CONSUMER WATCH
May Vehicle Forecast: Sales “Cooling Off” to 15.9 million SAAR
From WardsAuto: U.S. Light-Vehicle Sales Cooling Off in May; Inventory Still Falling (pay content). Brief excerpt:
With inventory set to continue declining month-to-month, and the cost to automakers of the tariffs more strongly kicking in by July, sales are likely to continue sequential weakness into the summer – unless automakers decide to eat most of the increased cost. Based on the North America production outlook for the next several months, most are not planning to eat a lot of the cost.
emphasis addedOn a seasonally adjusted annual rate basis, the Wards forecast of 15.9 million SAAR, would be down 7.9% from last month, and up 0.5% from a year ago.
Car buyers rushed to buy over the previous couple of months to beat the tariffs. There will be further payback in coming months.
Sales were 15.8M in 2024 and 15.5M in Q1’25. March was 17.8M and April 17.3.
Car sales volumes are only back to pre-pandemic levels but prices are up 32% for used and 20% for new vehicles, pre-tariffs…
Nvidia’s Huang Calls U.S. Export Controls a Failure, Praises Trump CEO says American curbs have pushed Beijing to accelerate development of its AI industry
Chief Executive Jensen Huang said U.S. export controls limiting the sale of advanced chips to China have been a failure, and commended President Trump for reversing a core part of the Biden administration’s policy.
The controls have galvanized China to push ahead with building its own artificial-intelligence technologies, and Nvidia has over the past four years lost market share to domestic competitors there, Huang said.
“The local companies are very talented and very determined, and the export controls give them the spirit, energy and the government support to accelerate their development,” Huang said in Taipei, where he is attending an industry conference. (…)
Huang said Wednesday that China was the second-largest computer market globally and would be a $50 billion AI market next year. Revenue from China, he said, could translate to tax dollars and jobs for the U.S. (…)
“America is not the only provider of AI technology,” he said. “If the United States wants to stay in the lead and the U.S. would like the rest of the world to build on American technology, then we would have to maximize AI diffusion, maximize the speed.”
Days after the rule was pulled, American chip makers including Nvidia unveiled deals to sell hundreds of thousands of the most powerful chips in the United Arab Emirates, Saudi Arabia and Qatar during a visit by Trump and Huang to the region.
Still, Nvidia hasn’t gotten everything it wanted from Trump. It said in April it would take a $5.5 billion charge after the Trump administration put new controls on the export of an AI chip that the company had tailored for sale in China.
Huang reiterated his desire to keep serving China, citing its importance to the world’s AI ecosystem.
The Silicon Valley chip executive has crisscrossed the globe over the past month, trying to drum up sales of his AI processors and excitement for his vision of a future driven by AI supercomputers. He has drawn closer to governments around the globe because of the geopolitical importance of AI, standing by Trump’s side in the Middle East and meeting senior Chinese officials.
Bloomberg’s account is more explicit:
Nvidia Corp. chief Jensen Huang blasted the “failure” of US restrictions intended to help contain China’s technological ascent, calling on the White House to lower barriers to AI chip sales before American firms cede that market to up-and-coming rivals such as Huawei Technologies Co.
Huang called for policymakers to propel US AI technology by lowering export barriers aimed at curtailing the rise of a geopolitical rival. Some corners of Washington are receptive to that argument when it applies to countries like Saudi Arabia or the United Arab Emirates, which have close ties to China — but Huang has so far failed to turn the tide of restrictions that specifically target the world’s second largest economy. (…)
Huang’s views align with the likes of White House AI adviser David Sacks, who has pushed for ensuring the world builds its AI tools and applications on an American “tech stack” — a full complement of hardware and services based on US know-how. The Trump administration is rescinding restrictions on Nvidia chip shipments to much of the world, though officials are drafting a replacement framework. (…)
“All in all, the export controls were a failure. The facts would suggest it,” Huang told reporters, in some of his harshest criticism yet of the US campaign. “The US should maximize the speed of AI diffusion. Because if we don’t, the competition will come.”
“China has 50% of the world’s AI developers, and it’s important that when they develop on an architecture, they develop on Nvidia, or at least American technology.” (…)
Huang reiterated the warning that if Nvidia can’t sell in China, Huawei and others will fill the gap.
“Power is quite cost-effective in China. And there’s plenty of land. And so the ban on H20 is not effective for that reason,” Huang said.
“They’ll just buy more chips from the startups, from Huawei, and others. And so I really do hope that the US government recognizes that the ban is not effective and give us a chance to go back and win the market.”
(…) “His fortune and misfortune is that he created the most valuable technological input of the decade,” said Barath Harithas, a senior fellow at Washington-based think tank Center for Strategic and International Studies. “The danger is that his visibility becomes a liability. He could end up the fall guy if things unravel in the Gulf, and then face political heat for any perceived overreach in China.” (…)
Huang has pulled off the feat of staying friends with both the U.S. and China, despite tensions between the two superpowers.
In early April, he attended a $1 million-a-head dinner with Trump at Mar-a-Lago, and afterward some inside Nvidia were confident the company could keep selling its H20 chips in China, which had been tailored to comply with earlier U.S. regulations. Instead, the U.S. said a few days later it would restrict the sale of the H20 chips, which led Nvidia to take a $5.5 billion charge in the first quarter.
Within days of the new rule, Huang flew to Beijing and publicly reassured senior Chinese officials the company would “unwaveringly serve” the market there. Later, he met the mayor of Shanghai and left with the city’s blessing to open a new research and development center there.
Huang has repeatedly said China will be a powerhouse in global AI development and it would be folly for Nvidia to neglect the market. Each time new U.S. export controls on advanced semiconductors have been introduced, Nvidia has adapted by downgrading its chips’ specs to continue selling to Chinese customers. (…)
Last week, the Commerce Department put out guidance against the use of American AI chips to train Chinese models and warned against the diversion of such silicon to China.
Harithas of CSIS said the perception of an American executive courting China ran against sentiment in Washington. “If he leans too far toward China with even a neutered chip variant, he risks crossing a red line, triggering public rebuke, or worse, legal blowback,” he said.
INFLATION WATCH
Macho-Pessimists Say Inflation’ll Be Back Tariffs will bring it with an unblinking certitude; the only question is when.
(…) The US has been slapping tariffs on a range of imports for a few months, and that’s already shown up in a sharp increase in the money being paid in import duty:
That is real money for Uncle Sam, and it has been paid by someone. But who, ultimately, will bear the price? (…)
Bloomberg’s survey of professional forecasters shows CPI estimates ticking up ever since the election. They’re only a little above 3%, so this isn’t extreme, but the shift is clear:
(…) Michigan has been logging inflation expectations by partisan identity since 2020, and the swing in the last few months has been spectacular. Trump Derangement Syndrome affects both ends of the spectrum, with Democrats expecting double-digit inflation, while Republicans think price rises could be abolished:
The depth of division is disquieting. But Michigan also polls independents, who suggest something more worrying for the administration. Their forecasts have shot up since the election, even as actual inflation has fallen. Reasonable people, then, expect tariffs to cause inflation:
What looks more encouraging on this chart is that import price inflation has declined slightly. Unfortunately, this doesn’t mean that tariffs won’t hit consumers, because US import prices exclude tariffs. Dario Perkins of TS Lombard in London says: “If Chinese exporters were absorbing them, US import prices would be falling much more sharply. Stability in these metrics means China ISN’T paying.” Apparently calm figures are a reason to expect the tariffs to show up in inflation soon. (…)
In recent posts, I have documented some inflation trends:
- Import prices excluding food and fuels rose 0.5% in April.
- Import prices for nonfuel industrial supplies and materials increased 0.8% in April.
- Import prices for capital goods increased 0.6%.
- Import prices for consumer goods increased 0.3% in April, the first monthly advance since October 2024.
Note that import prices exclude tariffs.
- Core goods PPI rose 0.4% after +0.3% in each of February and March. Last 3 months annualized: +4.1% following +2.0% in the previous 8 months when monthly gains were limited to 0.1-0.2%.
Note that Producer Prices exclude imports.
There is clearly price pressures in the goods pipelines.
Walmart, the king of low prices and a Goliath negotiator, warned last week that it plans to raise prices this month and early this summer, when tariff-affected merchandise hits its store shelves.
“The magnitude and speed at which these prices are coming to us is somewhat unprecedented in history,” Walmart Chief Financial Officer John David Rainey said in an interview.
Shoppers could see prices rise by the end of May, “and then certainly much more in June,” Walmart CFO John David Rainey said today in a CNBC interview.
“We’re wired for everyday low prices, but the magnitude of these increases is more than any retailer can absorb,” Walmart CFO John David Rainey told CNBC today.
“Well, if you’ve got a 30% tariff on something, you’re likely going to see double digits [in price increases],” he later told Yahoo Finance.
(…) “Imports are only 14% of the economy — the ability of those types of things to move the needle on inflation are limited,” Stephen Miran, chair of the Council of Economic Advisers, said in an interview on Bloomberg Television’s Surveillance. “We have been introducing tariffs since day-one of this administration. And what we have seen is tariffs have started to come up” yet there’s “been no real meaningful effect on inflation.” (…)
Miran, who previously worked as a senior strategist at hedge fund Hudson Bay Capital, said that American importers “have flexibility,” with the potential to make products domestically or buy them from “other countries that treat us better.” That gives them leverage, he said. (…)
“But over time, we have the leverage — and that’ll allow us to force the burden of the tariffs onto other countries.” (…)
More importantly for Miran is that services inflation might be subdued enough to offset coming goods inflation. Slowing wages and lower oil prices are helping here.
- Oil prices rose after CNN reported that Israel may be preparing to strike Iran’s nuclear facilities. The report, citing US intelligence, also said it wasn’t clear whether Tel Aviv has made a final decision. Last week, Donald Trump suggested the US is “getting close” to a deal to curb Iran’s nuclear activities, but later Iran’s top negotiator shared hopes for a “more realistic approach” to talks.
Donald Trump Plays Walmart CEO He goes full Kamala Harris in demanding that the retail giant not raise prices.
The WSJ Editorial Board:
Which American politician said the following?
Item one: “Walmart should STOP trying to blame Tariffs as the reason for raising prices throughout the chain. Walmart made BILLIONS OF DOLLARS last year, far more than expected. Between Walmart and China they should . . . EAT THE TARIFFS, and not charge valued customers ANYTHING. I’ll be watching, and so will your customers!!!”
Item two: “After causing catastrophic inflation, Comrade Kamala announced that she wants to institute socialist price controls . . . Her plan is very dangerous because it may sound good politically . . . This is Communist; this is Marxist; this is fascist.”
If you guessed that both are statements by Donald Trump, you have broken the code on the bizarro world of the President’s second-term economic policies. Last year he blasted Kamala Harris’s proposal for price controls on groceries. But now he is attacking Walmart for warning that it will have to raises prices in the wake of Mr. Trump’s tariffs.
Mr. Trump’s flip-flop on price controls is a rebuttal of his own previous tariff claims. For months he’s said that foreign producers pay the full cost of tariffs. But now he’s admitting that Walmart, an American retailer, will have to eat some of the costs or pass them on to Americans.
Despite his business background, Mr. Trump doesn’t know much about retail. Walmart’s net profit margin is below 3%, so it doesn’t have much room to absorb the higher costs caused by tariffs. Retail competition is intense, and Walmart’s longtime comparative advantage has been lower prices.
Mr. President is telling a company how to run its business, along with a vague, implicit threat of retribution. Marxist? How would Mr. Trump react if Congress told him how much his family could charge for a Mar-a-Lago fee?
Mr. Trump is trying to duck the political fallout for his misguided tariff policy by blaming everyone else. Americans are too smart to fall for it.