Trump’s upsetting some of his most enthusiastic followers:
President Donald Trump ’s plan to cut record beef prices by importing more meat from Argentina is running into heated opposition from U.S. ranchers who are enjoying some rare profitable years and skepticism from experts who say the president’s move probably wouldn’t lead to cheaper prices at grocery stores.
The National Cattlemen’s Beef Association along with the Ranchers-Cattlemen Action Legal Fund United Stockgrowers of America and other farming groups — who are normally some of the president’s biggest supporters — all criticized Trump’s idea because of what it could do to American ranchers and feedlot operators. And agricultural economists say Argentine beef accounts for such a small slice of beef imports — only about 2% — that even doubling that wouldn’t change prices much.
Trump wants to help his buddy Mileil by lowering tariffs to next to nothing on Argentinian beef. That’s just how it works now. These ranchers need to get with the program.
The economic consequences of allowing Trump and Bessent to dispense American policy based on whims and the needs of their best buds is, as yet, unknown. The markets are in an AI fever dream and so far, American companies and producers have been absorbing the costs of the ridiculous tariffs. Maybe that’s fine and Trump will emerge triumphant as the greatest economic mind since Adam Smith. But the jury is definitely still out.
Paul Krugman says the economy is in worse shape than people think:
There are some objective, measurable reasons to say that the US economy, which appears OK by the most commonly used measures, is definitely not OK once you look under the hood. One essential aspect of this weirdness is the economy is strongly bifurcated: AI is booming, but the rest of the economy isn’t. Another aspect is that in many ways the economy feels “frozen”: while there have been no mass layoffs so far, people who have lost their jobs or are just entering the work force are finding it very hard to get new jobs. Third, while the economy is growing thanks to AI spending, it’s a K-shaped expansion: People who were already affluent are becoming more so, but the less well-off are under severe pressure. For example, there are clear signs that middle-to-low income consumers are struggling: car loan and credit card delinquencies are rising, and grocers report that shoppers are buying cheaper varieties of food. At the same time, the affluent are spending freely: the top 10% of the income distribution now accounts for nearly half of all consumer spending.
What’s going on? I would argue that Trump’s wildly erratic policies are creating huge uncertainty which is deterring many companies – essentially those that are not in the AI sector or a sector catering to the affluent – from making investments. And those forgone investments include hiring new workers. The result is that much of the economy is frozen — companies aren’t hiring or investing. This freeze, in turn, explains both worker anxiety and rising inequality. Without the AI boom/bubble spending, we might very well have fallen into a recession, as some economists like Mark Zandi have claimed. And despite the AI boom, times for many workers are tough.
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Overall unemployment hasn’t risen that much, but the number of long-term unemployed — would-be workers who have been jobless for more than 6 months — had soared as of August, and has probably continued to rise since then:
Another important indicator of a troubled labor market is Black unemployment. After all these years, Black workers still tend to be “last hired, first fired.” And while the overall unemployment rate (dashed green line) hasn’t risen much so far, the Black unemployment rate (blue line) has soared, presumably because Black workers are finding it especially hard to find jobs in this frozen economy:
Again, we have yet to see mass layoffs, so most workers still have their jobs. But workers believe, rightly, that if they should happen to lose their current job they will have a hard time finding another. This obviously means that workers have much less bargaining power than they did when the job market was tight. Employers don’t have to give workers big wage increases to hang on to them; they can impose onerous conditions, like ending remote work, without fearing that employees will quit, because they have no place to go.
Historically, strong demand for labor has been especially good for lower-paid workers, while weak demand has hit them hard. The post-Covid expansion, during which labor was scarce, was marked by big gains at the bottom and a surprisingly large fall in wage inequality, what David Autor, Arindrajit Dube and Annie McGrew have called the “unexpected compression.”
Incidentally, all through the Biden-era expansion I kept hearing people say that the economic recovery was only benefiting an affluent minority, that ordinary workers were being left behind. This wasn’t at all true at the time. But it is true now. The Atlanta Fed has a wage tracker that, among other things, estimates the rate of wage growth at different parts of the wage distribution. During the Biden years wage growth for the bottom fourth of the wage distribution (blue line) was consistently higher than wage growth for the top fourth (red line). Now that equalizing process has gone into reverse.
He says that every economist he knows is extremely concerned:
Many economists — actually, all the economists I know — are worried about a potential downturn. The AI boom is troublingly reminiscent of the 90s tech bubble. After the sudden bankruptcies first of a subprime auto lender, then an auto parts supplier built on hidden loans, JPMorgan’s Jamie Dimon suggested parallels between bad lending in the private credit market and the bad subprime lending that brought on the 2008 crisis. To quote Dimon: “I probably shouldn’t say this, but when you see one cockroach, there are probably more.”
I hate to be cynical but I am beginning to wonder if Trump is going to be able to keep the balls in the air until he’s on his way out or gone. He may be the luckiest person in the world so it’s entirely possible. On the other hand, this is hitting hard early in his term and people are feeling it even if it isn’t translating into recession yet. The Republicans think they’ll have Morning in America in a couple of years but it is much more likely we’ll be fully falling into the dark ages.