President Trump speaks during a Keep America Great campaign rally in Manchester, N.H., last month. Nicholas Kamm AFP
President Trump’s latest tariffs on Chinese imports threaten to jeopardize the expansion of the U.S. economy — and as a result, the president’s own political fortunes are at risk.
That’s because the latest slate of tariffs that took effect Sunday are primed to take a real bite out of consumers’ wallets, just as consumer spending that has been propping up economic growth looks to be softening. The percent duties on about $ billion worth of goods will raise prices on items from clothing and footwear to sports equipment and televisions. While the Trump administration formulated earlier rounds of tariffs to try to shield consumers, hitting only percent of so-called final goods from China, with the latest round, that number jumps to percent, according to the Peterson Institute for International Economics:
That will swell the tab for the average American family from $ a year from earlier rounds of tariffs to $,, per JPMorgan Chase.
Strong consumer spending has helped prop up economic growth even as other categories of activity have flagged in recent months. Business investment and manufacturing for example both contracted in the second quarter. But the economy expanded at a rate of percent over that time period, largely thanks to consumer spending rising to a rate of . percent, the Labor Department reported last week.
Yet new data show consumer sentiment may be more fragile than it has appeared. The closely watched University of Michigan consumer sentiment index just registered its biggest monthly decline since December . Back then, shoppers were worrying over the uncertainty spawned by “fiscal cliff” negotiations in Washington. Now, survey director Richard Curtin said, the potential impact of tariffs is sapping confidence.
“The August data indicate that the erosion of consumer confidence due to tariff policies is now well under way,” Curtin said in a release accompanying the new data. “While the overall level of sentiment is still consistent with modest gains in consumption during the year ahead, the data nonetheless increased the likelihood that consumers could be pushed off the tariff cliff in the months ahead. This could result in a much slower growth in consumption and the overall economy.”
And it s not just consumers. Confidence among small businesses also hit a seven-year low in August, according to a monthly survey commissioned by the Wall Street Journal. “The portion of respondents that expect the economy to worsen over the next months rose to %, compared with % in July and % a year ago,” the paper’s Ruth Simon writes. And percent said the new tariffs would impact their business.
Trump has scored his strongest marks with voters on his handling of the economy. But new polling shows that may be starting to waver as economic growth slows and trade war uncertainty dims the outlook. A Quinnipiac University survey last week found for the first time in Trump’s presidency, more voters now say the economy is getting worse rather than better, by a – percent margin — and by – percent, voters say the president’s policies are hurting the economy. A recent CNN poll also registered a meaningful drop in voters’ assessments: percent of voters still say economic conditions are good, but that represents a -point drop from May.
Trump has remained defiant as business owners and others turn up the volume on their distress calls:
Meanwhile, U.S. and Chinese negotiators are struggling to agree on a schedule for new trade talks intended for this month. “In conversations over the past week, the two sides have failed to agree on at least two requests — an American appeal to set some parameters for the next round of talks and a Chinese call to delay new tariffs,” ’s Jenny Leonard and co. report. “Trump went ahead anyway with tariffs on Sunday, doubling down on a strategy that seems to be having the opposite of the desired effect.”
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A resident clings to the railing as a wave generated by Hurricane Dorian crashes into the jetty at Lighthouse Point Park in Ponce Inlet, Fla. on Monday. Joe BurbankOrlando Sentinel via AP
— Dorian could cost insurers $ billion. Reuters: Hurricane Dorian, which battered the Bahamas early on Monday, could cause insurance industry losses of up to $ billion, according to analysts at UBS. Dorian, the second-strongest Atlantic storm on record, was forecast to pound the archipelago through the day, then move slowly towards the east U.S. coast, where authorities ordered more than a million people evacuated in Florida, South Carolina and Georgia.
UBS analysts updated their model to reflect a wider potential industry insured loss range of $ billion to $ billion and raised their base case to $ billion from $ billion, with solvency capital at risk.
That would make it among the costliest hurricanes in U.S. history, as this chart from LPL Financial s Ryan Detrick shows:
— Parliamentary showdown looms for Brexit. The Post s Kevin Sullivan and Karla Adam: Rebel members of Britain’s Parliament were poised Tuesday for a legislative showdown with Prime Minister Boris Johnson by seeking a three-month Brexit delay, a move that Johnson has warned would trigger a snap general election in mid-October.
Johnson surprised the political opposition, including a faction from his own Conservative Party, on Monday by signaling that he would seek a mandate from voters if legislators successfully block Britain’s departure from the European Union on Oct. . The showdown is happening in Parliament, which returns from its summer recess Tuesday after days of legislators accusing each other of attacking British democracy and raucous street protests calling Johnson’s moves a coup.
The British pound is sliding to a three-year low on the developments. The pound slumped to the lowest since as the prospect of a general election added an extra layer of complexity to the Brexit calculus, s Charlotte Ryan and John Ainger write. Already under pressure from Britain’s brinkmanship over its departure from the European Union, sterling buckled on concern a national vote may either give Prime Minister Boris Johnson a mandate to quit the bloc without a deal, or usher in an anti-business Labour government instead. The uncertainty is taking its toll on the economy, exacerbating the currency’s weakness.
— Corporate executives are buying stocks. s Michael Msika: When equity markets tumbled in August, one group of investors showed unshakable confidence: company insiders. So much that the buy-to-sell ratio of corporate executives in Europe reached its highest level since December, according to data compiled by iQ Research.
Such spike in the ratio — it reached . in August — is usually seen by market strategists as a contrarian buy-signal for equities. Top-level managers are considered to have superior knowledge of their businesses, and know when their company’s stock trade at bargain prices.
Outside the World Trade Organization WTO headquarters in Geneva, Switzerland, in . Denis BalibouseFile PhotoReuters
— China punches back with WTO action: China has lodged a complaint against the United States at the World Trade Organization over U.S. import duties, the Chinese Commerce Ministry said on Monday, Reuters s Meg Shen and Tom Miles report.
The lawsuit is the third Beijing has brought to challenge Trump’s China-specific tariffs at the WTO, the international organization that limits the tariffs each country is allowed to charge.
Trade war fallout is felt around the globe: The fallout from an escalating trade war between the U.S. and China is rippling through the global economy, crimping growth in Asian industrial giants such as Japan and South Korea and hitting factories as far away from the front line as Germany, the WSJ s Ruth Simon, Megumi Fujikawa and Paul Hannon report.
A U.S. survey of manufacturing purchasing managers to be released Tuesday will shed further light on how much the trade conflict is affecting the U.S. industrial sector. Several reports in recent days suggested the fallout was deepening globally. Tariffs are putting upward pressure on costs for multinational companies, forcing them to look for ways to offset it. Moreover, uncertainty about the outlook for negotiations between the U.S. and China is making it difficult for managers to plan.
Factories worldwide feel the pain. s Jana Randow: Manufacturing across vast parts of Europe and Asia remain deeply mired in a crisis that took another turn for the worse over the weekend. One day after the U.S. and China enacted new tariffs on each other’s imports, factories from Germany and Italy to Japan, South Korea and Taiwan sent a gloomy reminder that they are suffering badly from increased global trade hostility. Purchasing managers’ indexes for all those countries, as well as the -nation euro area, signal a contraction in activity.
Companies are turning back to Bangladesh: The trade war between the U.S. and China has led many fashion brands to shift production to spots across Asia, including to Bangladesh, where safety issues persist years after two workplace accidents killed more than , workers, WSJ s Jon Emont reports.
Many American fashion brands cut back on sourcing from Bangladesh, and others abandoned the country entirely, after the and accidents. Over the past two years, however, companies have bulked up sourcing in the country amid efforts to improve safety conditions there, and at least one major brand that left—Ralph Lauren—has returned. That shift has accelerated as the trade dispute has heated up.
— Moderate Democrats begin to pressure Pelosi on USMCA: “Rep. Abigail Spanberger squinted into the August sun as the farmer beside her laid out how his profits on corn and soybeans are sinking — and how he believes passing President Donald Trump’s new North American trade agreement could help,” Politico’s Megan Cassella reports.
“Spanberger and other moderate freshman Democrats who flipped Republican districts to hand their party the majority in could be key to getting a vote on the U.S.-Mexico Canada Agreement this year. And even though that would give Trump a policy victory heading into the election, members of this group are beginning to put increasing pressure on House Speaker Nancy Pelosi to bring the measure to the floor as they head back from a summer recess spent talking to impatient constituents.”
Don’t forget: “Once the House reconvenes Sept. , lawmakers will have just legislative days on Capitol Hill before taking another two-week break — meaning the next several weeks could prove crucial to the pact s fate.”
China’s yuan weakened further, at one point nearing . to the dollar, less than a month after Beijing let the currency pass a threshold it had previously defended.
Daimler Trucks North America, Paccar, Volvo Trucks USA and Navistar International are logging sharply lower orders, as trade tensions and slower global growth depress freight volumes.
— The costs of weak infrastructure: “As a stalemate lingers between Trump and congressional Democrats over moving forward on an infrastructure package, the price of fixing U.S. roads and bridges is going up in dollars and lives,” WSJ’s Likhitha Butchireddygari reports.
“The number of public transit safety incidents on streets, highways and bridges rose by % between and , in part because of unsafe conditions. The amount of property damage caused by those accidents increased by almost %, according to an analysis of the National Transit Database. Additionally, the National Highway Traffic Safety Administration in reported , traffic fatalities on roads, or about deaths a day, up from a day in . The need for road improvements contributed to some of those deaths, experts say.”
CEO Mark Zuckerberg makes the keynote speech at F, the s developer conference in San Jose, Calif. AP PhotoTony Avelar
— The rise of UBI: “For decades, Republicans and Democrats alike have tried to push families out of poverty by adding restrictions to government welfare programs. There were work mandates, time limits, benefit caps — rules aimed at pointing families toward what the government thinks are good choices,” my colleague Robert Samuels reports.
“Now, there is increasing interest in trying out the reverse. … The idea of guaranteed income is gaining traction, from the presidential debate stage to Silicon Valley, where tech titans such as Mark Zuckerberg and Elon Musk have promoted it as a way to fend off a gloomy future in which automation and climate change eliminate millions of jobs. Activists associated with the Movement for Black Lives are advocating guaranteed income for African Americans as a form of reparations for slavery.”
— Fox launches sports betting platform: “When Rupert Murdoch’s Fox Corp. launches the FOX Bet sports betting platform on Monday, it will do what no other major media company has done in North America: become the face of a sports gambling platform,” Reuters’s Hilary Russ reports. “FOX Bet, which launches in New Jersey, is operated through a partnership with gaming provider The Stars Group.”
“Entertainment giants from Walt Disney Co. to AT&T .’s WarnerMedia have waded into the red hot sports betting arena, which experts project could generate $ billion of revenue over the next few years in gambling revenue. But most have relied on creating new shows and providing commentary and have kept an arms-length distance from actual gambling.”
More companies are helping workers gain access to payroll advances and loans, reflecting concern over the impact money problems are having on productivity levels and worker retention.
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