Recent world events have contributed to an uneven economic landscape. Political conflicts, trade wars and sanctions have all caused fluctuations. Despite this, the United States economy remains remarkably strong. The regularly released ‘Beige Book’ by the U.S. Federal Reserve shows strong performance in many sectors. Manufacturing and farming remain weak due to their dependence on importing and exporting goods. The ongoing trade war with China impacts these industries the most.
Consumer confidence rose 2 points from a rating of 89.8 in August. The general public’s perception of the tariffs and uncertainty over the trade war is evening out. As the impact becomes apparent, there is less apprehension of the unknown. While the tariffs may affect day-to-day life, that effect is now quantifiable. Further, a strong job market helps to ease concerns – security in relation to employment makes a large difference in outlook.
Economy: Solid Retail Sales Buck Tariffs
Many U.S. retailers are facing increased costs as tariffs loom. However, customers do not seem deterred as retail sales continued at a brisk pace over the summer. Car sales and new construction led the charge, each coming in over predictions. Whether or not these trends will continue after the tariffs are in place remains to be seen. Many of the tariffs are only now coming into force – while others are still set to go into effect in the coming months.
Further, the most important retail season of the year is fast approaching. Christmas and the holiday season are a benchmark for retail sales. A poor performance over the holiday season could be damning for the current administration – and possibly signal the start of an economic decline.
Manufacturing and Farming Remain Weak
Manufacturing in the United States often relies on importing components. Outside of the high technology equipment, the U.S. works as more of an aggregator than a direct manufacturer. As tariffs make importing more expensive, these manufacturing jobs will move to more advantageous locations. Manufacturing failed to expand alongside the rest of the economy. Further tariffs are likely to exacerbate this fact.
On the opposite side of tariffs, U.S. farming depends on a robust export environment. Soybean farmers were the first casualties of the current trade war. Almost entirely dependent on Chinese purchasers, soybean farmers had no real alternative major markets to sell their crop. Soybeans rotted before they could be sent out, causing lasting damage to the industry. Increasing subsidies may help in the short term but will do little to combat systematic problems. Luckily, China has exempt soybeans from upcoming tariffs, opening a potential avenue for purchase.
Article By: Adam Stone