Trump and the EU Dodge a Trade War The U.S. President gets his beloved 15% tariff but little else from Europe.
The WSJ Editorial Board:
The U.S. and Europe stepped back from the brink of a trade war Sunday, as the two sides announced a deal that avoids tit-for-tat escalation that could do larger damage to both economies.
President Trump and European Commission president Ursula von der Leyen announced the deal as a major event, but that’s true only as a relief. Mr. Trump had threatened a 30% tariff on European Union goods, while Europe had armed for a retaliatory strike on U.S. aircraft, cars, poultry, steel and much more. Europe also could have fired a bigger bazooka that included limits on U.S. investment and a big tax on U.S. companies operating on the continent.
The U.S. will impose a 15% across-the-board tariff on European imports, up from 10% today and less than 5% on average in January. This means Europe will get a partial reprieve from Mr. Trump’s 25% auto tariff, though reports say the 50% border tax on European steel and aluminum exports will continue.
Mr. Trump is trumpeting the EU’s commitment to buy some $750 billion in U.S. energy, invest $600 billion in America, and buy U.S. weapons. Much of this would have happened anyway. European countries have been signing long-term contracts with U.S. liquefied natural gas producers as they wean themselves off Russian energy.
Europe is already the largest foreign investor in the U.S., with European direct investment increasing by roughly $200 billion from 2023 to 2024. Three times that over an undefined period is hardly a great coup. By the way, those investment inflows will increase the U.S. trade deficit because of balance-of-payments accounting. Sorry, Mr. President.
European defense spending is also set to increase as Russia gets aggressive and leaders realize they need to rearm. Buying F-35 jets has been a centerpiece of Germany’s rearmament since Russia invaded Ukraine in February 2022.
Alas, the deal doesn’t appear to address America’s biggest commercial grievances with Europe, such as digital taxes, punitive regulation against U.S. tech firms, and such faux food-safety rules as GMO restrictions and bans on hormone-treated U.S. beef. Nor does it require Europeans to pay more for drugs, one of Mr. Trump’s longstanding complaints.
Mr. Trump seems to have abandoned these goals in favor of his beloved tariff, which is a tax increase on American consumers and businesses, including for pharmaceutical imports and ingredients. Making Americans pay more for drugs via the tariff is an odd way to punish Europe for its price controls that let it free ride on American drug innovation.
Europe may figure that it’s better off paying a 15% blanket tariff that avoids steeper sectoral duties, and U.S. courts are likely to strike down Mr. Trump’s on-his-own-whim tariffs in any case. The U.S. Court of Appeals for the Federal Circuit will hear arguments Thursday on the International Emergency Economic Powers Act, or IEEPA, that Mr. Trump is using to justify his worldwide tariffs.
As Mr. Trump pulls back from the worst of his trade threats, his supporters are pulling what amounts to a rhetorical and political bait and switch. Because there hasn’t been a recession or a global tariff spiral, they say his trade policy is a great success. No Great Depression II, the critics must have been wrong.
Bloomberg’s columnist Lionel Laurent:
(…) Yet it’s hard to fully reconcile the we-dodged-a-bullet rhetoric with the reality that Europe’s 27-country single market faces a real hit. The combination of a 15% tariff rate and the euro’s 13% rise against the US dollar year-to-date represents a competitiveness double-whammy with little in return. The details are lacking and it’s unclear if this really is the end of hostilities. While US tariffs are expected to curb euro zone GDP by around 0.4%, that could rise to 0.7% if more surprises are to come, warns Bloomberg Economics.
Considering EU officials claimed to be ready in a worst-case scenario from possible retaliation against US tech firms like Amazon.com Inc. to teaming up with other vulnerable trade targets like Canada, it’s curious that so much has been given up for so little. Trump also claimed the EU is promising to buy $750 billion in US energy, invest $600 billion in the US and buy “vast” amounts of US weapons — a reminder of the continent’s dependence on American security that has only helped the Trump administration wring concessions on trade and tax. A few months ago, German Chancellor Friedrich Merz called for a more “independent” Europe; today, the Italian left calls this deal “unconditional surrender.” (…)
Of course, tariffs cut both ways. The US consumer will, all things being equal, suffer as protectionist levies are passed on and the global economy suffers a $2 trillion hit that saps investment. A lot now depends on the strategies of multinationals and industries; some will choose to absorb the tariff impact themselves, others will try to keep negotiating with the promise of new factories to come. One of LVMH’s tariff-mitigation strategies is a new plant in Texas — following one it opened in 2019. A lot also depends on just how expansive the part of the deal promising zero-tariff goods turns out to be. (…)
Cracks widen in Japan and US’s interpretation of tariff trade deal Tokyo officials contest Washington’s claim that American investors assured of vast share of profits from joint investment
(…) “The Japanese will finance the project. We will give it to an operator and the profits will be split 90 per cent to the taxpayers and 10 per cent to the Japanese. They basically bought down their tariff rate by this commitment,” said Lutnick.
On Thursday, Trump said the $550bn was a “signing bonus” to the US. “What Japan did is they brought down their tariffs,” Trump told reporters. “They gave us $550bn upfront, 100 per cent. We get 90 per cent, they get 10 per cent.”
But a slideshow issued by Japan’s Cabinet Office on Friday appeared to contradict Lutnick by saying the ratio of profit distribution would be “based on the degree of contribution and risk taken by each party”.
(…) Akazawa has been clear that Japan will provide “up to” $550bn in investment, financing and loan guarantees, rather than framing the number as a target or commitment.
“There is nothing inspiring about the deal,” said Mireya Solís, senior fellow at Brookings Institution. “Both sides made promises that we can’t be sure will be kept . . . there are no guarantees on what the actual level of investments from Japan will be.”
Some of the $550bn of investments could involve the US government owning the assets and undertaking large capital investments with funding backed by both nations and affiliated institutions, according to Japanese and US officials. The assets would then be leased to the private sector for operating.
One US official said details of the scheme were still being worked out. (…)
Political analysts said that on balance Japan appeared to have walked away with a good deal at little cost, setting an example that could become a model for other large exporters such as Germany and South Korea.
“Japan has been playing a card game with Trump and the reality is Trump has a better hand with more jokers that he can play,” said David Boling, Asian trade director at Eurasia Group. “They ended the card game in a good position.”
Trump’s Tariffs Are Already Stunting World Growth While Markets Shrug
(…) The hit to the world economy will reach $2 trillion by the end of 2027 relative to its pre-trade war path, Bloomberg Economics projects. Looking further ahead, some of those losses would be recouped as production and supply chains realign.
“It’s becoming clear that President Trump’s tariff negotiations are bad for investment,” perhaps especially so in the US, says Daniel Harenberg, lead economist with Oxford Economics. “In the end, tariffs may not be as high as feared. Still, they are essentially a tax that puts sand in the wheels of supply chains and global trade.” (…)
It’s true that Wall Street economists have nudged their forecasts for the US a little higher in recent months, and dialed back recession warnings that peaked amid the market turmoil in April. But the consensus is still for a slowdown rather than a takeoff. (…)
To look through the swings in trade and inventories, some analysts focus on a category known as inflation-adjusted final sales to domestic purchasers. It grew at a 1.9% rate in the first quarter, down from 2.9% in the final three months of 2024. The Atlanta Fed’s GDPNow forecast, which draws on multiple official data releases to create a real-time proxy for growth figures, now predicts that reading will slow further to around 1% in the second quarter. (…)
Weak data on construction spending and equipment purchases that feed into the Atlanta Fed’s GDPNow model have left it predicting a contribution of just 0.1% to economic growth in the second quarter from non-residential investment. That amounts to a stalling out. (…)
Trump’s decision to tariff tomatoes from Mexico has hit NatureSweet’s production there. Inputs it needs for cultivating the plants in Arizona — from Sri Lankan coconut husks to Chilean fertilizer — are all subject to new taxes, too. And going ahead with the expansion will require importing greenhouse and irrigation systems from places like the Netherlands and Israel.
“My main competitors in Canada are getting no tariffs,” says Rodolfo Spielman, NatureSweet’s president and CEO. “So the current situation is the worst possible situation for us.” (…)
In every member of the G-7 group of advanced economies, forecasts for business investment next year are lower now than they were when Trump took office, Bloomberg surveys show. (…)
Wolfgang Niedermark, a member of the Executive Board of the Federation of German Industries, said on Sunday that “even a tariff rate of 15% will have an immense negative impact on Germany’s export-oriented industry.”
Similar worries abound in Japan, even though it sealed a deal for 15% tariffs on all exports — including autos — to the US, its biggest market. (…)
That points to another feature of the trade war: While much of the worry in the US is now focused on higher prices, the tariffs are a drag on growth in the US and almost everywhere else. That’s bad news for China, the biggest US adversary, where growth prospects and deflation are already problems.
The Chinese economy grew 5.2% in the second quarter of this year, despite slowing exports to the US, but it’s clear the impact hasn’t been fully digested. A Bloomberg Economics analysis found that only five of 33 industrial sectors accounting for just 2.4% of China’s GDP can absorb the current tariffs and remain profitable. (…)
(…) The deal isn’t a trade treaty — such things cannot be thrashed out in a 45-minute meeting at the golf course. It’s barely even about trade. And the EU gets nothing from it. To use a phrase from Tigress Financial Partners’ Jean Ergas, it’s more the extraction of reparations from Europe for perceived past wrongs.
And yet, it’s market-friendly, because the US had threatened to levy a tariff of 30% on EU imports from Friday. In possibly the biggest victory for Trump, stock markets have brushed off the excitement to set all-time highs.
The deals with Japan and the EU (and others in recent days) follow massive concessions to the administration by the media group Paramount and Columbia University. The classic Hulk tactics have worked, and opponents have been picked off one by one. Despite game theory to the contrary (which Points of Return covered back in April), bullying has paid off. Game theorists show that bullies can be beaten if the victims stand together, and take some pain — the bully will hurt more than they do. The rest of the world seemed ready for this a few months ago. US trading partners from China to Canada and through to the EU immediately threatened retaliation. But now they’re caving one after another.
How has this happened? Facts have helped. To date, tariffs have produced a lot of revenue for Washington without clear negative effects on inflation or US profits. The dollar, contrary to expectation, has weakened, making US goods more competitive and failing to counteract tariffs. That strengthened Trump’s hand and made him more credible. Beyond that, the bully has convinced people he means business with renewed and escalating threats, and his targets haven’t coordinated their defense. (…)
The biggest gainers were Japan’s automakers — a strange outcome as the 15% tariffs are meant to defend the US car industry from the likes of Toyota Motor Corp. and Honda Motor Co. Japan can now send cars to the US bearing only 15% tariffs, while Ford Motor Co. or General Motors Co. must pay tariffs on all imported components, including 50% on steel; so it’s not clear this dents Japanese cars’ competitiveness. (…)
These are not detailed and carefully negotiated treaties, and may not survive for long. But some clarity on what the tariffs will be for at least a few months, and the knowledge that countries are chickening out of a damaging fight with the bully, are good for now and allow a focus on positive things like artificial intelligence.
Whether this is a secular bull market will depend on how the economy and markets digest the mixture of fiscal juice, much higher tariffs and mostly lower interest rates that they have been prescribed. Trump has won his bout via two submissions. It will be months before we know whether the economy delivers a fall or a knockout.
Ruchir Sharma, chair of Rockefeller International in the FT:
(…) The bigger mystery is why the stagflationary impact of tariffs has yet to materialise in the aggregate data. Is the US really enjoying a free lunch, taking in $300bn a year in tariff revenues with none of the expected heartburn? By some estimates, foreign exporters are indeed absorbing 20 per cent of the costs — a much larger share than they did in response to tariffs in Trump’s first term. The remaining 80 per cent, however, is still getting paid in roughly equal shares by US corporations and consumers.
The likely answer is that the negative economic effect of tariffs is being countered by other forces, including the mania for artificial intelligence and more government stimulus. Since January, estimates of what the big tech companies will spend this year on building out AI infrastructure have risen $60bn to $350bn. Smaller businesses are scrambling to catch the wave too, further boosting growth. (…)
Meanwhile, the promise of tax relief makes it easier for US corporations to absorb a larger than expected share of the tariff costs, rather than pass it all on to consumers. Trump’s “big, beautiful bill” is expected to save US businesses around $100bn this year and more than that in 2026, mainly in tax breaks. (…)
Donald Trump freezes export controls to secure trade deal with China US officials have been warned to avoid tough moves against Beijing as Stockholm hosts third round of negotiations
(…) The commerce department’s Bureau of Industry and Security, which runs export controls, has been told in recent months to avoid tough moves on China, according to eight people, including current and former US officials.
US and Chinese officials will meet in Stockholm on Monday for a third round of trade talks following previous meetings in Geneva and London. (…)
Jimmy Goodrich, a senior adviser to Rand for technology analysis, said chips are measured by power and memory bandwidth and that the H20 “excels at memory bandwidth beyond any current domestic Chinese chip” that was critical for the large-scale development of AI.
“The H20 is the gasoline fuelling China’s AI engine,” he added.
Beyond the H20 debate, US security officials and experts are frustrated that the Trump administration is holding back actions on China.
“Trump has now effectively frozen US export controls and given away the H20 semiconductor for nothing, undermining one of our most critical national security tools,” said one former official. (…)
The spokesperson said Trump had imposed export licence requirements for the H20 and would consider applications “carefully, accounting for both the benefits and the costs of potential exports from America”.
Nvidia said the Trump administration had “full visibility and authority over every H20 transaction”. Several people familiar with the situation said the Trump administration had yet to issue any H20 export licences.
Underlying Demand for Durable Goods Weakens in June
Aircraft-related volatility continued to whipsaw overall durable goods data for June. As expected, the surge in orders for nondefense aircraft in May was met with a sizable pullback in June, which pulled overall orders for new durables down 9.3% during the month. For a cleaner read of underlying demand conditions we exclude the transportation sector, which shows orders were up 0.2% last month.
Yet despite that better outturn, underlying orders activity was still rather weak.
Core capital goods orders, which excludes defense spending and aircraft specifically, fell 0.7% in June, and although that came with a slight upward revision to May’s data, it signals a slowdown amid the monthly volatility seen throughout the first half of the year.
When it comes to growth implications, it is the shipments data that feed into the Bureau of Economic Analysis’ GDP estimate. Nondefense capital goods shipments (including aircraft) slipped 0.9% in June, suggesting a much slower pace of equipment spending in Q2 than the north of 20% annualized rate at which it picked up in the first quarter. We’ll get the first look at Q2 GDP growth next [this] week, where we look for a pickup in growth that likely says more about an unwinding of tariff-induced behavioral changes in Q1 than a strong underlying growth profile for the U.S. economy.
Businesses are ultimately given little incentive to make large capital expenditures in today’s environment. August 1 is the next date circled when it comes to potential changes to tariff policy, and the fluid nature of these policies has left many firms in limbo or paralyzed on if and when they should make large equipment outlays. (…)
Core capital goods orders slipped at a 1.7% average annualized pace over the past three months, the largest drop in a year. We’re still bracing for a softening in capital investment in the second half of the year amid increased costs, lower end demand and still-elevated borrowing costs.
Source: U.S. Department of Commerce and Wells Fargo Economics
US sees inflated new-vehicle sales in July
The seasonally-adjusted annualised rate (SAAR) for new-vehicle sales is expected to be 16.7 million units, the highest point in more than three years. This is up by around 700,000 units compared with July 2023. New-vehicle retail sales are expected to reach 1,135,300 units, a 5% increase year on year. (…)
“While the top-line sales results are impressive, they are being inflated by sales that would have otherwise occurred in June. The delay occurred because of the software outages in June that limited many dealers’ ability to process transactions, affecting the June sales pace,’ said Thomas King, president of the data and analytics division at J.D. Power. (…)
‘Manufacturer discounts are continuing to rise,’ King pointed out. ‘The average incentive spend per vehicle has grown 52.1% from July 2023 and is currently on track to reach $2,892. Expressed as a percentage of MSRP, incentive spending is currently at 5.9%, an increase of 1.9 percentage points (pp) from a year ago. Spending has increased by $197 per unit from June 2024. (…)
(CalculatedRisk)
Trump floats the possibility of tariff rebate checks
President Trump on Friday suggested the government might consider issuing rebate checks to some Americans from the tariff revenue collected this year.
Rebates would return to consumers some of the higher prices they’ve paid as a result of those tariffs — but could also raise the specter of inflation, similar to previous rounds of government stimulus.
“We have so much money coming in, we’re thinking about a little rebate,” Trump told reporters outside the White House. “A little rebate for people of a certain income level might be very nice.”
The government collected more than $100 billion in tariff revenue in the first half of this year, per Treasury data, and is on track to collect more than $27 billion this month alone.
(…) there was talk of a DOGE savings stimulus earlier this year that went nowhere.
Americans are making increasing use of BNPL payments according to Bank of America debit and credit card retail spending data. The number of light users (1-4 payments per month, 63% of the total) is growing 13% YoY suggesting growing adoption. Extra heavy users (20+ payments per month) grew the most across all income groups in June, “suggesting BNPL adoption has likely become more mainstream as consumers, especially younger people, face rising cost pressures.”
The Chicago Fed’s National Activity Index is a monthly indicator designed to gauge overall economic activity. It is a composite of 85 monthly indicators across four broad categories. The index is constructed so a zero value for the index indicates that the national economy is expanding at its historical trend (average) rate of growth. Negative values indicate below-average growth, and positive values indicate above-average growth.
The index is not in contraction mode (-0.7) but is clearly in “below average growth” territory.
(Advisor Perspectives)
Job openings keep falling …
… although unemployment is not threatening so far:
But slowing wages suggest a slowing labor market:
The Indeed Wage Tracker measures wage growth by monitoring changes in the advertised pay found in job postings on Indeed. Other measures of wage growth — including the Bureau of Labor Statistics’ Employment Cost Index (ECI) and the Wage Growth Tracker published by the Federal Reserve Bank of Atlanta — track wages differently and focus on existing employees (instead of job postings), but have shown similar patterns in recent years, albeit at more muted levels.
As of June, annual growth in posted wages for high-paying jobs clocked in at an annual rate of 2.9%, while middle and low-paying jobs came in at 3% and 2.8%, respectively.
In June, typically higher-paying jobs still accounted for every spot in the top five list of categories with the fastest growth since last year.
Much of the recent strength in posted wage growth has been concentrated in typically higher-paying roles, but that seems to have faded. Low- and middle-wage jobs have seen more modest pay gains at or below the pace of inflation, but are showing signs of stabilization.
Slowing job growth, slowing wages. Inflation?
EARNINGS WATCH
From LSEG IBES:
The Beat Goes On
168 companies in the S&P 500 Index have reported earnings for Q2 2025. Of these companies, 79.8% reported earnings above analyst expectations and 14.3% reported earnings below analyst expectations. In a typical quarter (since 1994), 67% of companies beat estimates and 20% miss estimates. Over the past four quarters, 76% of companies beat the estimates and 18% missed estimates.
In aggregate, companies are reporting earnings that are 6.8% above estimates, which compares to a long-term (since 1994) average surprise factor of 4.3% and the average surprise factor over the prior four quarters of 6.3%.
Of these companies, 78.6% reported revenue above analyst expectations and 21.4% reported revenue below analyst expectations. In a typical quarter (since 2002), 62% of companies beat estimates and 38% miss estimates. Over the past four quarters, 62% of companies beat the estimates and 38% missed estimates.
In aggregate, companies are reporting revenues that are 2.3% above estimates, which compares to a long-term (since 2002) average surprise factor of 1.3% and the average surprise factor over the prior four quarters of 1.2%.
The estimated earnings growth rate for the S&P 500 for 25Q2 is 7.7%. If the energy sector is excluded, the growth rate improves to 9.5%.
The estimated revenue growth rate for the S&P 500 for 25Q2 is 4.5%. If the energy sector is excluded, the growth rate improves to 5.7%.
The estimated earnings growth rate for the S&P 500 for 25Q3 is 8.4%. If the energy sector is excluded, the growth rate improves to 9.1%.
Trailing EPS are now $254.97. Full year 2025e: $264.51. Forward EPS: $281.37e. Full year 2026e: $301.39.
We are thus entering the most volatile time of the year with strong earnings, upward revisions and most everybody dismissing much tariff impact on either the economy or profits.
Source: Topdown Charts
Callum Thomas: “Seasonally speaking it’s the Aug-Oct period that tends to see the most volatile and worst returns for the year.”
Source: Topdown Charts Professional
Right when the skew index, a measure of potential tail risk in the financial markets, has spiked near the high end of its historical range.
Some people are worried that “meme stocks are back, with GoPro, Opendoor and Krispy Kreme rallying double digits this week thanks to investor hype and Reddit threads” Axios’ Madison Mills reports.
Their resurgence is the latest signal that investors are willing to take on more risk, as stocks keep hitting record highs and it gets harder to beat the broader market.
Data: Financial Modeling Prep; Chart: Axios Visuals
JP Morgan: “The latest bout of extreme crowding, currently in the 100th percentile, is in high-beta stocks. This spans both riskier low-value and speculative growth plays. It is also the fastest pace in 30-years.”
Why care when profits are booming?
Well, tariff revenues are running at a $325B+ annual pace. That’s 1.0% of nominal GDP, 1.5% of disposable income and 7.5% of total pretax corporate profits. Where the hit?
Fiscal Dominance Will Rule the Federal Reserve
From my good friend Hubert Marleau:
Indeed, too much attention has been spent on the theatrics of whether Powell will be fired as Chair of the Federal Reserve, overlooking the deeper truth: that regardless of what may happen to him, the reality is that a fundamental overhaul is coming to the world’s most important central bank that its way beyond mere interest rate settings and building renovations. (…)
Thus the objective is about imposing a policy mix called “Fiscal Dominance,” a sort of a watershed moment that would subordinate the Federal Reserve to the priorities of the US Treasury and political aims. The thing is that the fiscal arithmetic is sufficiently dire, the political environment sufficiently febrile, the strong productivity sufficiently broad, and the promise of AI exceptionalism sufficiently credible for an era of fiscal dominance to become an existential threat to the Fed’s independence.
Kevin Warsh, a former Fed governor and Treasury Secretary Scott Bessent, two leading contenders to take over Powell’s job, are saying that there must be a close cooperation between the Fed and the Treasury. Howard Lutnick, Secretary of the Commerce Department, and Mike Johnson, House Speaker, are also supporters of the idea.
Kevin Warsh laid out the idea in a CNBC interview, essentially stating: “We need a new Treasury-Fed Accord, like we did in 1951 after another period where we built up our nation’s debt and we were stuck with a central bank that was working at cross-purposes with the Treasury. That’s the state of things now. So if we have a new accord, then the Fed chair and the Treasury secretary can describe the markets plainly and with deliberation. This is our objective for the size of the Fed’s balance sheet.”
Meanwhile, Scott Bessent said on CNBC: “What we need to do is examine the entire Federal Reserve institution and whether they have been successful because its autonomy is threatened by persistent mandate creep into areas beyond its core mission, provoking justifiable criticism that unnecessarily casts a cloud over the Fed’s valuable independence on monetary policy, wondering what the Fed’s legions of Ph.D. economists are doing.’
As a result, there is serious talk in Washington to install Scott Bessent as Treasury secretary and Fed Chair, either at the same time or as a board member – a return to the original system where the Treasury had a seat on the board of the central bank.
Howard Lutnick, in an interview with Sean Hannity on Fox News, called out for Jerome Powell to be removed, by hook or by crook. He said: “This guy gotta go. He should be replaced, we need lower interest rates”: while Mike Johnson, became the latest member of Trump’s inner circle to assail Jerome Powell, thinking that all scrutiny is appropriate in support of modifying the laws which delineate the Fed’s purpose and role in the US economy.
While I believe the market would not refuse the inclusion of non-elite school economists to join the Fed’s staff and experienced business CEOs to sit on the Fed’s board, I’m certain that they would not favour a Fed that would become the piggy bank for the Treasury system. On the contrary, the Fed should be fenced in from political winds.
Decades of research has proven that market economies need independent central banks to counterbalance inflationary pressure, often emanating from the ambitious goals of governments. Put simply, conservative monetary theory dictates that within the broad guardrails of price stability and maximum employment given by the government, central banks should be given substantial freedom to control the variability and expectation of inflation.
FYI
From Bruce Melhman:
- The party holding the White House has lost seats in the House of Representatives in 18 of the past 20 midterm elections (90%). American voters have always been suspicious of concentrated government power and have consistently sought balance over time. 9 of the past 11 elections were change elections with the party in the White House losing the House, Senate and/or Presidency. Advantage Democrats in 2026.
- It may be “the economy stupid” for Presidential elections, but no economic indicator (consumer confidence, inflation, stock market returns) correlates consistently to midterm outcomes. What does correlate (high R2)? Presidential Approval. Midterms are referendums on the party in power, usually narrowing the mandate given at the last election. And absent >60% approval, the President’s party loses seats. Trump is currently at 44.6% approval. Advantage Democrats.
- One reason the “out” (of the White House) party consistently gains ground in House midterms is comparative partisan motivation — the enthusiasm gap. Out-party voters are highly motivated to vote to fight back against the party in control, while in-party voters are complacent or disappointed that they have not gotten everything they expected (e.g. Epstein files per Steve Bannon). This week’s CNN poll shows 72% of Dem/lean Dem voters “extremely motivated” to vote in next year’s election vs 50% of Republican / lean-Republicans. Advantage Democrats.
- “The Democratic Party’s image has eroded to its lowest point in more than three decades, with voters seeing Republicans as better at handling most issues that decide elections. The new survey finds that 63% of voters hold an unfavorable view of the Democratic Party—the highest share in Journal polls dating to 1990 and 30% higher than the 33% who hold a favorable view.” Advantage GOP.
- Musk / 3rd parties. World’s richest man Elon Musk says he will launch and fund a new “America Party,” aiming to get candidates on the ballot in multiple swing seats and states. Of course Musk says a lot of things. It’s very hard to get third parties on the ballot, and even harder for them to win. Since 1945, third party candidates have only won 6 Senate seats (out of ~1,500 races held) and ZERO House seats (out of the more than ~8,000 House races including third party candidates).