Next round of tariffs: Markets are bracing for President Trump’s “Liberation Day” announcement on April 2nd, when he’s expected to unveil a new round of reciprocal tariffs. With last week’s 25% tariff on foreign-made vehicles already raising eyebrows, analysts at Goldman Sachs warn the next wave could be even steeper than expected, potentially up to 15-20%.
Historically, tariffs function as taxes on the end consumer, not foreign manufacturers. In our view, these measures slow growth and add friction to the economy. As costs rise across supply chains, businesses often have no choice but to pass them along to consumers, leading to price pressures that ripple through the economy.
March jobs report: This Friday’s March jobs report is expected to show a modest 135,000 added, with unemployment holding at 4.1%. However, we believe there is a real risk that data could disappoint further. Government layoffs (particularly from DOGE departments) and mounting signs of private-sector retrenchment may drag hiring down more than economists currently anticipate.
A weak jobs report, combined with cautious business sentiment reflected in recent PMI data, could further reinforce the view that the U.S. economy is slowing, even if not yet in recession territory.
Sticky inflation: Goldman Sachs now expects core inflation to rise to 3.5% this year, well above the Federal Reserve’s 2% target, as tariff-related cost pressures kick in. At the same time, GDP growth is projected to slow to just 1%, and unemployment could creep up to 4.5%. While the Fed is still expected to cut rates three times this year to support the economy, those cuts may not be enough to offset the drag from higher consumer prices.
We continue to believe that tariffs are inherently inflationary. It’s difficult to see how importers absorb at 20-50% tariff without passing a significant portion on to consumers. That risk, combined with a softer labor market, is fueling concerns about a potential return of stagflation, a rare and challenging environment for policymakers and investors alike.
Looking ahead: We’re entering Q2 with more questions than answers. Trade tensions are heating up, the labor market appears to be losing momentum, and inflation may not be done with us yet. While short-term volatility is likely, we remain focused on long-term fundamentals and disciplined investment strategy. As always, we’re monitoring the landscape closely and are here to discuss how these developments may (or may not) impact your financial plan.