The customs duties data for the United States was recently updated, and we can assess the “success” of Trump 2.0’s tariff policies so far. On an annualised run rate, customs duties were 0.88% of GDP in the second quarter (the latest monthly figure Treasury I saw was around $350 billion annualised versus the $267 billion BEA second quarter figure).
I have been looking at term premium models as part of a non-writing project. I decided to take a look at the Kim & Wright model output (available via the Federal Reserve, paper link: http://www.federalreserve.gov/pubs/feds/2005/200533/200533abs.html). By way of background, there are two very popular term premium models, the Kim & Wright paper, and the one by Adrian, Crump, and Moench (ACM).
Toby Nangle recently wrote “How to (more) properly compare bond yields across markets” (non-gift link). The story behind the article is straightforward: commentators are going back to their old habit of comparing the raw yields on 10-year bonds and making assertions about what this means about implied credit quality. As Nangle’s article notes, this is not a good idea, since bond yields embed rate expectations.
A weak August PPI report today continues the narrative that inflation in the United States is a nothingburger. If I were attempting to be a forecaster, I could have easily been wildly wrong in my inflation prognostications (although the previous chickening out on mega-tariffs meant that my initial reactions would have to have been revised).
Adrien Auclert, Hannes Malmberg, Matthew Rognlie, and Ludwig Straub presented the paper “The Race Between Asset Supply and Demand” at the Jackson Hole shindig (link to paper). The paper argues that the demand for assets has so far outstripped supply, and the abstract has the eye-catching conclusion: “Making debt sustainable requires a fiscal consolidation of at least 10% of GDP, but debt could reach 250% of GDP without pushing up interest rates.”
News today was that Prime Minister Mark Carney withdrew many Canadian retaliatory tariffs on American good, although some remain. (One report indicated that the withdrawal was for goods covered by CUSMA/USMCA.) This news angered many Canadians, as it is an apparent reversal of the “elbows up” message of the election campaign.
I was slow to the outrage about the floated idea of stopping the publication of the monthly Jobs report (in favour of just the quarterly numbers). It now appears that E.J. Antoni has walked away from that suggestion.
Backing down is hardly unexpected. From the point of view of politics, economics data just seems to be a nuisance when it goes the wrong way, and shutting it off does not matter. But for people who are paid to discuss the economy, in the absence of data, there is nothing useful to do. As a result widespread push back from economists in finance and financial media to data cuts are inevitable.
