Member Briefing February 3, 2025
Trump Imposes 25% Tariffs on all Mexican and Canadian Goods, 10% on Chinese Goods
The White House on Saturday announced a wave of tariffs against Mexico, Canada and China, marking the first major levies of President Trump’s second term and laying the groundwork for a continental trade war. Effective Tuesday, the U.S. will impose a 25% levy on imports from Canada and Mexico, a 10% tariff on energy products from Canada, and an additional 10% tariff on China. The tariffs will be imposed under emergency economic authority never before used for tariffs “because of the major threat of illegal aliens and deadly drugs killing our Citizens, including fentanyl,” Trump posted on his Truth Social platform. Read more at the WSJ
Tariff Headlines
- Trump Issues Tariffs On Canada, Mexico And China – Supply Chain Dive
- Trump Says Potential Pain Caused By Tariffs ‘Worth The Price That Must Be Paid’ – The Hill
- NAM: Tariffs Will Upend North American Supply Chains, Risk Manufacturing Growth
- China Hits Back At US Tariffs With Vow To Take Case To The WTO – SCMP
- Canada, Mexico Want America to Feel the Pain of Tariffs Too - WSJ
- Canada imposes 25% tariffs in trade war with US - BBC
- Tariffs On Canada, Mexico Imports, Threaten N.A. Auto Supply Chain – Automotive News
- Trump’s Brutal Tariffs Far Outstrip Any He Has Imposed Before – The Economist
- What Items Will Cost More? What To Know About Trump's Tariffs On Canada, Mexico, And China – USA Today
- Experts React: Trump Just Slapped Tariffs On Mexico, Canada, And China. What’s Next? - Atlantic Council
PCE Shows Core Inflation At 2.8%, In Line With Expectations
Inflation closed out 2024 on a strong note, as a price gauge the Federal Reserve focuses on came in well above the central bank’s target, the Commerce Department reported Friday.The personal consumption expenditures price index increased 2.6% on a year-over-year basis in December, 0.2 percentage point higher than the November reading and in line with the Dow Jones estimate. On a monthly basis, headline PCE rose 0.3% while core increased 0.2%, both in line with forecasts as well.
- Excluding food and energy, core PCE registered a 2.8% reading, also meeting expectations and the same as the prior month.
- Food prices increased just 0.2% on the month, but energy jumped 2.7%.
- Durable goods prices, which include items such as aircraft, appliances and electronics, showed deflation, falling 0.4%. Nondurables saw a 0.5% increase.
- Over the past three months, core PCE inflation has run at a 2.2% annualized rate. That's down from 2.8% in the three months through October, and just barely above the Federal Reserve's target.
US Labor Costs Rise From Year Earlier by Least Since 2021
U.S. labor costs rose marginally in the fourth quarter, offering some comfort to Federal Reserve officials after progress lowering inflation stalled at the end of 2024. The employment cost index (ECI), the broadest measure of labor costs, gained 0.9% last quarter after rising 0.8% in the third quarter, the Labor Department's Bureau of Labor Statistics said on Friday.
- Wages and salaries, which account for the bulk of labor costs, rose 0.9% last quarter after gaining 0.8% in the July-September quarter. They increased 3.8% on an annual basis, slowing from the third quarter's 3.9% rise.
- When adjusted for inflation, overall wages increased 0.9% in the 12 months through December after advancing 1.4% in the July-September quarter. The rising so-called real income is underpinning spending.
- Private sector wages and salaries rose 0.9%. They increased 3.7% in the 12 months through December after rising 3.8% in the third quarter. State and local government wages gained 1.0% last quarter, matching the gain in the July-September quarter. They rose 4.5% in the 12 months through December.
- Benefits for all workers climbed 0.8%, matching the third quarter's gain. They increased 3.6% in the 12 months through December after rising 3.7% in the July-September quarter.
U.S. GDP Grew 2.3% Annualized Rate in Q4
The U.S. economy expanded at a 2.3% annualized rate in the fourth quarter—that's a step down from the post-pandemic average (3.2%) but roughly in line with the average quarterly rate that prevailed in the last expansion that stretched from 2010-19 (2.4%). Further economic growth held up better than the Q4 growth rate implies as a slower stockpiling in inventories dramatically dented on output.
- Inventories alone sliced 0.9 percentage points off of headline GDP growth in the fourth quarter which we expect partially reflects a pull forward in demand amid concerns over tariffs toward the tail-end of last year.
- Retail and wholesale inventory data fell in December and the advance goods trade balance showed a large widening in the deficit due to a surge in industrial supplies imports, likely reflecting a stockpiling of inputs amid importers.
- Business spending was mixed. Real equipment outlays slipped 7.8%, and while the expected large aircraft-related drop in transportation equipment due to strikes at Boeing is mostly to blame, other key areas like spending on information processing equipment were weaker than expected.
- Spending on intellectual property products advanced 2.6%, a continued bright spot in a flagging capex environment, while structures pulled back a modest 1.1%.
- Elsewhere, residential investment spending rose 5.3% and
- government investment was up 2.5%.
- Cutting through the noise, underlying domestic demand was still quite strong—real final sales to private domestic purchasers rose 3.2%—signaling the U.S. economy ended 2024 in a sturdy position
Global Headlines
Middle East
- Three Israeli Hostages And Dozens Of Palestinian Prisoners Released – BBC
- Netanyahu Leaves For Washington Looking To Deepen Ties With Trump - Reuters
- Iran Test-Fires Anti-Warship Cruise Missile With A Range Of More Than 600 Miles - AP
- Israel Says 79 Hostages Abducted On Oct. 7, 2023, Remain In Captivity, Including The Bodies Of At Least 34 - WSJ
- Interactive Map- Israel’s Operation In Gaza – Institute For The Study Of War
- IDF Carries Out 3 Drone Strikes In Jenin Area; Palestinians Say 4 Dead, Including Teen -Times Of Isreal
- Sick And Wounded Palestinians Leave Gaza As Rafah Crossing Reopens - BBC
- Turkey Says It Will Join With Neighbors To Fight The Islamic State Group In Syria - AP
- Map – Tracking Hamas’ Attack On Israel – Live Universal Awareness Map
Ukraine
- AP Interview: Zelenskyy Says Excluding Ukraine From US-Russia Talks About War Is ‘Very Dangerous - AP
- U.S. Wants Ukraine To Hold Elections Following A Ceasefire, Says Trump Envoy - Reuters
- Russia Quietly Imposes Trade Tariffs on Ally China - Newsweek
- Four Dead In Russian Strike On Kursk School, Ukraine Says - BBC
- Russian Air Attack Kills 15 In Ukraine, Gas Infrastructure Targeted - Reuters
- One Ukrainian Brigade Lost Entire Companies In ‘Futile’ Attacks On Worthless Treelines - Forbes
- Lithuania Backs Trump's Defense Spending Demands: 'You Can Never Feel Safe' - Newsweek
- Interactive Map: Assessed Control Of Terrain In Ukraine – Institute For The Study Of War
- Map – Tracking Russia’s Invasion Of Ukraine – Live Universal Awareness Map
Other Headlines
- Punxsutawney Phil Sees His Shadow, So Get Ready For More Winter -USA Today
- Venezuela Frees 6 Americans After Meeting Between President Maduro And Trump’s Envoy - AP
- US strikes stronghold of Islamic State affiliate in Somalia - VOA
- Millions Of Hindus Take 'Holy Dip' A Day After Fatal Stampede - Reuters
- An Anti-Red-Tape Revolution is Taking Hold Around the World – The Economist
- Global Energy Transition Investment Exceeded $2 Trillion Last Year - Reuters
- Justin Trudeau Gives Dire Warning to Canadians Ahead of Trump Tariffs - Newsweek
- Shelling At Busy Sudanese Market 'Fills Mortuary With Bodies' - BBC
- Rubio Heads To Central America, Pursuing ‘America First’ Diplomacy, Countering China - VOA
- ECB Cuts Rates With Economy at a Standstill - WSJ
Policy and Politics
NYPA Proposed Rate Increase Would Impact ReCharge NY Manufacturers
On December 24, 2024 the New York Power Authority released a Notice of Proposed Rule Making to adjust the Preference Power rates for customers that receive cost-based hydropower from the Niagara and St. Lawrence-FDR power projects. This rate modification plan, if adopted, will do the following:
- Raise the rates for municipally and cooperatively owned utilities in New York nearly three times the current rates; Rates will increase from $12.88/megawatt hour to $33.05/megawatt hour over the course of four years.
- Change the rate-setting methodology that has been in place for decades. This proposed rate methodology is counter to the cost-based methodology that is currently in NYPA’s contracts with preference power customers, in accordance with the Niagara Redevelopment Act.
- Also of concern is the impact this rate increase will have on companies that have agreements for cost competitive hydro power through the ReCharge New York program.
You have the opportunity to comment and be heard. Here is how you can take action by Submitting written comments to the New York Power Authority, Comments are due February 23, 2025. You can also comment in person Tuesday, Feb. 4, 2025, 11 a.m. – 3 p.m. at the Albany Hilton, 40 Lodge Street Albany, NY 12207
Hochul Eyes Worker Compensation Changes To Encourage More Provider Participation
As part of her State of the State agenda, Gov. Kathy Hochul wants to make changes to the state’s workers compensation system to make it easier for those with claims to control who provides care and encourage more providers to participate in the system. According to Dr. James Tacci, medical director for the New York State Workers Compensation Board, thanks to the conditions of current state statute, only about 10% of medical providers are authorized to treat individuals with workers compensation claims. He said that’s largely due to a system that is so burdensome that many people’s primary care providers or specialists simply decline to participate.
Workers’ Compensation Board Chair Clarissa Rodriguez told Spectrum News 1 that Hochul is pushing to automatically authorize all licensed medical care providers to treat those with claims. She explained that it will strip away that burdensome process and make it so if someone has a claim, their doctor is already authorized to handle it. Rodriguez acknowledged that added cost could be borne by insurance companies, and such initiatives are bound to sound the alarm in the business community. To further entice providers to get on board, Rodriguez added that the governor wants to codify regulations to ensure those providers get paid by insurance companies while claims are being contested.
Read More at NY State of Politics
Nation’s Report Card Spurs Calls For Change As Reading And Math Scores Circle The Drain
Data released Wednesday in the National Assessment of Educational Progress (NAEP), commonly referred to as the Nation’s Report Card, showed reading scores have fallen even further for fourth and eighth graders than they did in 2022, while math scores show only slight progress for fourth graders but still not enough to catch up to prepandemic numbers. Reading scores took the biggest hit, with the percentage of eighth graders able to read at NAEP’s basic line at the lowest in the assessment’s history. The news is even worse for the lowest-performing students: Those in just the 10th and 25th percentiles for both fourth and eighth grade had the lowest scores since NAEP’s first reading assessment in 1992.
Math scores saw somewhat better outcomes, though they are little cause for celebration. Fourth graders had a 2-point gain in math but were still unable to overcome the 5-point drop that was seen in the subject when the pandemic began. Eighth graders had no significant changes in their math scores. Math has been assisted by extra federal dollars going toward tutors and after-school programs, and critics say that type of investment was not made for reading.
Trump’s First 100 Days
- 5 Things To Know About Trump’s Buyout Plan For Federal Employees – The Hill
- Tulsi Gabbard Faces Growing Concern About Her Nomination After A Tough Confirmation Hearing - NBC
- Where Trump's Cabinet Nominees Stand In Senate Confirmation Process - Fox
- What To Know About RFK Jr.'s Financial Ties With A Personal Injury Law Firm - CBS
- Senate confirms Lee Zeldin to lead the Environmental Protection Agency - NYT
- Venezuela To Accept Deported Migrants, Trump Says Amid Immigration Crackdown - Politico
- Federal Workers Ponder an Existential Question: Do I Pack Up and Quit? – WSJ
- USAID Website Appears To Be Offline As Trump Administration Reportedly Moves To Put It Under State Department Control - Forbes
- ICE Aims To Lower US Immigration Detention Standards To Encourage More Sheriffs To Aid Crackdown - Reuters
- Democrats Pick Minnesota’s Ken Martin As New Chair As Party Grapples With Trump’s Flurry Of Actions - CNN
Health and Wellness
Menopause In The Workplace: 5 Strategies To Support Women
Women between the ages of 45 and 54 make up approximately 20% of the U.S. workforce. And yet, at a time when these women are at the peak of their careers, many are suffering in silence as menopause symptoms affect both their work and personal lives. Luckily, businesses are starting to take notice of this underserved employee demographic. In 2022, only 4% of large organizations offered or planned to offer a specialized menopause benefit, but that number encouragingly rose to 15% in 2023.
Still, these numbers are far too low. Offering menopause benefits – like flexible working hours, workplace accommodations, and mental health resources – not only sets your business apart as an employer but also supports your female employees as they navigate a new chapter in their lives. To help your business better understand menopause in the workplace, Culture Amp put together a brief look into how menopause can adversely affect women and they share tips on how your business can reduce the stigma associated with this natural life transition and make a positive impact on your female employees' lives.
Industry News
How China’s DeepSeek Used a Loophole in U.S. Export Controls to Outsmarted America
Take a team of young Chinese engineers, hired by a boss with disdain for experience. Add some clever programming shortcuts, and a loophole in American rules that allowed them to get advanced chips. That is the formula China’s DeepSeek used to shock the world with its artificial-intelligence programs. Conventional thinking held that developing leading AI required loads of expensive, cutting-edge computer chips—and that Chinese companies would have trouble competing because they couldn’t get those chips. DeepSeek defied those predictions with a resourcefulness that led to a $1 trillion bloodbath on Wall Street and is spurring Silicon Valley to rethink its approach.
Another part is the rocky introduction of U.S. export controls, which gave DeepSeek a window to buy powerful American chips. The Biden administration in 2022 put in place controls on chips exported to China. U.S. companies that wanted to sell to China first needed to throttle a chip function called interconnect bandwidth, which refers to the speed at which data is transferred. In response, Nvidia, the world’s leading designer of AI chips, came up with a new product for China that complied with this parameter—but compensated for it by maintaining high performance in other ways. That resulted in a chip that some analysts said was almost as powerful as Nvidia’s best chip at the time.
Crackdown on Tariff Exemption Snares U.S. E-Commerce Retailers
U.S. apparel retailers say they are caught in the crosshairs of varying and still developing regulatory actions in the U.S. and Mexico targeting the Customs de minimis exemption, which allows companies to avoid U.S. tariffs on shipments worth less than $800. Some companies say they are resetting the international e-commerce supply chains they have built to take advantage of the provision. Many U.S.-based companies import goods from Asian factories to warehouses in Mexico. The companies fill orders from U.S. customers from those sites, allowing them to sidestep tariffs on individual parcels sent directly to consumers.
Use of the trade provision has ballooned in recent years, partly through the explosive growth of Shein and Temu, the China-founded merchants that have flooded international e-commerce networks with deeply discounted goods. About 1.36 billion shipments entered the U.S. using the de minimis provision in fiscal year 2024, up from 637 million in fiscal year 2020, according to U.S. Customs and Border Protection. The growing use of a duty exemption that was originally aimed at helping travelers bring goods into the U.S. from abroad is getting more government attention. U.S. Customs officials say smugglers of counterfeit goods and narcotics are also using the de minimis provision.
Dow Plans 1,500 Layoffs In $1B Savings Plan
Chemical manufacturer Dow announced plans Thursday to reduce its global workforce by 1,500 people in a bid to save $1 billion. The company’s strategy includes cutting $500 million to $700 million in direct costs, largely focused on purchased services and third-party contract labor, according to the press release. Dow intends to spend $20 million to $30 million to carry out the plan. It expects to generate $300 million in savings this year and fully implement the cost-saving strategy by 2026, according to a Q4 2024 presentation.
During a Q4 earnings call, Dow CFO Jeff Tate cited a weak global manufacturing industry as a factor in the company’s middling performance. “Ongoing affordability challenges also continue to pressure spending in housing and durable goods sectors,” Tate said. “These dynamics have created a two-speed economy and we continue to monitor key indicators for signs of positive inflection in more challenged end-markets.” Other challenges include the pace of interest rate cuts in the U.S. and Europe as well as China’s stimulus policies, which could impact inflation and end-market demand, Tate added.
Read more at Manufacturing Dive
GE Vernova Outlines $600M US Expansion
GE Vernova Inc. outlined a capital investment program for U.S. manufacturing and development operations totaling close to $600 million through 2027. It projected the investments would address issues involving energy affordability, national security, and manufacturing growth, and would prompt the creation of more than 1,500 new jobs. GE Vernova, which is the former General Electric portfolio of businesses that manufacture industrial and alternative energy systems, pegged the new U.S. investments as part of its broader, $9-billion global capital investment and research program.
Among the planned U.S. investments are expansion projects at plants in Greenville, S.C. ($160 million), and Schenectady, N.Y. ($50 million), in order manufacture up to 80 heavy-duty gas turbines annually. One of the largest investments will be a nearly $100-million program to improve the electrification and carbon research programs underway at the GE Vernova Advanced Research Center in Niskayuna, N.Y. That program also covers talent recruitment and research into direct air capture technologies, alternative fuels for power generation, “the grid of the future,” and critical infrastructure security.
Read More at American Machinist
American Axle Combining with Drivetrain Rival
American Axle & Manufacturing will acquire parallel automotive drivetrain manufacturer Dowlais Group plc in a deal projected to be worth $1.44 billion in cash and AAM stock. “We are excited to bring together these two outstanding companies to create a leading driveline and metal-forming supplier serving the global automotive industry as it continues to evolve,” stated AAM chairman and CEO David Dauch. American Axle anticipates the combined group will achieve $300 million in cost savings within three years of completing the deal.
Together the two businesses represent a range of design and manufacturing capabilities that span internal combustion engine, hybrid, and electric vehicles, with presence in major automakers supply chains. As summarized by AAM, their combined portfolio of products and an optimized cost structure, will position the new organization to serve automakers in multiple regions and “support changing propulsion trends as the industry continues to evolve.”The takeover will close by the end of 2025, subject to approval by shareholders, and regulatory approvals in the U.S., European Union, and China (where Dowlais has a joint-venture business.)
Read More at American Machinist
Nissan Offers Buyouts As US Production Scales Back
Nissan Motor Co. is offering voluntary buyouts to workers at its manufacturing plants in Smyrna, Tennessee and Canton, Mississippi, to scale back production and cut costs amid cooling global sales, company spokesman Brian Brockman told Automotive Dive. The automaker, which is in merger talks with Honda Motor Co., does not plan to shutter the two plants, which combined employ 10,000 workers, Brockman said in an email to Automotive Dive. Instead, Nissan intends to cut one shift from each site and has long-term plans to continue building vehicles at both locations.
Nissan’s latest action follows its November announcement to eliminate 9,000 jobs and cut 20% of global production as worldwide vehicle sales slowed. The automaker sold 3.3 million vehicles globally in 2024, a 7.9% year-over-year drop, according to its December production report. However, its U.S. sales improved 0.8% YoY with 924,008 vehicles sold. Brockman said the moves coincide with the company’s broader plan to transition some of its U.S. production to EVs while continuing to produce gas-powered vehicles.
Hyundai, Kia Rack Up Double-Digit U.S. Sales Gains, Setting January Records
Hyundai Motor America reported record-breaking total January sales of 54,503 units, a 15% increase compared with January 2024. This was the best January in Hyundai history. All time total sales records in January were set for Santa Fe HEV (+160%), Tucson HEV (+89%), IONIQ 5 (+54%) and IONIQ 6 (+15%). Total sales of hybrid electric vehicles jumped 74%, while total EV sales grew by 15%. "Hyundai is kicking off the year with record-breaking sales, achieving our best January ever across multiple models and fuel types," said Randy Parker, CEO, Hyundai Motor North America.
Kia America opened 2025 with the highest January sales in company history with sales of 57,007 units. This figure represents a 12-percent increase compared to the same period last year, marking the successful start of 2025 after achieving record annual sales for two consecutive years. Retail sales at Kia dealerships also set a new January record, up 10-percent over same period last year, reflecting a strong double-digit growth trend. This strong January performance included Kia's SUV and electrified lineup sales increasing over the previous records set in January 2024. Five Kia models set all-time January sales records: Forte/K4 (+29-percent); EV6 (+27-percent); Carnival (+22-percent); Telluride (+16-percent) and Sportage (+14-percent).
Boom: Supersonic Travel Is Making A Comeback As Newly Developed Aircraft Breaks The Sound Barrier
Boom Supersonic, a startup, has just set a notable world first: its XB-1 demonstrator became the first privately developed aircraft to break the sound barrier by reaching Mach 1.122, or 860.8 miles per hour. The achievement is a huge milestone toward the return of commercial supersonic flights, which stopped over 20 years ago. Piloted by former US Navy aviator Tristan "Geppetto" Brandenburg, XB-1 took off from the Mojave Air and Space Port in California last Tuesday. It reached Mach 1.1 about 12 minutes later, staying at that speed for around four minutes. The aircraft broke the sound barrier a total of three times during its 33-minute flight. The speed of sound through air is 767 mph (Mach 1).
XB-1 is a demonstrator prototype that's one-third the scale of a commercial aircraft Boom Supersonic is developing called Overture. The supersonic airliner is being designed to have a cruising speed of Mach 1.7 over water, a cruise altitude of 60,000 feet, a maximum speed of Mach 2.2 (1,687 mph), and carry around 55 passengers. It's expected to be able to fly between London and New York in three and a half hours.