US Economy Powers On As FIFA Spending & IRS Tax Rebates Fade
(…) The games are over. The fans are heading home, and an important economic tailwind is beginning to fade. According to Bank of America, the FIFA World Cup generated roughly $20 billion in economic activity across the United States, boosting spending in host cities and helping fuel the strongest surge in consumer spending in more than four years.
The stimulus from tax refunds is also fading. Thanks to the One Big Beautiful Bill Act, the total amount refunded to households rose 18.1% y/y to $324.8 billion, putting nearly $50 billion of additional cash into consumers’ pockets.
With both tailwinds now fading, the economic data are reflecting the slowdown. We aren’t concerned. Seven years into our Roaring 2020s scenario, the underlying pulse of the US economy and American consumer remains strong. (…)
ADP hiring growth continues to slow from stronger readings during the spring. US private employers added an average of 16,500 jobs per week in the four weeks ending July 4, down from 19,250 in the prior four-week period (chart). Nevertheless, the pace remains consistent with a monthly payroll gain of roughly 66,000, i.e., around the “breakeven” rate necessary to keep the unemployment rate down. (…)
The Q2-2026 earnings reports of the largest US banks were strong last week. Their CEOs delivered a consistently upbeat assessment of US consumers.
Bank of America’s Brian Moynihan called the economy “more durable than expected, supported by the strong consumer,” adding that while “affordability is a real issue,” consumers are “still spending money, and that’s good for the US economy in the broadest context.”
JPMorgan described consumers and small businesses as “resilient despite elevated gas prices and inflation.”
Citi’s Jane Fraser pointed to a “resilient customer base” fueling “loan growth, higher spend and better credit performance than expected,” while
Wells Fargo’s Charlie Scharf cited “broad-based economic strength.”
US Bancorp added that customers “are continuing to spend money” even as sentiment surveys look negative, with credit-card purchase volumes “accelerating across credit scores.”
The largest US banks see a consumer who continues to spend.
Yardeni adds this caveat:
The Conference Board’s Index of Leading Economic Indicators (LEI) fell 0.2% m/m in June, while the Index of Coincident Economic Indicators (CEI) rose 0.2% to a record high. The LEI has long been a favorite of recession alarmists. Yet no recession has materialized, and both the LEI and the alarmists have been wrong.
Indeed, the CEI’s correlation with real GDP has weakened recently. The former was up just 0.7% y/y in June, while the latter rose 2.7% y/y in Q1-2026.
Yesterday:
Preliminary weekly NER Pulse hiring report from ADP for the four weeks ending July 4th continued its softening since peaking the four weeks to May 2nd at +163k, coming in at +66k (+16.5k/wk). The 4-week moving average is now down to +91k, the least since March 21st. (@neilsethinew)
Indeed Job Postings keep weakening (through July 10):
War Risk to Oil Supplies Grows With Red and Black Sea Disruptions Tankers loaded with Saudi oil do a U-turn after Houthi blockade threats, while Ukrainian attacks snarl pipeline operations
Global oil supplies face a growing list of disruptions, as a threat by Yemen’s Houthi militants to blockade Saudi Arabia began to take shape and Ukrainian attacks on Russia’s Black Sea shipping disrupted operations of a key pipeline there.
Two oil tankers loaded with Saudi crude oil turned around Tuesday. A successful blockade would open another front in the U.S.-Iran conflict and compound the disruption caused by Iran’s stranglehold on the Strait of Hormuz. (…)
The [Ukrainian] attacks have disrupted flows through a pipeline that delivers Russian and Kazakh oil to the Black Sea. The pipeline is run by a consortium that includes Exxon and Chevron and carries almost 2% of the world’s oil. (…)
“Any disruption at Bab al-Mandeb would therefore threaten not only Saudi shipments but one of the few remaining routes capable of compensating for the severe reduction in Hormuz traffic,” said Jorge León, head of geopolitical analysis at consulting firm Rystad Energy. (…)
A Houthi military spokesperson had declared a maritime blockade of Saudi Arabia on Monday. (…)
Some 12% of global seaborne oil passed through Bab al-Mandeb before the war.
Loadings at Saudi Arabia’s Red Sea port at Yanbu have averaged around 4 million barrels a day since the war began, up from around 1 million barrels a day before the war, León said. Of those, roughly 2.5 million barrels a day go south through Bab al-Mandeb, heading toward Asian buyers, he said. If a ceasefire doesn’t materialize and both Hormuz and Bab al-Mandeb remain disrupted, the risk of a significant rebound in oil prices would be substantial, he said.
Trump brushed off concerns that a Red Sea blockade would spark a new Middle East conflict but said he would take action if the situation escalated. (…) “Might happen, but we take care of things.” (…)
Trump Takes Another Swing at Canada Round three of the senseless tariff war between North American neighbors.
The WSJ Editorial Board:
What do you know? President Trump is conceding that his blunderbuss border taxes are harming U.S. business as other countries retaliate. So now he’s whacking Canada harder for punching back. The trade brawl could leave both countries with more bruises than a hockey fight. (…)
He may also enjoy showing off his new tariff bazooka. Section 338 lets the President impose tariffs up to 50% on countries that discriminate against “commerce of the United States, directly or indirectly” in relation to foreign countries. No previous President has used this power, which hails from the disastrous Smoot-Hawley Act.
The provision was intended to let the President retaliate against countries that impose tariffs on the U.S. Mr. Trump is using the law to punish Canada for retaliating against his tariffs. His tariff order cites Canada’s 25% tariffs on U.S. cars that exceed certain quotas, which were a response to Mr. Trump’s 25% duties on motor vehicles and parts. According to the order, U.S. motor vehicle exports to Canada subsequently fell 22%, while Canadian imports from other countries increased. (…)
His announcement “deepens trade tensions and raises the risk of further retaliation at a time when many U.S. hospitality businesses continue to face financial hardships,” said the president of the Distilled Spirits Council.
Many hospitality businesses have also been harmed by a decline in Canadian tourism. A study in March found that the tourist dropoff has cost between 14,000 and 42,000 jobs in the U.S. markets most exposed to Canadian tourism. Northern border areas have also suffered from a decline in cross-border trade.
That may be why Mr. Trump is justifying his tariffs as retribution for Canada’s treatment of U.S. autos and dairy, which are key industries in the Midwest. But Canada is the second largest U.S. trade partner after Mexico, and Mr. Trump’s tariffs are complicating cross-border supply chains, raising costs and creating uncertainty for business.
The more Mr. Trump keeps swinging recklessly, the more Americans are likely to think there’s only madness in his tariff methods.
- Trump’s Tariffs Enter New Phase, Ending Months of Calm President Trump prepares new levies to replace the ones he put in place after the Supreme Court gutted his trade agenda
(…) The calm is ending. U.S. Trade Representative Jamieson Greer said on CNBC on Tuesday that he expects new tariff action soon, previewing replacement tariffs for the ones that expire Friday. And a day earlier, Trump said he would impose additional 50% tariffs on certain goods from Canada, a move that pressures America’s northern neighbor to renegotiate the U.S.-Mexico-Canada Agreement. The Canada tariffs were separate from the sweeping global levies Trump is trying to rebuild after the Supreme Court ruling.
(…) the president’s trade team is expected to impose duties under Section 301 of the Trade Act of 1974. Those are widely seen as more legally durable, but trade observers expect that overall U.S. tariff rates won’t change much in the short term under the new legal regime. In crafting the replacement tariffs, administration officials have said they would devise levies at similar levels to the expiring levies.
In March, Greer’s office opened a tariff investigation into 60 economies it accused of not prohibiting the use of forced labor in supply chains. Early this month, it issued a preliminary finding in the investigation, proposing 10% tariffs on more than a dozen U.S. trading partners including Canada, Mexico and the European Union, and 12.5% tariffs on over 40 nations, including China, India, Japan and South Korea. All told, Greer has said the tariffs would cover 99% of U.S. trade. (…)
Once in place, the totality of the Section 301 tariffs could return the U.S. to an average tariff level similar to before the Supreme Court decision, said DeLong, the former State official. That would mean an average U.S. tariff of about 17%, up from about 11% today under the temporary measures.
Greer’s office is also overseeing a high-stakes renegotiation of the USMCA, its largest trade deal. (…)
But why the USMCA since Trump’s 50% duties override the protection offered by the USMCA? Why even bother, Trump does not respect his own signature?
Earlier this year, my Bloomberg Opinion colleague Scott Lincicome made a convincing case for why the tariffs placed on aluminum imports to the US may be the dumbest of all the Trump administration’s duties. Things got a lot dumber this week.
The White House on Monday said companies that build, expand or refurbish aluminum plants in the US would see tariffs on the metal they ship into the country from abroad lowered to about 25% from 50%. That may appear reasonable on the surface, but in reality, the administration is just negotiating against itself without solving the problem it created: A drop in aluminum imports that has sent prices soaring for a critically important metal used in everything from housing and cars to cans. (…)
Imports constituted approximately 60% of domestic consumption last year, even with the tariffs, according to the US Geological Survey.
Recall that one of the key reasons the Trump administration gave for imposing broad tariffs last year was to make the cost of doing business with the US so expensive for foreign manufacturers that they would have no choice but to relocate operations to the US to avoid the levies.
That has not happened, especially with the aluminum industry. Taxes, regulations, permitting burdens, high construction costs and other complexities make bringing a modern smelter online very hard. (…)
A relatively new phenomenon has cropped up to make construction even less economical: rising power prices. Smelters use tremendous amounts of electricity and must now compete for it with artificial intelligence data centers, whose surging demand for power has driven costs higher. (…)
That makes the White House’s decision to apply tariffs to an input as critical as aluminum an even bigger headscratcher.
All the White House accomplished with its tariffs was to push up aluminum prices. The so-called US Midwest premium, or the amount added to global price benchmarks to deliver the metal to that region, rose to around $2,600 per ton in June from some $1,200 a year earlier and $420 two years ago. The premium — a proxy for the additional burden on American manufacturers of products such as appliances, beverage cans and automobiles — means US businesses have essentially been paying the highest raw material prices in the world, according to Bloomberg News. And that won’t likely change anytime soon. (…)
The US is not a very efficient producer of aluminum and may never be. What country is? Canada. As Lincicome pointed out, our neighbor to the north has long been America’s largest aluminum supplier, thanks to abundant hydroelectricity that gives its producers a big cost and environmental advantage. Pittsburgh-based Alcoa Corp. owns three Canadian smelters that collectively churn out almost 30% of the nation’s total output.
But rather than work with Canada to exploit its advantages in making aluminum to help ease prices, the Trump administration is more intent on damaging its relationship with America’s closest ally — or what was America’s closest ally. (…)
No wonder Canadian aluminum producers are sending US-bound shipments to Europe instead, according to Bloomberg News. Aluminerie Alouette — North America’s largest smelter — saw its European sales rise from 4% of production to 57% within a few months. Rio Tinto Plc largely stopped shipping Canadian aluminum to the US, and even Alcoa diverted around 100,000 metric tons to non-US destinations.
Trying to find logic in the White House’s trade policies has been a fool’s errand. (…)
- Trump’s 100% Generic Drug Duty Threatens US Low-Cost Supply
The White House always says that “President Donald Trump always acts in the best interests of the United States and the American people.”
Pete Hoekstra, the U.S. ambassador to Canada, speaking at a conference in Edmonton on Monday, said that, on Oct. 7, 2025, Carney proposed, as part of a preliminary trade agreement, that Canada would be willing to ship three to four million barrels of oil to the United States, additional barrels of oil to the United States.
U.S. Interior Secretary Doug Burgum and U.S. Energy Secretary Chris Wright wanted to take Mr. Carney’s offer, Mr. Hoekstra said.
“Doug Burgum and Secretary Wright had to be restrained by the President because they were so eager for getting more oil and getting it from Canada,” he said. Mr. Trump “had to advise them that crawling across the table and shaking Carney’s hand” was “not necessarily the best negotiating strategy,” Mr. Hoekstra added.
No deal was ever reached, as Mr. Trump walked away from talks later that month over an anti-tariff advertisement from the Ontario government.
The global oil supply has subsequently become one of the thorniest problems in Mr. Trump’s presidency. In response to his war on Iran, Tehran blockaded the Strait of Hormuz, reducing the flow of petroleum from the Persian Gulf and driving up prices for consumers in many countries, including Americans. (…)
The U.S.’s reliance on Canada’s oil is the main reason for Washington’s goods trade deficit with Ottawa, about which Mr. Trump has repeatedly complained. But Mr. Hoekstra said it would be a good idea for the U.S. to import more oil from Canada.
(Bloomberg)
“We want oil, we need oil,” he said. “Probably the region that can make the most compelling case for supplying more oil to the United States would be Saskatchewan and Alberta.”
Alberta Premier Danielle Smith has targeted a doubling of production in the province to as much as eight million barrels a day in the next decade, much of that predicated on building new pipelines to Canada’s coasts, where oil can be shipped overseas. (…)
At the Monday event, Mr. Hoekstra complained that anti-American sentiment from the Canadian public was making it more complicated to reach a trade agreement. He did not acknowledge that this sentiment arose in response to Mr. Trump’s tariffs and repeated threats of annexation.
“I have a problem,” he said. “Canadians don’t think very highly of the United States right now. It makes it harder for politicians to get to an agreement.” (…) (The Globa & Mail)
BTW, a senior administration official said the tariffs aren’t the wildfire tariffs that President Trump had earlier threatened. The official said those options remain under consideration. (Axios)
U.S. import prices up 0.3% in June on higher nonfuel prices
Prices for U.S. imports rose 0.3 percent in June following increases of 1.7 percent in May and 2.1 percent in April. U.S. import prices advanced 7.1 percent from June 2025 to June 2026, the largest over-the-year increase since the index rose 7.7 percent in August 2022.Prices for nonfuel imports increased 0.4 percent in June following an advance of 0.7 percent in May. In June, higher prices for nonfuel industrial supplies and materials; capital goods; and consumer goods, excluding automotives, more than offset lower prices for automotive vehicles, parts, and engines as well as foods, feeds, and beverages.Nonfuel import prices rose 4.2 percent from June 2025 to June 2026, the largest 12-month increase since the index rose 4.6 percent for the year ended June 2022.
Prices of non-fuel imports (which do not include tariffs) are up 7.0% annualized in the first 6 months of 2026. They had declined 0,2% a.r. in the second half of 2025.
Selected import prices (ex-tariffs):
- Industrial supplies & materials ex-petroleum: last 3 months: +5.0% a.r. and +13.3% YoY
- Finished metals related to durable goods: +23.6% a.r. and +13.8%.
- Capital goods: +9.7% and +5.7%.
- Consumer goods ex-automotive: +3.2% a.r. and +1.7% YoY
Cyclical and Acyclical Core PCE Inflation
Cyclical components include those categories where prices tend to be more sensitive to overall economic conditions. Acyclical components include those categories that are more sensitive to industry-specific factors.
This next chart shows how a weakening contribution to PCE inflation from cyclical components (reflecting weaker demand) is being more than compensated by acyclical, stickier, inflation:
