Mar 28, 2025

I recently heard from a trade expert that the U.S. economy may face a stall in the next quarter due to President Trump’s tariffs. The expert, Brad Setser, mentioned that the tariffs, especially on autos, could potentially lead to a recession as early as next quarter. Setser highlighted the impact of reciprocal tariffs and the inflationary effects of suppliers raising prices due to lack of competition. He also dismissed Apple’s claim of investing $500 billion in the U.S., stating it was not real investment but rather orders for future chip production.

Setser emphasized that the tariffs could have an immediate negative impact on the economy in the second quarter, potentially causing the U.S. economy to come close to a stall. He ruled out the possibility of a Great Depression but mentioned the risk of a self-induced recession. Additionally, he discussed the challenges of negotiating with other countries, such as Canada and Europe, due to certain policy constraints. Setser concluded that the tariffs, along with other factors, may not lead to a manufacturing renaissance in the U.S.

The news also highlighted President Trump’s recent tariff announcements on imported vehicles, which caused share-price losses for foreign automakers and companies like General Motors. The ongoing trade tensions and potential escalation of the trade war were mentioned as factors that could impact the markets and global economy. The possibility of tariffs affecting Canada and Mexico, and the implications for their economies, were also discussed in the news. Overall, the outlook portrayed a challenging economic environment amidst trade uncertainties and tariff threats.

Recently, there has been a shift in the US computer supply chain due to the trade war initiated by Trump during his first term. Large tariffs on Chinese desktops, storage, and components led to a peak in computer imports from China in 2022, with factories in Mexico filling the gap left by lost Chinese imports. Mexico has become a key player in supporting the US data center buildout amidst the AI boom, and last year, Mexico surpassed China as the single largest source of US computer imports.

In addition, Canada’s aluminum industry has grown to replace imports from China and Russia that were heavily restricted due to the trade war. Canadian aluminum has stepped in to fill the gap, especially after being exempted from tariffs imposed during Trump’s first term. Both Canada and Mexico were betting on the growth of their economic partnerships with America, only to face challenges from the US through massive trade wars.

Stay Well!