Weekly Signal & Noise Filter
April 2nd Has Come and Gone – Supply Shocks & Transitory Inflation Part II
With the Trump Administration set to announce its tariff schedule against U.S. trading partners on April 2nd and markets tagging and hovering near correction territory, the growth scare has gone from recession chatter to stagflation chatter.
Confusion is a feature and a tactical tool, not a bug, of this Administration’s governance style so as maximize its political leverage over its opposition and raise the probability of the outcomes it desires. Tariff uncertainty will not disappear after April 2nd, and in typical Trumpian fashion, will likely create more questions than answers.
How will tariffed countries respond and retaliate?
What is Trump’s response the above, which will likely be capricious and impulsive and designed for political consumption?
What are the distinctions between reciprocal tariffs and sectoral tariffs?
What do policy off ramps look like as the economy and labor market slow while inflation remains elevated due to Q1 seasonality and tariff front running by the supply side?
A core principle of these pages is that markets front run and price in everything - with an uncertainty handicap – the so-called risk premium. However, front running is not confined to financial markets but extends to markets in the real economy.
Tariff front running has caused data bullwhips and distortions to our understanding of the data.