Good economic news can't catch a break
Add Axios as your preferred source to
see more of our stories on Google.
Photo illustration: Aïda Amer/Axios. Photo: Mandel Ngan/AFP via Getty Images
America is so far defying the gloomiest economic forecasts, but tariff threats keep scrambling the good news.
Why it matters: Inflation is at a four-year low, consumer sentiment might be on the mend and the stock market has recovered from its post- "Liberation Day" lows — but it's all being overshadowed by intensifying China trade tensions.
State of play: President Trump signaled Friday that the U.S.-China trade truce, a deal that effectively reopened trade between the world's two largest economies in May, might be in danger.
- "The bad news is that China, perhaps not surprisingly to some, HAS TOTALLY VIOLATED ITS AGREEMENT WITH US. So much for being Mr. NICE GUY!," Trump wrote on Truth Social.
Friction point: The big economic threat is that tariffs ramp up, instead of the de-escalation and new deals that the White House has indicated and Wall Street expects.
- Economists don't expect price pressures to seep into the data until the summer months. Retailers are rolling through inventory stockpiled before the worst of the tariffs took effect.
The irony is that two consumer sentiment surveys this past week showed consumers started to feel good about the economy of late — or at the very least, did not feel worse — after the administration lowered tariffs on Chinese goods.
- The University of Michigan's closely watched consumer sentiment index held steady in May. Sentiment is still near the lowest level ever, but the data ended four straight months of the index falling off a cliff.
- The Conference Board noted a huge surge in its index as well.
Consumers are tying their economic fortunes to trade — and nothing else.
- "Despite the many headlines about the tax and spending bill that is moving through Congress, the bill does not appear to be salient to consumers at this time," the University of Michigan said in a release.
What to watch: So far, Trump's trade drama has played out against a largely favorable economic backdrop. But there are early signs that backdrop might be shifting.
- Consumers pulled back on spending last month, choosing to sock away their income, rather than buy things.
- Separate data this past week showed the most recurring unemployment filings since November 2021, a indication that jobs are getting harder to find.
The bottom line: It's hard to be happy about uncertainty.
