weeks have passed since “The Pause” — the day Trump announced a 90-day tariff pause to make room for “quick” trade deals.
There was optimism back then. Real optimism. We were told talks were going well. Deals were imminent. And yet… not a single trade deal has been signed. Not one. Nada. Zip. We got absolutely no news over the weekend!
We still have country-specific tariffs on dozens and dozens and dozens of nations floating around out there. And zero trade deals to permanently eliminate any of those tariffs.
Despite positive headlines, no actual deals have been announced.
One example is this morning’s news that India’s prime minister, Narendra Modi, and U.S. Vice President JD Vance have made “significant” progress in trade talks. We’re thrilled to hear it, but at this point, we’re ready for news that a deal is official.
In the meantime, Trump’s blanket 10% tariff on nearly all the U.S.’s trading partners is in effect. The longer it remains, the greater the risk of reinflation, despite the recent cool, backward-looking inflation data.
For perspective, though 10% tariffs are infinitely better than the nosebleed levies that Trump originally proposed for each trading partner, that’s not the relevant comparison. The analysis we should consider compares “10% blanket tariffs to the tariff rate before the trade war.”
And what is that?
According to Visual Capitalist, in 2024, the U.S. average effective tariff rate on imports was 2.5%. So, this new normal of 10% – while in effect – has the potential to be inflationary.
At the beginning of the month, Citi modeled a base case of 10% tariffs, which it predicted could push the economy into stagflation in roughly six months.
From its note to clients:
Looking out, large tariffs would move us closer to the stagflationary risks we have downplayed this past year.
To help us, let’s look at day-to-day U.S. consumer purchases.
After all, if inflation is our concern, then such “everyday purchases” are the best window into where prices are today, and where they’re going tomorrow. For that analysis, there’s one place to turn – Amazon.
As you can see below with data from Statista, 71% of all items sold on Amazon are made in China.
Even if China is the only country facing higher tariff rates, prices for many of the “everyday goods” purchased via Amazon are going to get caught up in the tariff war – assuming these manufacturers raise their prices to offset the tariffs…
Will that happen?
Two weeks ago, Ross Sorkin of CNBC interviewed Amazon CEO Andy Jassy. From that CNBC interview:
SORKIN: Who is going to eat the cost, though, because I think that’s one of the big questions. How much can get passed on to the customer? How strong do you think the American consumer is right now and how much of it gets eaten by Amazon? How much gets eaten effectively by potentially a third-party seller?
JASSY: I think we’ll have to see how it all plays out. But if you made me guess, you know, I’m guessing that that sellers will pass that cost on… Depending on which country you’re in you don’t have 50% extra margin that you can play with.
So, I think they’ll try and pass the cost on.
Now, as we’re going to press, there’s good news on this front.
Earlier today, Treasury Secretary Scott Bessent told investors that he anticipates “there will be a de-escalation” in the trade war with China in the “very near future.”
Here’s CNBC:
“The next steps with China are, no one thinks the current status quo is sustainable” with tariff rates at their current levels, Bessent said at a private investor summit in Washington, D.C., hosted by JPMorgan Chase…
Bessent said he believes that the prospect of de-escalation between the economic superpowers “should give the world, the markets, a sigh of relief,” according to the person in the room.
We’ll bring you more on this as new details emerge.
So far, prices on Amazon are stable.
According to CamelCamelCamel, a company that provides pricing history for Amazon products, prices have been mostly flat for items ranging from iPads to toothpaste.
Here’s Wired explaining:
At least for now, ecommerce pricing experts say there are three leading reasons why Amazon sellers are keeping their prices steady: Many still have existing inventory in the US, are fearful about violating Amazon’s pricing rules, and remain inclined to wait out the mercurial president.
Regular readers of Louis know what’s behind the first point since he’s highlighted it repeatedly in recent weeks: foreign countries dumped their products into the U.S. ahead of Trump’s “Liberation Day.” So, they’re still sitting on a glut of inventory.
As to the second point, Amazon has “fair pricing” rules that penalize merchants that abruptly raise prices.
Finally, many companies share the same “hope it all goes away” mentality as do many investors – which is a real possibility. With Trump, a change of mind resulting in a single post on social media could end this instantly.
On April 1, in the lead up to President Trump’s “Liberation Day” tariffs, Israel eliminated all tariffs on U.S. imports. We’re talking 0% levies on U.S. imports across the board.
However, on Liberation Day, the U.S. hit Israel with a 17% tariff, which was based on our trade deficit.
On April 7, after flying to Washington to meet with President Trump, Israeli Prime Minister Benjamin Netanyahu announced that Israel would eliminate its trade deficit with the U.S.
From Netanyahu:
We will eliminate the trade deficit with the United States.
We intend to do it very quickly. We think it’s the right thing to do. And we’re going to also eliminate trade barriers.
It’s now more than two weeks later, and as far as I’m aware after searching, the U.S. still imposes the 10% blanket tariff on Israel.
Why?
Israel has removed all tariffs. And Netanyahu has publicly committed to eliminating the trade imbalance that appears to be at the heart of Trump’s trade grievances.
Netanyahu went so far to say:
Israel can serve as a model for many countries who ought to do the same.
I’m a free-trade champion, and free trade has to be fair trade.
With Israel giving Trump everything he’s asked for, minus the implementation, what is Trump waiting for?
If the answer is “implementation,” how does that work for every one of our trading partners?
Remember, a significant reason why we have trade deficits is because many of our trading partners are smaller, with lower GDPs and reduced per capita incomes. These smaller nations don’t have the economic resources to instantly “buy more U.S. goods” to balance the deficit.
So, if “canceling the trade deficit” must be accomplished, then “shipping fewer goods into the U.S.” would be the faster, more realistic way to achieve the goal. But that would risk pushing those nations toward different trading partners…
Such as China.
In our April 8 Digest, we looked at the case for Trump’s main goal with tariffs being the engineering of a flight into bonds, pushing yields lower. The purpose would be to reduce the refinancing burden on $9.2 trillion in federal debt maturing this year.
And in our April 16 Digest, we analyzed the idea that Trump’s real goal is the reshoring of domestic manufacturing as a matter of national security. As we profiled in that Digest, we’re woefully vulnerable to global manufacturers – especially China.
But stepping back, whatever the motivation, questions remain as we look forward to how this resolves…
Though Netanyahu says, “Israel can serve as a model for many countries who ought to [balance their trade deficits],” is the U.S. serving as a model for what our trading partners can expect when they give us 99.999% of our ask?
Bottom line: We’re crossing fingers that Louis is right about trade deals getting done. And it does appear that progress is being made. But at this point, we’d like to see some headlines.
We’ll keep you updated.
When they are complete and not before.
RE: When they are complete and not before.
Can you define “complete” for us?
Countries like Israel has removed all tariffs. And Netanyahu has publicly committed to eliminating the trade imbalance that appears to be at the heart of Trump’s trade grievances.
What moer needs to be done to COMPLETE this?
The day of reckoning is coming and Trump can’t stop it.
Can you describe for us what the Day of Reckoning will look like?
>> can you describe...
hyperbole
The percentages in that graphic add up to 166% - who made that graph ?
One problem is if you are making individual deals with each country you’re going to want to hide the details so others don’t use any concession with one country as a standard for another.
R U sure u-er on the rite site?
What kind of tripe is that - it seems to be from the lower part of the stomach where stuff is beginning to form into 💩
Agreed. Each country (and sometimes regions) will have particular details in the “deal” that will need to be negotiated to meet realistic conditions and needs.
I also believe this is an opportunity for the USA to not only remove/adjust tariffs, but also come to certain other trade understandings that will address the sale of strategic materials to our adversaries, and enforce US suppliers as the source for certain materials, goods, services (to work toward the 0 trade deficit goal.) The “deal” is many complicated deals, with many countries.
These negotiations are addressing decades of imbalances and strategic issues.
They may need more than three weeks. A lot of moving parts…
BTW: This is the ultimate level of “The Art Of The Deal.” A true master class.
Never, if we listen to people who think that we should try to produce internally whatever we consume, that we can return to our 1950’s economy.
Which we do not have yet.
I know the special people who are gambling in the market wants "hints and sneak peaks" but you are not going to get them.
Just have to wait like the rest of the normal people.
I am sure the fraud of omaha and his worshipers are having a tiny little fit but that is the way it goes.
When Will We See Trade Deals?
—
Shortly after you expire from holding your breath.
So why bother attempting in the first place?
Its a trade war which is totally different from tariff negotiations.
Yes, a very serious recession, our children and grandchildren have never really struggled financially. You can’t play this game forever, we have too much debt as a nation.
That’s ridiculous, I have no problem with tariffs, but a nation can not keep kicking the can down the road. A serious correction must occur.
RE: You can’t play this game forever, we have too much debt as a nation.
I’m still trying to get your point.
Are you saying that a serious recession would occur anyway REGARDLESS of what Trump and the current Republican Congress does ( e.g., say, they made the 2017 tax cuts permanent and added more tax cuts to it )? In other words, you’re saying a serious recession is INEVITABLE and nothing can be done?
RE: I have no problem with tariffs, but a nation can not keep kicking the can down the road. A serious correction must occur.
Exactly what are you referring to when you mention the “can” that is being kicked down the road? The trade deficit? or the budget deficit?
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