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Category: Economy
May 23, 2025
Economy
News

Trump Threatens 50% Tariff on EU as Negotiations ‘Going Nowhere.’

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❓What Happened: President Donald J. Trump proposed a 50 percent tariff on European Union (EU) imports and a 25 percent tariff on foreign-manufactured iPhones.

👥 Who’s Involved: President Trump, the EU, and American exporters.

📍 Where & When: Trump’s statements were made via Truth Social; proposed tariffs could take effect June 1, 2025.

💬 Key Quote: “Our discussions with [the EU] are going nowhere! Therefore, I am recommending a straight 50 per cent Tariff on the European Union, starting on June 1, 2025.” — President Trump.

⚠️ Impact: Economic repercussions for the EU; gains for U.S. automakers.

IN FULL:

President Donald J. Trump has called for a 50 percent tariff on all European Union (EU) imports, accusing the bloc of exploiting the United States through “powerful Trade Barriers, Vat Taxes, ridiculous Corporate Penalties, Non-Monetary Trade Barriers, Monetary Manipulations, unfair and unjustified lawsuits against Americans Companies.” The announcement on Truth Social comes amid trade negotiations with the EU.

In his post, Trump said the EU’s trade tactics have contributed to a $250 billion annual trade deficit with the bloc, calling the figure “totally unacceptable.” He proposed that the tariffs would take effect starting June 1, 2025. “The European Union, which was formed for the primary purpose of taking advantage of the United States on TRADE, has been very difficult to deal with,” he said.

EU leaders, such as European Commission President Ursula von der Leyen, have previously said they would retaliate against American tariffs on EU goods. In April, however, the EU suspended a proposed 25 percent retaliatory tariff, with von der Leyen stating she wanted to give negotiations a chance.

The EU has also stated it will go to the World Trade Organization (WTO) to contest the U.S. tariffs, asserting that they violate the organization’s rules.

President Trump also targeted Apple, warning the tech giant that iPhones sold in the U.S. must be manufactured domestically or face a 25 percent tariff. “I have long ago informed Tim Cook of Apple that I expect their iPhones that will be sold in the United States of America will be manufactured and built in the United States, not India, or anyplace else,” Trump stated.

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May 22, 2025
Economy
News

Bitcoin is Hitting New Highs. Here’s Why…

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❓What Happened: Bitcoin surged past $110,000 for the first time, reaching a new all-time high.

👥 Who’s Involved: Traders, institutional investors like MicroStrategy, and market analysts such as Joshua Lim and Tony Sycamore.

📍 Where & When: Early Asian trading on Thursday; Bitcoin is currently trading just under $111,000.

💬 Key Quote: Joshua Lim, global co-head of markets at FalconX Ltd., stated, “It has been a slow-motion grind into new all-time highs. There’s no shortage of demand for BTC from SPAC and PIPE deals…”

⚠️ Impact: The milestone reflects growing optimism in cryptocurrency markets, driven by regulatory developments, institutional demand, and bullish options activity.

IN FULL:

Bitcoin has reached a historic milestone, surpassing $110,000 per coin during early Asian trading on Thursday. The cryptocurrency, now trading just below $111,000, has gained 2.95 percent over the past 24 hours, fueled by growing optimism among traders and investors.

The surge comes amid increased anticipation for regulatory clarity in the cryptocurrency sector, spurred by progress on a stablecoin bill in the U.S. Senate. Market participants view the potential legislation as a step toward legitimizing and stabilizing the digital asset industry. However, some market analysis points to high levels of volatility in international bond markets as driving the flight of investors into Bitcoin.

Notably, a failed Japanese government bond auction earlier this week sent the country’s bond yields to near all-time highs. The ripple effect has dampened confidence in U.S. Treasury bonds as well, leading to a subpar 20-year auction on Wednesday, resulting in a sell-off and increasing yields. This has also made Bitcoin more attractive.

Bitcoin surged in December after President Donald J. Trump expressed an interest in creating a crypto reserve for the United States. This was later achieved in March when President Trump established a reserve of around 200,000 bitcoin, most of which had been seized by federal agencies in criminal proceedings.

Institutional demand has played a significant role in Bitcoin‘s latest rally. MicroStrategy, led by Michael Saylor, has amassed over $50 billion worth of Bitcoin, while other entities, including smaller companies and newly formed firms by crypto leaders, are financing acquisitions through methods such as convertible bonds and preferred stocks.

Joshua Lim, global co-head of markets at FalconX Ltd., highlighted the steady upward trend, commenting, “It has been a slow motion grind into new all-time highs. There’s no shortage of demand for BTC from SPAC and PIPE deals, which is manifesting in the premium on Coinbase spot prices.”

Options markets also reflect the bullish sentiment, with traders taking positions in Bitcoin calls expiring on June 27. Strike prices of $110,000, $120,000, and even $300,000 have seen significant open interest on the Deribit derivatives exchange.

Market analyst Tony Sycamore of IG noted that this new record high indicates Bitcoin’s earlier drop from January’s peak to below $75,000 in April was merely a correction within a broader bull market. “A sustained break above $110,000 is needed to trigger the next leg higher towards $125,000,” Sycamore added.

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May 22, 2025
Economy

Target Reports Significant Sales Slump After Left-Wing DEI Boycott, Deflation.

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❓What Happened: Target’s sales dropped 2.8 percent in the first quarter, falling short of Wall Street expectations, amidst a left-wing boycott over its decision to end some diversity, equity, and inclusion (DEI) policies and slumping consumer demand.

👥 Who’s Involved: Target Corporation, CEO Brian Cornell, customers, the Federal Reserve, and the Trump administration.

📍 Where & When: United States; first quarter of 2025, earnings call on May 21, 2025.

💬 Key Quote: “I want to be clear, we’re not satisfied with these results, so we’re moving with urgency to navigate through this period of volatility,” said Target CEO Brian Cornell.

⚠️ Impact: Target shares fell over six percent on Wednesday morning, now down 40 percent over the past year; the company revised its sales forecast downward for the rest of 2025. Sales at the retail giant were significantly impacted by a boycott over its move to scale back company DEI policies, along with falling consumer demand that suggests the economy could be facing deflationary pressures.

IN FULL:

Target Corporation reported a 2.8 percent drop in first-quarter sales, falling to $23.85 billion, below Wall Street’s anticipated $24.23 billion, as announced during the company’s May 21 earnings call. The decline comes amid boycotts following Target‘s decision to scale back its diversity, equity, and inclusion (DEI) initiatives earlier this year, a move made in response to criticism from the Trump administration.

Target CEO Brian Cornell addressed the disappointing results, stating, “I want to be clear, we’re not satisfied with these results, so we’re moving with urgency to navigate through this period of volatility. We’ve got to drive traffic back into our stores or visits to our site.”

The retailer also warned of further sales declines throughout the remainder of 2025, citing a challenging economic environment where customers are reducing spending. Target’s shares fell over six percent on Wednesday morning and have dropped 40 percent over the past year.

Notably, recent economic data, including the Consumer Price Index (CPI) and Producer Price Index (PPI), have signalled a possible deflationary cycle, due in part to the Federal Reserve’s refusal to cut interest rates. This means retailers could begin experiencing significant demand collapse, placing further strain on profits.

In an effort to recover, Target is introducing 10,000 new items priced at $1 or more, with most under $20, aiming to appeal to budget-conscious shoppers. This initiative is part of a broader strategy to offer value as customers remain cautious amid economic uncertainty.

The company’s earlier decision to scale back DEI initiatives, prompted by political pressure, led to backlash from a segment of its customer base, resulting in boycotts that further impacted sales. Previously, conservatives have boycotted the retailer over transgender restroom policies and Pride clothing lines for children and babies.

Additionally, the retailer claims it is contending with the effects of tariffs imposed by the Trump administration, which it says have added to its challenges.

Image by Phillip Pessar.

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May 21, 2025
Culture
Economy

L.A. Mayor Follows in Trump’s Tariff Footsteps – Make Hollywood American Again!

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❓What Happened: Los Angeles Mayor Karen Bass issued an executive order to simplify filming processes in the city.

👥 Who’s Involved: Mayor Karen Bass, President Donald J. Trump, entertainment professionals, and the Department of Commerce.

📍 Where & When: Los Angeles, California; announcement made Tuesday, May 20, two weeks after President Trump’s tariff declaration.

💬 Key Quote: “Keeping entertainment production in L.A. means keeping good-paying jobs in L.A., and that’s what we are fighting for,” said Bass.

⚠️ Impact: The directive seeks to retain entertainment jobs in Los Angeles amidst competition from other U.S. locations and foreign countries.

IN FULL:

Democratic Mayor Karen Bass issued an executive order on Tuesday designed to streamline the filmmaking process in Los Angeles, declaring her intent to keep entertainment production within the city. The announcement comes over two weeks after President Donald J. Trump revealed plans for a 100 percent tariff on foreign-produced movies, citing concerns over national security and economic harm.

Bass’s announcement appears to largely align with Trump’s push to reshore film productions, running counter to efforts by national Democratic Party leaders to undermine the President’s trade agenda. The National Pulse previously reported that Trump’s film tariff announcement also received backing from the Teamsters.

Bass’s directive aims to cut bureaucratic hurdles for filmmakers, making it easier to shoot at popular Los Angeles locations such as the Griffith Observatory, the L.A. Central Library, and the Port of Los Angeles. Additionally, the order reduces the requirement for city employees to be present during filming to just one, a move intended to lower costs for production teams.

“We are going to fight now,” Bass stated, continuing: “While we push for the tax credits to be passed in Sacramento, we need to do what we can today to impact building in Los Angeles.” She added: “Keeping entertainment production in L.A. means keeping good-paying jobs in L.A., and that’s what we are fighting for.”

The executive order comes amid increasing competition from other U.S. cities and foreign countries offering more affordable and accessible production options.

President Trump recently criticized Hollywood’s reliance on foreign incentives, describing it as a “national security threat” and a source of economic devastation. In a Truth Social post earlier this month, Trump explained his decision to authorize a 100 percent tariff on foreign-made films, stating, “Hollywood, and many other areas within the U.S.A., are being devastated… WE WANT MOVIES MADE IN AMERICA, AGAIN!”

Trump also highlighted the role of foreign film incentives in what he called “messaging and propaganda,” instructing the Department of Commerce and the U.S. Trade Representative to initiate the tariff process.

Image via U.S. Institute of Peace.

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May 20, 2025
Economy

Major U.S. Chain Blames Fed for Slower Sales, Not Tariffs.

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❓What Happened: Home Depot reiterated its full-year sales forecast and announced it would not raise prices in response to tariffs.

👥 Who’s Involved: Home Depot, Chief Financial Officer Richard McPhail, U.S. consumers, suppliers.

📍 Where & When: United States, fiscal first quarter ending May 4.

💬 Key Quote: “We intend to generally maintain our current pricing levels across our portfolio,” said CFO Richard McPhail.

⚠️ Impact: Home Depot’s pricing strategy contrasts with competitors like Walmart, and the company reported muted sales growth amid a tough housing environment.

IN FULL:

Home Depot announced on Tuesday that it will maintain its current pricing strategy despite claims that President Donald J. Trump’s tariffs could result in higher retail costs for consumers, citing strong supplier relationships and operational efficiency. Chief Financial Officer (CFO) Richard McPhail said that the company’s scale and partnerships would allow it to avoid price hikes.

“Because of our scale, the great partnerships we have with our suppliers and productivity that we continue to drive in our business, we intend to generally maintain our current pricing levels across our portfolio,” McPhail said during an interview with CNBC on Tuesday morning.

The Home Depot CFO noted earlier on Tuesday, during a company earnings call, that the tariffs provided an opportunity for the massive hardware and supply retailer to expand its market share against competitors. “It’s a great opportunity for us to take share, and it’s a great opportunity for our suppliers to take share as well,” he said.

McPhail highlighted that over half of Home Depot’s products are sourced domestically. Additionally, the company has diversified its import sources, reducing reliance on China. By next year, no single country outside the U.S. will account for more than 10 percent of its purchases, according to McPhail.

The announcement coincided with the release of Home Depot’s fiscal first-quarter results. The company missed Wall Street’s earnings expectations for the first time since May 2020 but exceeded sales forecasts. Net income for the quarter, ending May 4, stood at $3.43 billion, or $3.45 per share, down from $3.60 billion, or $3.63 per share, a year earlier. Total sales grew 2.8 percent year over year, bolstered by the acquisition of SRS Distribution, a supplier for home professionals.

Home Depot CEO Ted Decker, on the same earnings call, contended that the slower sales were because of “stubbornly high” interest rates, laying the blame at the feet of the Jerome Powell’s Federal Reserve—though he did not name the central bank directly.

Comparable sales fell 0.3 percent during the quarter, with U.S. comparable sales increasing slightly by 0.2 percent. McPhail attributed February’s decline to poor weather but noted that sales improved in March and April, with the latter seeing a 1.8 percent year-over-year increase. The company also reported a 2.1 percent rise in customer transactions, with an average ticket of $90.71.

Notably, McPhail’s comments add further evidence to the argument that many companies will attempt to maintain current price levels or mitigate increases as much as possible to maintain their market share. This appears to be especially true for suppliers and U.S. retailers who are considering shifting or even eliminating product sourcing in China.

Image by Harrison Keely.

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May 19, 2025
Economy
UK

Guinness Owners Revise DOWN the Expected Impact of Trump’s Tariffs.

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❓What Happened: Diageo, owner of Guinness and Johnnie Walker, is reducing the projected annual loss it attributed to President Donald J. Trump’s tariff policies by $50 million.

👥 Who’s Involved: Diageo, U.S. President Donald J. Trump, Diageo CEO Debra Crew, and equity analyst Aarin Chiekrie.

📍 Where & When: Tariffs announced April 2, 2025; Diageo issued its update on Monday.

💬 Key Quote: “Looking ahead, we will continue to work on measures to mitigate this impact further,” Diageo stated, expressing confidence in navigating international tariffs.

⚠️ Impact: The company forecasts reduced profits but plans to mitigate losses and save $500 million by 2028.

IN FULL:

The British beverage giant Diageo, owner of Guinness and Johnnie Walker, has flagged a $150 million annual hit to its profits, claiming this will be due to U.S. tariffs introduced under President Donald J. Trump. However, the company’s newest estimate, released on Monday, is a significant decrease from the expected $200 million loss it projected earlier this year.

It is unclear whether Diageo’s estimate includes provisions laid out in the new landmark bilateral trade agreement signed earlier this month between the United States and the United Kingdom, or if the loss is based mainly on the revenue impact of the 10 percent global tariff imposed by President Trump on April 2, 2025. Notably, President Trump paused higher, country-specific reciprocal tariffs for 90 days in mid-April. However, the recent U.S.-UK trade deal would preclude additional trade duties from being imposed on British exports once the pause expires.

Diageo’s recent shareholder update noted that its tequila and Canadian whiskey brands remain exempt from these levies, and tariffs on U.S.-China trade have had minimal impact on its operations. The company stated that it expects to mitigate about half of the tariff-related losses and expressed confidence in its ability to manage the challenges posed by international trade policies.

“Looking ahead, we will continue to work on measures to mitigate this impact further,” the company said, adding that its long history of navigating tariffs provided reassurance. The expected financial impact is already factored into Diageo’s fiscal guidance for 2025 and 2026. Importantly, the British company says it believes it can achieve around $500 million in savings by 2028, suggesting the long-term impact of the Trump administration tariffs will leave its business and market relatively unaffected.

CEO Debra Crew emphasized the company’s resilience: “We continue to believe in the attractive long-term fundamentals of our industry and in our ability to outperform the market. We view the near-term industry pressure as largely macroeconomic driven, with continued uncertainty impacting both the timing and pace of recovery.”

Diageo also reported a 2.9 percent rise in net sales for the first quarter of the year, reaching $4.4 billion.

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May 16, 2025
Economy
Immigration

Why Is Mexico’s Govt Lobbying Against Trump’s ‘Big, Beautiful Bill?’

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❓What Happened: House Republicans proposed a five percent tax on remittances sent out of the U.S. by non-U.S. citizens, sparking opposition from Mexico. In response, Mexican government officials are lobbying House Republicans in the U.S. to drop the provision from President Donald J. Trump’s budget bill.

👥 Who’s Involved: U.S. House Republicans, Mexican Ambassador Esteban Moctezuma Barragán, Mexican President Claudia Sheinbaum, and President Trump.

📍 Where & When: U.S., ongoing discussions as of May 2025.

💬 Key Quote: “Imposing a tax on these transfers would disproportionately affect those with the least, without accounting for their ability to pay,” Barragán wrote in a letter to U.S. Congressional leaders.

⚠️ Impact: The proposal could generate $1 billion in tax revenue by 2026, but faces resistance from Mexican government officials, as remittances from the United States comprise a significant portion of the country’s revenue.

IN FULL:

The foreign remittance tax provision in President Donald J. Trump‘s budget plan, currently working its way through the House of Representatives, has become the target of a lobbying campaign by the Mexican government, which seeks to remove it from the legislation. Under the plan being pushed by President Trump and his allies in Congress, cash remittances sent by non-U.S. citizens to family members abroad would be subject to a five percent tax.

In a letter to House Ways and Means Committee leaders, Reps. Jason Smith (R-MO) and Richard Neal (D-MA), Mexico’s Ambassador to the U.S., Esteban Moctezuma Barragán, urged the U.S. lawmakers to reconsider the tax measure. “Imposing a tax on these transfers would disproportionately affect those with the least, without accounting for their ability to pay,” Barragán wrote, claiming the provision will have unintended consequences such as increased use of unregulated financial channels.

Mexico is the third-largest recipient of remittances among nations worldwide. In 2024, the country received an estimated $64.745 billion in remittances, with most of the money sourced through transfers from the United States. The country’s heavy reliance on payment transfers from the U.S. as a source of revenue has even prompted Mexican President Claudia Sheinbaum to weigh in on the issue, declaring it “arbitrary and unjust” and calling it “a measure that is unacceptable.”

The Joint Committee on Taxation released estimates that the tax could generate $1 billion in revenue by 2026, rising to $3 billion by 2034. During his first term in office, President Trump pushed for a remittance tax to recoup costs for his border wall with Mexico.

As part of the Mexican government’s push against the tax provision, Barragán has met with U.S. lawmakers, including Reps. Tony Gonzales (R-TX) and Maria Salazar (R-FL). Salazar stated she is still evaluating the proposal.

Image via Mexico City Government.

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May 16, 2025
William Upton
Economy
Politics

Here’s How the FCC Just Advanced Trump’s America First Agenda in New Verizon Deal.

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❓What Happened: The Federal Communications Commission (FCC) will allow Verizon’s purchase of Frontier, a regional telecom company, to move forward, with the former agreeing to enact a series of reforms in alignment with President Donald J. Trump’s pro-worker, America First agenda.

👥 Who’s Involved: Verizon, Frontier, the FCC, FCC Chairman Brendan Carr, tower climbers, and telecom workers.

📍 Where & When: Washington, D.C., on Friday, May 16, 2025.

💬 Key Quote: “The agreement between NATE, Verizon, and the FCC is massive news. As a 36-year tower contractor and employer of over 200 tower technicians, this brings fairness back to our relationship. We can’t thank Chairman Carr enough for looking out for Main Street while still being fair to Wall Street. We hope T-Mobile and AT&T will follow Verizon’s lead,” said Craig Snyder, a tower climber and one of the negotiators for his industry in the Verizon acquisition deal, in comments to The National Pulse.

⚠️ Impact: Verizon’s acquisition approval comes with a commitment to ending its diversity, equity, and inclusion (DEI) policies and programs and agreeing to a new set of pro-worker conditions with the tower climber and telecom worker industries.

IN FULL:

The Federal Communications Commission (FCC) is allowing telecom giant Verizon to acquire Frontier, a regional communications company, with the aim of expanding its fiber Internet service. Notably, Verizon’s acquisition was contingent on a series of policy and labor practice changes, in alignment with President Donald J. Trump’s pro-worker America First agenda, imposed by the FCC through its regulatory authority.

“By approving this deal, the FCC ensures that Americans will benefit from a series of good and common-sense wins. The transaction will unleash billions of dollars in new infrastructure builds in communities across the country—including rural America,” FCC Chairman Brendan Carr said in a statement announcing the acquisition approval. “This investment will accelerate the transition away from old, copper line networks to modern, high-speed ones. And it delivers for America’s tower and telecom crews who do the hard, often gritty work needed to build high-speed networks.”

One of the biggest concessions being made by Verizon is the company’s decision to end its diversity, equity, and inclusion (DEI) policies and programs. In a letter to Chairman Carr on May 15, the telecom company acknowledged that it “recognizes some DEI policies and practices could be associated with discrimination.” Verizon goes on to announce that it “is changing its HR structure and will no longer have a team or any individual roles focused on DEI.” The move comes after Chairman Carr informed a number of telecom and Internet technology companies that the FCC would halt license approvals and authorizations for those that maintain discriminatory DEI programs.

The FCC also highlights that the deal represents a win for American workers. Verizon, as part of the approval, is committing to rework its agreements with NATE, the Communications Infrastructure Contractors Association, and remove the costly burdens its policies have placed on tower climbers. These new provisions include taking into account considerations in pricing when it comes to site conditions, the adoption of regional pricing for tower climbers and telecom workers’ labor, 30-day payment terms with fair indemnity clauses, and limits on Verizon’s use of 1099 outside contractors, which have been used to undercut worker wages.

Craig Snyder, a tower climber and negotiator for his industry in the Verizon acquisition deal, told The National Pulse: “The agreement between NATE, Verizon, and the FCC is massive news. As a 36-year tower contractor and employer of over 200 tower technicians, this brings fairness back to our relationship. We can’t thank Chairman Carr enough for looking out for Main Street while still being fair to Wall Street. We hope T-Mobile and AT&T will follow Verizon’s lead.”

Image by Gage Skidmore.

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May 16, 2025
William Upton
Economy
World

Trump Promises Fair Tariff Adjustments for Trade Partners in Coming Weeks.

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❓What Happened: President Donald J. Trump announced that his administration will inform U.S. trade partners as to what tariff rates their exports will face in the next several weeks.

👥 Who’s Involved: President Trump, Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and leaders from the Middle East, the United Kingdom, China, and elsewhere.

📍 Where & When: Abu Dhabi, United Arab Emirates; May 16, 2025.

💬 Key Quote: “We have 150 countries that want to make a deal—but you’re not able to see that many countries. So at a certain point over the next two to three weeks, I think Scott and Howard will be sending letters out essentially telling people—and we’ll be very fair—but we’ll be telling people what they’ll be paying to do business in the United States,” Trump said.

⚠️ Impact: The administration plans to dictate trade terms to numerous countries in the coming weeks, impacting global trade dynamics and continuing its ‘America First’ agenda.

IN FULL:

President Donald J. Trump announced that his Treasury Secretary, Scott Bessent, and Commerce Secretary, Howard Lutnick, will inform around 150 nations within the next month regarding the U.S. tariff rate on their exports. The comments were made early Friday morning on May 16, as President Trump departed Abu Dhabi—the final leg of his Middle East tour in which he secured more than a trillion dollars in investments into the United States.

“We just reached a fantastic trade deal with the United Kingdom. And we have another big one that we reached with China. At the same time, we have 150 countries that want to make a deal—but you’re not able to see that many countries,” Trump said shortly before he departed from the Middle East. “So, at a certain point over the next two to three weeks, I think Scott and Howard will be sending letters out essentially telling people—and we’ll be very fair—but we’ll be telling people what they’ll be paying to do business in the United States.”

Trump reiterated, “It’s not possible to meet the number of people who want to see us.”

Shortly after announcing a 10 percent global tariff and even higher country-specific reciprocal tariffs in early April, the Trump White House moved to pause the trade duties after most nations around the world scrambled to open talks for bilateral trade agreements. While the higher reciprocal tariffs were set aside for 90 days, the 10 percent global tariff has remained in place for nearly every country that engages in trade with the U.S.

Last week, President Trump finalized a significant bilateral trade agreement with the United Kingdom—a deal that had been sought by the United States ever since Great Britain voted to leave the European Union (EU). Under the terms of the agreement, the United States has been given unprecedented influence over the United Kingdom’s supply chains, with provisions regarding ownership structure and security guarantees appearing to be targeted at excluding Chinese suppliers.

Meanwhile, earlier this week, the United States and China agreed to dramatically lower the trade barriers the two nations had erected against one another for 90 days. Under the agreement, U.S. tariffs on Chinese goods dropped from 145 percent to 30 percent, while China reduced its levies from 125 percent to 10 percent. The move aims to de-escalate tensions from the ongoing trade dispute.

While the renewed possibility of higher tariff rates on U.S. trade partners is likely to stoke a new round of market volatility, recent hard data has clearly indicated that the tariffs have had little to no impact on inflation and, in fact, appear to be deflationary.

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May 15, 2025
William Upton
Economy
News

U.S. Economy Showing Signs of Deflation, Not Inflation.

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❓What Happened: U.S. wholesale prices unexpectedly dropped in April, marking the first decline in over a year. Additionally, retail sales data released by the Department of Commerce show sales slowing in April. The numbers are further evidence that America is experiencing deflation, not inflation.

👥 Who’s Involved: U.S. Labor Department, U.S. Department of Commerce, President Donald J. Trump, and American consumers.

📍 Where & When: United States, with the data released on May 15, 2025, reflecting economic transactions from April 2025.

⚠️ Impact: The producer price index saw its largest drop in five years, and retail sales slowed, suggesting that the U.S. could be entering a deflationary cycle. The data could finally push the Federal Reserve to cut interest rates.

IN FULL:

New data released by the U.S. Department of Commerce suggests that the American economy is experiencing deflation, despite President Donald J. Trump’s detractors insisting his tariffs would cause a spike in inflation. Consumer retail spending dropped in April, partly because consumers frontloaded purchases ahead of President Trump’s reciprocal tariffs taking effect. However, the slowdown in retail purchases also suggests that there is ongoing downward pressure on demand, giving strong support to the idea that inflation has subsided but has been replaced by deflation.

Retail sales in April rose by only 0.1 percent after a surge in purchases in March, where sales rose by 1.7 percent. The minor positive growth was almost entirely buoyed by restaurant and bar purchases, with retail, hobby, and miscellaneous stores all reporting negative growth of over one percent. Gasoline sales at stations fell by half a percent.

The deflation signals in the retail sales numbers are further backed by a surprising Producer Price Index (PPI) number from April. The PPI, which measures price changes before reaching consumers, dropped 0.5 percent compared to March, according to data released Thursday by the U.S. Labor Department. This represents the largest monthly decrease since 2018.

Critics of President Trump’s tariffs predicted that the PPI would rise, fueled by higher tariff costs. This, they contended, would be a form of inflation. Notably, Federal Reserve Chairman Jerome Powell has taken a similar line, suggesting that the Federal Reserve has been hesitant to cut interest rates as they believe the Trump tariffs to be inflationary in impact—which has so far proven to be incorrect.

By not cutting interest rates at the last two Federal Open Market Committee (FOMC) meetings, the Federal Reserve likely made a grave error and may need to resort to emergency measures to head off a deflationary spiral, which could portend an economic recession.

Since the start of 2025, President Trump has repeatedly called on Powell and his colleagues at the Federal Reserve to reduce rates.

Image by Rafael Saldana.

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