They’re on. They’re off. They’re on again, but not for everyone. Or not immediately. Or maybe they are! Donald Trump’s tariffs, and his plans for more, are wreaking havoc on the economy before they are even a week old.

Consumer electronics retailer Best Buy saw its stock plunge as much as 13% this week after CEO Corie Barry told analysts on Tuesday that the stores will have to pass on to customers some of the cost of tariffs, raising prices and consequently reducing sales. New York Fed president John Williams said Tuesday he expects tariffs to increase inflation. Tariffs “filter into prices that consumers pay. That happens relatively soon,” he said.

Core inflation, which excludes volatile food and energy prices, has been falling steadily from a recent peak of 5.6% in 2022 to 2.6% in January, but still above the Fed’s ~2% target. Raising tariffs on Canada and Mexico by 25% and on China by 10% could add 0.5 to 0.8 percentage points to the core inflation rate, according to the Boston Fed.

Trump’s tariffs aren’t only affecting the U.S., said Bank of England governor Andrew Bailey. “The risks to the U.K. economy, and the world economy, are substantial,” Bailey told Parliament on Wednesday. He said there’s concern that Trump could lead the U.S. to withdraw from the International Monetary Fund and the World Bank, the two institutions launched after World War II to help avoid a repeat of the Great Depression. “That would be a very damaging thing for the world,” Bailey said.

Back home, EY chief economist Gregory Daco says steep tariff increases against top U.S. trading partners could create a “stagflationary shock — a negative economic hit combined with higher inflation — while triggering financial market volatility.”

Businesses are already upset over tariffs, which Ray Farris, chief economist at Prudential PLC told The Wall Street Journal will be “wildly disruptive to business investment plans.” Tariffs will inflate prices, creating “a shock to real household income just as household income growth is slowing because of slower employment and wage gains,” he said. Smelling the blowback from Canada and Mexico (Canada is boycotting U.S. goods, and Manitoba just banned U.S. alcohol from its liquor stores), Trump first announced that U.S. car makers will get an exemption for the next few weeks, then he  delayed tariffs on Canada and Mexico for a month. Commerce Secretary Howard Lutnick said Wednesday that Trump is “thinking about a plan” to roll back some or all of the tariffs on trading partners. Whatever happens, U.S. trade partners are already spooked and angry and looking elsewhere for goods and markets, and tariffs are making the economy very unsteady.

“This thing could get off the rails pretty quickly,” said Tim Mahedy, chief economist at Access/Macro. “This is not at the level of the 1970s or 1980s. But it does have a whiff of stagflation, or a ministagcession.”

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Elsewhere in Trumplandia

• Is China cunning or asleep at the wheel? This week, Trump doubled tariffs on imports from China to 20% and has pledged to add more fees to Chinese ships docking in the U.S. While all that will raise prices of Chinese goods for U.S. consumers, it’s also expected to crush demand for Chinese products. So what’s China doing? At a meeting of its legislature this week, the government set a target of 5% GDP growth, but didn’t offer much of a plan on how to get there. Up to now, China has relied on trade for growth, becoming the world’s factory, but with one of its largest markets ready to shrink, and repeated efforts to boost internal consumption failing, China is in a bind. So far, all it’s really come up with is encouraging its own consumers to spend. But given the crash of China’s real estate market and the control the state exerts over the economy, no one wants to waste their yuan. In fact, national sales tax revenue, the country’s largest source of taxes, fell 3.9% last year, a clear indication that spending is down. Still, at the same meeting, Prime Minister Li Qiang said the country will invest more in AI, even as reports emerge of Chinese firms using shell companies and off-shore transactions to obtain the latest AI chips from Nvidia, breaking a U.S. tech export ban.  The Wall Street Journal found that companies registered outside of China buy the chips, some for their own use, and simply resell the rest to Chinese firms.
• Data protection racket: One of the key things that makes the U.S. such a desirable place to invest is the accuracy and sanctity of U.S. economic data. But now it looks like the Trump Administration is taking a sledgehammer to unfavorable indicators, especially if, as many economists now suspect, they show the country is headed into a recession. Howard Lutnick, Trump’s commerce secretary, said he may change the way some data is reported by removing the impact of government spending on the economy. “You know that governments historically have messed with GDP,” Lutnick told Fox News. “They count government spending as part of GDP. So I’m going to separate those two and make it transparent.” Economists already have a way to measure the economy while leaving out government spending. It’s called final sales to private domestic purchasers. But with Trump and first buddy Elon Musk slashing federal spending, businesses and consumers have already stopped their own spending. According to the Atlanta Fed’s respected GDPNow model, the economy is expected to shrink by 2.4% in the first quarter. But hey, just don’t mention inflation.
• Crypto capital complaints: On Sunday, Trump announced plans to “move forward” with creating a “Crypto Strategic Reserve” for the U.S. that would include three thinly traded coins—XRP, solana, and cardano—plus, in an afterthought, Bitcoin and Ethereum. “I will make sure the U.S. is the Crypto Capital of the World,” Trump declared in a post on Truth Social. It’s not clear what “move forward” means in practice, but some conservatives and even the crypto world are concerned about the plan. Crypto-crazy Sen. Cynthia Loomis, a Wyoming Republican, introduced a bill last July that would have the Treasury buy 1 million Bitcoins, worth about $92 billion at Thursday’s price. But that bill’s been sitting in the Senate Banking Committee for the past seven months. Advocates say the country could benefit from cryptocurrencies’ explosive growth, but when it comes to crypto, what goes up often comes down. On Thursday, Bitcoin was down 3.5% this year. Meanwhile, Trump’s Securities and Exchange Commission has ruled that meme coins don’t need to be regulated because they’re not securities. Hmmm. Remember that night in January, less than three days before his inauguration, when Trump locked the world’s crypto luminaries in a ballroom and then launched his own meme coin, $Trump? It shot up from $6 to more than $75 overnight before plummeting, earning more than $100 million in commissions for the groups behind it and hundreds of millions in losses by ordinary investors.
• Hold my EB-5 Visa: Trump’s plan to sell permanent U.S. residency for $5 million in a program he’s calling a “Gold Card,” and which he said would be open to Russian oligarchs, has real estate financiers worried. They’ve been financing big projects for years with the promise of a U.S. residency with an EB-5 visa for investors who invest at least $800,000 in an economically depressed area and show they’ve created 10 jobs. But at least some of that funding—about $4 billion a year, could dry up if Trump starts selling Gold Cards. So who’s been using EB-5 visas? Well, Vornado’s Hudson Yards megaproject in Manhattan, and, yes, many Trump projects, including Trump Plaza in Jersey City.

Who’s not happy?

• The oil industry: Pumping all that oil and gas out of the ground requires a lot of pipe, and that 25% tariff on steel imports expected next week will raise the price of pipes, just as the price of oil is falling. (It’s down about 10% since Trump took office.)
• Car makers: They wrangled an exemption to the Canada tariffs for a month, arguing that Detroit’s cars are made from parts that are sourced or assembled in all three countries that make up the US/Mexico/Canada free trade zone.
• Guacamole fans: A one-month respite announced Thursday on Mexico tariffs might help, but U.S. farmers don’t grow avocados in winter.
• Timber: Just days before the 25% tariff on imports from Canada was to go into effect, Trump has told Commerce Secretary Howard Lutnick to look at whether lumber imports from Canada threaten America’s national security. If Lutnick’s inquiry finds they do, Trump can impose more tariffs. Canada sold $28 billion worth of lumber to the U.S. in 2021 (the last year for which data is available) or about half of U.S. timber imports, while the U.S. exported $10 billion of lumber to Canada and $6.5 billion to Mexico.

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The Usual Suspects

• Walgreens going private? Struggling drugstore chain and overpriced minimart Walgreens may have been tossed a lifeline by private equity firm Sycamore Partners, which could take Walgreens (and its New York City chain Duane Reed) off the market for about $10 billion. Walgreens has been around for 120 years and is credited with inventing the malted milkshake (good luck finding one these days). The company’s market cap hit $100 billion in 2015 but collapsed to under $8 billion last year. It’s up a smidge since, but it missed a major market shift, focusing on retail while its rivals went into pharmacy benefit management.
• Goldman sacks: Wall Street icon Goldman Sachs is preparing for its annual layoff season, and this time, CEO and part-time D.J. David Solomon said a raft of vice presidents will be among the 3%–5% of employees getting the boot. “Hints have been given to vice presidents who are likely to get cut both in the form of poor reviews late last year and small bonuses earlier this year,” The Wall Street Journal reported.
• Two AI patties, special sauce? What’s going into your Big Mac these days? Artificial intelligence, of course. Mickey D’s is trying to alleviate the stress that plagues employees who have to deal with customers at counters, drive throughs and curbside delivery. Working with Google Cloud to use AI to manage workflows, McDonalds wants to grow its base of loyal customers from 175 million to 250 million by 2027. It figures AI can help. And it may also be able to keep those McFlurry machines from breaking down.
• Chips ahoy! Taiwan Semiconductor Manufacturing Co. said it will invest another $100 billion in chip-manufacturing plants in the U.S., adding to its chip plant in Arizona with three new chip plants, two chip-packaging plants, and an R&D center, CEO C.C. Wei said. TSMC’s first U.S.plant began operations late last year. The company has made no secret of its concerns that China could invade Taiwan and has been seeking to diversify its operations.
• No protection? The Consumer Financial Protection Bureau, meant to protect ordinary Americans from predatory financing schemes, extra fees, and other financial abuses, is dropping cases like Travis Kelce drops passes. CapitalOne $COF got off the hook for allegedly using deceptive tactics to cheat customers out of $2 billion in savings account interest. As Trump’s budget executioner Russell Vought follows through on his pledge to shut the agency, Rocket Homes Real Estate, Heights Finance, and Vanderbilt Mortgage and Finance (owned by Warren Buffett’s Berkshire Hathaway) all saw the agency drop its complaints against them.
• 23 and nobody. Having driven the price of shares in the DNA testing firm down from a peak of $320 four years ago to $1.48 on Thursday, co-founder and CEO Anne Wojcicki (ex-wife of Google co-founder Sergey Brin) got a slap in the face from the company’s board, which on Monday rejected her offer of 41 cents a share for the company. Shares closed at $2.20 on Friday and $1.47 on Monday. That bid was an 84% drop from one she made last month, for $2.53 a share, with the help of a firm called New Mountain Capital. 23andMe has failed to find a successful business model for its DNA testing business, and last year shuttered a planned drug development venture that would use its trove of genetic material.

Scalp City

Gen Z concert fans are paying an arm and a leg for tickets to see their favorite bands and singers, nearly three times as much in inflation-adjusted dollars as their parents paid in 1996 when the average ticket price for the top 100 tours was $25.81, about $52 when adjusted for inflation. By 2024, average ticket prices had risen to $135.92, The New York Times reports, citing data compiled by a music industry trade publication. By 2024, average ticket prices had risen to $135.92. Newly liberated concertgoers drove up prices after the Covid pandemic, but so did dynamic pricing systems, legalized scalping by ticket reselling apps, the consolidation of the live performance industry, and a sea change in the way artists make money: Where album sales used to make the fortunes of musicians into the early 2000s, now the penny—or less—per stream on music apps like Spotify, has prompted, if not forced, musicians to continue touring for decades to make money.

Elon’s World

Whether or not you believe Elon Musk’s easily discredited accounts of billions in saving with his DOGE chainsaw, one thing is clear. Musk’s businesses are among the more significant recipients of U.S. government money. The Washington Post dove into Musk’s public business dealings, cataloguing some long fingers in the pocket of the U.S. Treasury and state governments. By their account, backed up by a trove of official documents, over the past two decades Musk’s businesses have received at least $38 billion in “government contracts, loans, subsidies and tax credits,” most of it in the past five years. Among the highlights:

• Tesla has received more than $15 billion in contracts, loans, subsidies and tax credits since 2007:
• • Automotive regulatory credits: $11.4 billion
  • Nevada Governor’s Office of Economic Development: $1.4 billion
  • Nevada (multiple sources): $1.3 billion
  • New York: $750 million
  • Energy Department:  $471.3 million
  • Treasury Department:  $326.8 million
  • Texas: $64.5 million
• Space X has received more than $22 billion, including:
• • National Aeronautics and Space Administration: $14.9 billion
  • Defense Department: $7.6 billion
  • Export-Import Bank of the U.S.: $106.1 million
  • State Department: $4.5 million
  • Commerce Department: $3.6 million
  • U.S. Agency for International Development: $3.3 million