Member Briefing February 6, 2025
Race To Beat Trump Tariffs Sends US Imports Soaring, Widening in Trade Deficit
The U.S. international trade deficit widened considerably to end 2024. At -$98.4 billion, the deficit has only been larger once, in March 2022, when it was temporarily larger for the month. The deficit widened by $19.5 billion during the month of December, which is the largest-one month move in data going back to the early 1990s. The larger deficit was due to a surge in imports (+3.5%, or $12.4 billion) and collapse in export growth (-2.6% or $7.1 billion). For the year as a whole, import growth outpaced exports, causing the overall U.S. trade deficit to widen $134 billion, which leaves it about 17% larger than where it was in 2023.
Goods exports were weak across the board in December with the largest drops in consumer (-8.5%) and autos (-6.7%). Meanwhile, most of the gain in imports is tied to a 19% pop in industrial supplies, and a little over $9 million of the $10.8 million gain there is from imports of finished metal shapes specifically. Beyond that there were some other import gains, but there wasn't large evidence of a pull forward in demand ahead of potential tariffs. Consider that if industrial supplies imports were flat in December, total imports would have grown just 0.2%.
US Services PMI at 52.8%
Economic activity in the services sector expanded for the seventh consecutive month in January. The Services PMI® registered 52.8 percent, 1.2 percentage points lower than the seasonally adjusted December figure of 54 percent.
- The Business Activity Index registered 54.5 percent in January, 3.5 percentage points lower than the seasonally adjusted 58 percent recorded in December.
- The New Orders Index recorded a reading of 51.3 percent in January, 3.1 percentage points lower than the seasonally adjusted December figure of 54.4 percent.
- The Employment Index remained in expansion territory for the fourth consecutive month; the reading of 52.3 percent is a 1-percentage point increase compared to the seasonally adjusted 51.3 percent recorded in December.
- The Supplier Deliveries Index registered 53 percent, 0.5 percentage point higher than the 52.5 percent recorded in December.
- The Prices Index registered 60.4 percent in January, a 4-percentage point decrease from December's seasonally adjusted reading of 64.4 percent.
US Consumer Confidence Inches Up In February
The RealClearMarkets/TIPP Economic Optimism Index, a leading gauge of consumer sentiment, increased slightly by 0.2% in February to 52.0. The index posted its 40-month high in December (54.0) and pulled back to 51.9 in January. Since President Trump's re-election in November 2024, the index has posted readings in the optimistic territory. February’s reading of 52.0 is 5.8% higher than its historical average of 49.2. Investor confidence improved by 1.6% (0.9 points) to 57.8, while non-investor confidence declined marginally by 0.6 points (1.2%) to 48.9. The RCM/TIPP Economic Optimism Index has three key components. In February, two of the three components declined, and one advanced.
- The Six-Month Economic Outlook, which measures how consumers perceive the economy's prospects in the next six months, declined by 1.9%, from 52.1 in January to 51.1 in February.
- The Personal Financial Outlook, a measure of how Americans feel about their own finances in the next six months, dropped by 6.8% from its previous reading of 60.1 in January to 56.0 this month.
- Confidence in Federal Economic Policies, a proprietary RCM/TIPP measure of views on the effectiveness of government economic policies, improved from 43.4 in January to 48.8 this month, reflecting a 12.4% gain. This component has been below 50.0 in the pessimistic territory for 42 consecutive months since September 2021.
Read more at Real Clear Markets
Global Headlines
Middle East
- Trump Says 'Everybody Loves' Plan For US Gaza Takeover, As Allies Reject Idea - BBC
- Arab World Reacts to Donald Trump's Gaza Plan - Newsweek
- UN Refugee Boss Urges Donors To Fill Gap Left By Trump Aid Freeze - Reuters
- Congress puts hold on Trump’s $1 billion arms sale to Israel – The Hill
- Civilians Caught In Crossfire Of Israeli Military Operation In West Bank's Jenin – France 24
- Hope Turns To Regret Among Syrians Returning Home From Turkey - Reuters
- Interactive Map- Israel’s Operation In Gaza – Institute For The Study Of War
- Map – Tracking Hamas’ Attack On Israel – Live Universal Awareness Map
Ukraine
- Ukraine Reels In Trump With Mineral Riches – Politico
- 'Majority' Of Ukrainians Want Ceasefire With Russia, Zelensky's Ex-Spokesperson Says – France 24
- Russia Supported Sabotage Spree In Germany To Roil Election Campaign, Report Says - Politico
- The Russian TV Star Who Became the Voice of the Kremlin - WSJ
- Putin's Shadow Fleet May Have NATO Origins: Report - Newsweek
- 'It's Like Hell': Race To Evacuate Residents From Ukraine Front-Line City - BBC
- 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
- China Launches WTO Dispute Over Trump Tariffs – Yahoo Finance
- French Prime Minister Bayrou Survives First No-Confidence Vote In Parliament – France 24
- Billionaire And Spiritual Leader The Aga Khan Dies - BBC
- US Sends Bombers to South China Sea in Warning to Beijing - Newsweek
- The Salvadoran Mega-Prison Offering to Take America’s Worst Criminals - WSJ
- More Than 100 Women Raped And Burned Alive In DR Congo Jailbreak, UN Says - BBC
- Guantanamo — A Historic Military Base In Disputed Territory - VOA
- Milei To Pull Argentina Out Of WHO, Mirroring Trump - Politico
- Rubio Pledges US Support For Costa Rica's Fight Against Cyberattacks, Drug Trafficking - VOA
Policy and Politics
Senate Panel Will Advance Budget Next Week, Graham Says
The Senate will move forward with a budget blueprint next week setting out a two-track approach to enacting President Donald Trump's domestic agenda, key senators said Wednesday. Graham made a presentation on the blueprint he plans to advance, which will tee-up the Senate's two-part reconciliation strategy — starting with a border, energy and defense bill. A tax-focused package would follow.
The announcement, made by Senate Budget Committee Chair Lindsey Graham (R-S.C.) inside a closed-door Senate GOP lunch, comes after a competing framework from Speaker Mike Johnson and other House Republican leaders has stalled in recent days due to internal conflicts in that chamber.
New York Lawmakers Propose Legislation To Mitigate PFAS Exposure
State lawmakers on Wednesday announced a group of five bills aimed to reduce per- and polyfluoroalkyl substances (PFAS) for consumers and New York residents. The group of bills includes banning the use of PFAS in consumer and household products, cosmetic products and menstrual products. Additionally, the bills would regulate PFAS as an air pollutant and require the disclosure of PFAS levels in all permitted facilities discharging waste. Currently, the New York Department of Environmental Conservation has limits for PFOA and PFOS at 10 ppt of each.
The campaign, PFAS Free-NY, also calls for the banning of spreading sewage sludge on New York’s farmland. Sewage sludge is a byproduct of the wastewater treatment process that is then used as fertilizer on fields. However, the sludge has been found to contain “forever chemicals” from the wastewater and then can contaminate drinking water. Exposure to PFAS chemicals has been linked to decreased fertility, developmental effects or delays in children, increased risk of some cancers, reduced ability of the body’s immune system to fight infections, and increased cholesterol levels, according to the Environmental Protection Agency.
Read More at NY State of Politics
Takeaways of Trump 2.0 Two Weeks In
A lot has happened since President Trump took office for his second term. In this report, we examine a few of the key takeaways from President Trump's first few weeks in office, including why the European Union could be Trump's next tariff target and why Trump has less leverage over China this time than during the first trade war. Tariffs and associated uncertainties should be consistent with a stronger U.S. dollar, although we acknowledge that “tariff fatigue” may set in and become less supportive of the greenback over time.
Trump's “negotiate from a position of power” approach may not work as well on China this time. Yes, China has plenty of economic vulnerabilities that could be exploited, most relevant of which to the U.S. is China's export driven economic model. But the U.S.-China trade relationship is significantly weaker today relative to Trump's first term. The U.S. imports significantly fewer goods relative to 2017, while China has found replacement trade partners intra-Asia and has set up manufacturing capabilities in Mexico to circumvent tariffs. U.S. tariff influence may not be as powerful, as China has made some necessary adjustments. In fact, an argument can be made the U.S. has become more dependent on China as a source of critical imports.
Trump’s First 100 Days
- Senate Committee Backs Tulsi Gabbard As Next Intelligence Chief – NBC
- DOGE Aides Search Medicare Agency Payment Systems for Fraud - WSJ
- Trump Admin Puts Almost All USAID Workers Worldwide on Leave - Newsweek
- Defense Department Drafting Plans To Withdraw All U.S. Troops From Syria - NBC
- Fired NLRB Member, Gwynne Wilcox, Sues In Test Of President's Power – Law360
- Trump’s Arctic Goals Demand Icebreakers, but U.S. Struggles to Build Them - WSJ
- Texas Democrat To Bring First Articles Of Impeachment Of Trump Second Term - Newsweek
- Dismantling Of USAID, Including Putting All Staff On Leave, Appears To Be A Test Case For New Administration - WSJ
- Dems, GOP Spar On Schools As Education Department Hangs In The Balance – The Hill
- Democrats Pick St. Lawrence County Dairy Farmer As Nominee For Pending NY-21 Special Election – NY State Of Politics
- Judge Cements Block On Trump’s Order Restricting Birthright Citizenship – The Hill
Health and Wellness
The Flu Season Feels Worse Than Normal This Year. Is It?
It feels like everyone is sick right now. And while that is a slight exaggeration, the real situation isn’t too sunny either. Last week, more than half of states – 27, to be exact – had “very high” flu activity, according to the latest data from the Centers for Disease Control and Prevention. That’s the CDC’s most severe classification for flu activity. Reports of respiratory illness are still trending upward, and lab tests for influenza are turning up about 30% positive, the CDC says. Emergency room visits and hospitalizations are also up. So far, it seems like this winter’s flu season is shaping up to be worse than the past several years.
It’s not that this year’s strains are particularly bad, and the vaccine formula wasn’t a bad match either, Adalja said. It could have more to do with lower vaccine uptake. “We are seeing less people getting vaccinated for all conditions including influenza,” said Dr. Donald Dumford, infectious disease specialist at Cleveland Clinic. If you look at how many doses of the flu vaccine were administered as of mid-January, we’ve had 146 million shots go into arms around the U.S. That sounds like a lot, Dumford acknowledged, but it’s the lowest it has been in years.
Industry News
Trump’s Tariff Orders Feature Key Clause For Logistics Managers
President Donald Trump’s executive orders implementing tariffs on China, Mexico and Canada all share one detail that could help logistics managers save on last-minute costs: shipments in transit may not have to pay the duties. Duties will apply to “goods entered for consumption, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern time on February 4, 2025,” according to each order.
Goods shipped from China prior to Feb. 1 can avoid the duty upon arrival in the U.S. if they meet two specific conditions. First, the product must have been “loaded onto a vessel at the port of loading” or have been “in transit on the final mode of transportation prior to entry into the United States” before 12:01 EST on Feb. 1. Second, the exception will apply “only if the importer certifies to CBP as specified in the Federal Register notice,” according to the order. It is not common practice to certify the exact date products are laden on vessels, Jansen said, but shippers will need to document tracking details to ensure they can prove goods were in transit prior to the tariff enforcement date.
Read more at Supply Chain Dive
How China Dominates Critical Minerals Production
China has been able to dominate the global critical minerals market through strong international financing, according to a recent report. A study by AidData at the College of William & Mary, published late last month, found that Chinese policy and commercial banks—working alongside private Chinese entities and some non-Chinese groups—issued loans worth nearly $57bn from 2000 to 2021 in 19 low- and middle-income countries for mining and processing copper, cobalt, nickel, lithium and rare earths, components critical to clean energy technologies such as electric vehicle batteries and solar panels. Among the study’s principal findings are the following:
- The critical minerals funding is “much broader” than the financing in place for China’s Belt and Road Initiative, the country’s global infrastructure investment strategy.
- China’s state-owned banks play the biggest financing role.
- Most lending is for “upstream resource extraction.”
- Two-thirds of the financing has gone into joint ventures and subsidiaries in which “the host government” has no significant ownership.
- China’s dominance in many cleantech sectors is expected to expand over the next 10 years, according to forecasts.
GM Takes Over Cruise, Ends Robotaxi Program
General Motors completed its purchase of GM Cruise Holdings LLC, the autonomous vehicle technology developer in which it had been the major stakeholder since 2016. No cost was reported for the acquisition, which involved about 10% of the Cruise organization. In December the automaker announced its plan to make Cruise a wholly owned subsidiary and to combine the self-driving technology with its own autonomous vehicle technology and driver assistance systems for personal vehicles. GM expects to cut the program costs by as much as $1 billion per year by ending the Cruise robotaxi development effort.
GM will integrate the Cruise technology into the Super Cruise assisted driving system, which is a software platform that allows hands-off driving on more than 20 GM vehicle models. The plan is to expand Super Cruise technology for use on surface streets as development continues toward autonomous vehicles. Cruise was launched in 2013 with a plan to offer self-driving technology as kits, in a direct-to-consumer model. General Motors made its majority investment three years later, but it allowed the developers at Cruise to retain their responsibility for the research and technology, and its commercialization.
Read more at American Machinist
Tesla Sales Plunge 59% in Germany to Lowest Level in Years
Tesla Inc.’s sales plummeted 59% last month in Germany, adding to indications that Chief Executive Officer’s Elon Musk political activities are hurting the carmaker’s business in major electric vehicle markets. The US manufacturer registered only 1,277 new cars in January, its lowest monthly total since July 2021, according to the German Federal Motor Transport Authority.
Tesla also posted declines in France and the UK last month, meaning its sales fell in Europe’s three largest EV markets. In addition to vouching for Germany’s far-right Alternative for Germany party and taking on UK Prime Minister Keir Starmer, Musk spent the month cementing his position in the administration of US President Donald Trump, who’s threatened to hit the European Union with tariffs. The company’s sales plunged 63% last month in France — the EU’s second-biggest EV market, after Germany — and dropped 12% in the UK.
Stellantis Names Bob Broderdorf New CEO For Jeep
Bob Broderdorf was named CEO of the Jeep brand, parent company Stellantis announced Monday. Broderdorf most recently served as SVP and head of Jeep for North America, and succeeds Antonio Filosa, who was appointed as Jeep CEO in November 2023. Filosa will continue as America’s regions COO for Stellantis, overseeing the Chrysler, Dodge, Jeep and Ram brands. He will also have the added duty of supervising quality for Stellantis’ global operations.
His appointment continues a wave of C-suite changes at Stellantis in recent months, including the resignation of CEO Carlos Tavares, as the company seeks to improve its operations and end its sales slump. Stellantis is turning to Broderdor to return the Jeep, Ram and Dodge brands to profitability, the company said. He brings more than 25 years experience and a proven track record of driving growth through strong dealer relationships and effective marketing strategies.
AMD Earnings Include Disappointing Data Center Revenue
Advanced Micro Devices under-delivered on Wall Street’s estimates for its important data center business. AMD reported better-than-expected results on the top and bottom lines, but it also reported data center sales of $3.86 billion. That reflected 69% growth from a year ago but fell short of the $4.14 billion in sales expected by analysts polled by LSEG. The key unit, responsible for selling advanced chips for data centers, has benefited in recent years from growing demand for its graphics processing units, as megacap technology companies race to develop advanced artificial intelligence tools.
Data center revenue grew 94% for the full year to $12.6 billion, with $5 billion of those sales stemming from AMD’s AI-focused Instinct GPUs. The company is the second-largest producer for gaming after Nvidia, which has triumphed as the market leader in AI chips and ballooned in value to a nearly $3 trillion market value.
Google Parent Alphabet Misses Earnings Estimates
Alphabet shares dropped on Wednesday after the search giant fell short of Wall Street’s fourth-quarter revenue expectations and announced big spending plans for its ongoing artificial intelligence buildout. The company topped earnings estimates by 2 cents per share. Revenue came in at $96.47 billion, behind the $96.56 billion expected by LSEG. Alphabet’s revenue grew 12% overall from a year ago, while its YouTube advertising business, search business and services segment slowed year over year.
Alphabet also said it plans to spend $75 billion on capital expenditures as it builds out its AI offerings and races against megacap rivals to build out data centers and new infrastructure. The figure was much higher than the $58.84 billion. The company expects capital expenditures to range between $16 billion and $18 billion. That was higher than the $14.3 billion estimate from FactSet.
EPA Launches Wildfire Hazardous Material Removal Effort
On Jan. 24, 2025, President Trump issued Executive Order Emergency Measures to Provide Water Resources in California and Improve Disaster Response in Certain Areas. This directs EPA to complete its hazardous materials mission responding to the Los Angeles wildfires as soon as practical. EPA’s work removing hazardous materials is Phase 1 of the federal cleanup response. The Phase 2 debris removal in the burn footprints, and to prevent these materials from being released into the environment. Phase 2 will be conducted by the U.S. Army Corps of Engineers, as coordinated by FEMA. Once Phase 1 has been completed at a property, Phase 2 will begin automatically.
On February 3, the EPA announced that it has completed reconnaissance at 6,022 properties due to the wildfires. This includes 3,636 properties impacted by the Eaton Fire and 2,386 properties impacted by the Palisades Fire. Currently there are 1,050 response personnel in the field, up from 478 at the end of last week and with an additional 280 mobilizing today. EPA is assembling 60 teams to clear hazardous materials from the more than 13,000 residential and 250 commercial fire-impacted properties. EPA has convened a working group to coordinate with utilities, state, local and federal stakeholders to expedite cleanup operations and meet unmet needs in the sector.