Robert Pape: “The mistake the media and markets have made on estimating the impact of the Iran war: assuming a very short war.”
How Much Donald Trump Is Costing the U.S. Economy
The Economist: “Together, the squeeze from tariffs on real incomes, reduced labor supply and capex-shy companies adds up to 0.8 percentage points. That is in line with the earlier figure we arrived at by considering a counterfactual American economy… Looking ahead, there is little sign of relief. Tariffs remain in flux, sustaining high uncertainty for businesses and households. The war in Iran and effective closure of the Strait of Hormuz has triggered an energy shock that will further compress real incomes and corporate margins, dampening investment even more.”
“A natural reaction to such figures is to despair at how much damage bad policies can cause. Another, though, is to marvel at the awesome power of America’s economic engine. Despite everything Mr Trump has put in its way, GDP may grow at an annual rate of 4% in the current quarter, if you believe the latest real-time forecast by the Federal Reserve’s Atlanta branch. Without the deadweight of the MAGA tax, in other words, America might be rocketing ahead at nearly 5% annualized growth.”
Three Indicators for the Next Global Economic Shock
Robert Pape looks at the likelihood of the next global economic shock
“First, inventories. Watch U.S. East Coast diesel inventories, European LNG storage levels, and Asian jet fuel reserves. U.S. distillate inventories are already running roughly 11–18 percent below seasonal norms, while European gas storage remains near 30–35 percent full — far below the roughly 55 percent level Europe normally enters summer with. Historically, once inventories fall below roughly 20–25 days of forward demand coverage, governments begin losing the ability to stabilize shortages through temporary releases and subsidies alone.”
“Second, industrial slowdown. Watch for refinery utilization cuts in India and South Korea, fertilizer shutdowns tied to LNG shortages, falling container freight volumes, and airline route reductions across Asia and Europe. If major Asian refiners begin reducing throughput by 10–15 percent, or if airlines begin cutting summer schedules by another 5–10 percent because of jet fuel shortages rather than weak demand, the crisis has likely entered synchronized contraction.”
“Third, political intervention. Export controls, diesel allocation programs, anti-price-gouging measures, emergency food subsidies, and fuel rationing indicate governments are entering the political phase of the crisis. Early warning signs include limits on diesel purchases, restrictions on fertilizer exports, government fuel-allocation orders, and emergency price caps spreading across multiple countries simultaneously.”
Nearly Half Are Anxious About Their Financial Situation
A new CBS News/YouGov poll finds 44% of respondents said they see their “own personal financial and economic situation” as either “fairly bad” or “very bad,” while 49% said they see their personal financial and economic situation as “very good” or “fairly good.” Seven percent of respondents said they were unsure about their personal financial and economic situation.
In the same poll, 57% of respondents said they believed Trump’s policies “are making” them “financially worse off.”
Americans Are Buying Now, Paying Later
Semafor: “About one in four Americans are often or occasionally paying in installments when they buy things online, a figure that rises among people worried about their finances.”
“Thirty-seven percent of lower-income Americans report using installment plans either frequently or occasionally, according to new Gallup polling.”
Not the Economy Kevin Warsh Wanted to Inherit
“Kevin Warsh won the Fed chair nomination with a double-barreled policy agenda for the central bank: lower interest rates and a smaller Fed balance sheet. As he takes the reins, economic conditions will make it tough for him to achieve either of those goals,” the Wall Street Journal reports.
“A troubling rise in inflation over the past two months has left Fed policymakers in no mood to deliver the rate cuts that President Trump has demanded. The job market has shown signs of stabilizing, further undercutting the case for easing.”
Soaring Prices Test Voters’ Finances and Patience
New York Times: “For Mr. Trump, the nation’s political and economic strains are laid bare in a series of dour reports released over the past two weeks. Consumer prices last month rose at their fastest clip in about three years, outpacing workers’ wages, while businesses saw their costs increase at a rate not seen since 2022.”
“Americans are racking up more debt. Families are saving less. And a key measure of consumer confidence dipped to an all-time low this month. The anxiety has bled into recent political polls, which have registered broad public disapproval of Mr. Trump’s handling of the economy.”
Trump Faces No Good Options on Beef Prices
“President Donald Trump returned home from China to a politically-fraught domestic policy challenge that has vexed top aides for months: sky-high beef prices,” Politico reports.
“The White House must now decide how to proceed with an executive order to temporarily ease tariffs on imported beef — a move that was delayed earlier this week amid intense backlash from farm-state lawmakers and industry allies.”
“The executive order could help lower prices for consumers, though by how much remains uncertain. Doing so would simultaneously drive up competition for American ranchers as they face a host of higher costs brought on, in part, by the Iran war.”
Republicans Fumble on Affordability
Bloomberg: “The Republican-led Congress, faced with deepening economic discontent exacerbated by President Donald Trump’s Iran war, is struggling to find consensus on any plan to address the cost of living with less than six months before midterm elections.”
“Frustration is building among vulnerable GOP lawmakers and moderates who say the party is wasting valuable time on issues that aren’t resonating with Americans while ignoring the concerns about prices and inflation dominating the campaign trail.”
Trump’s Killer Quote Exposes His Bind on Iran War
“President Trump’s remark this week that ‘I don’t think about Americans’ financial situation’ as he weighs his next moves in Iran may have inadvertently captured the fundamental bind he’s in: how to pressure Iran without spooking markets and sending oil prices soaring,” Axios reports.
“Trump currently has no clear way to square his desire to end the war on his terms with the need to rein in inflation and keep the stock market humming in an election year.”
Wall Street Journal: “Trump’s war in Iran has exacerbated Americans’ anxieties about costs, as prices at the pump have surged. But even as Trump’s congressional allies wrestle with keeping him focused on the economy, they are struggling to agree on a strategy to address voters’ concerns.”
Inflation Is Wiping Out Wage Gains
Wall Street Journal: “For the first time in three years, inflation is outstripping growth in Americans’ paychecks.”
Wholesale Inflation Jumps 6%
“Wholesale prices in April posted their highest annual increase in more than three years, signaling more nettlesome inflation as pipeline costs intensify,” CNBC reports.
Trump’s Five-Alarm Economy
“President Trump flew to Beijing on Tuesday under some of the darkest economic clouds of his political career, leaving behind a country reeling from the cost of everyday life,” Axios reports.
“The bottom is falling out on Trump’s economic credibility — the central promise of his return to power. The inflation crisis that doomed his predecessor suggests he may not recover.”
Ballroom and Gas Tax Fights Highlight GOP’s Problem
“Americans are furious about the rising cost of living, and a series of internal battles on Capitol Hill this week is laying bare why Republicans are struggling to do anything about it,” Politico reports.
“House and Senate Republicans are facing divisions over a gas-tax holiday being demanded by President Donald Trump, not to mention housing and energy permitting bills that have stalled for months.”
Wall Street Gets More Anxious About Long-Term Inflation
Wall Street Journal: “Investors bet on inflation by buying and selling both ordinary U.S. Treasurys and those that hedge the risk of inflation, called Treasury inflation-protected securities, or TIPS. The gap between the yields of the two types of bonds—known as the break-even rate—recently hit its highest level since October 2022, according to Federal Reserve data, suggesting that investors expect annual inflation to average around 2.7% over the next five years.”
America Is Scaling Sin in Real Time
Axios: “Las Vegas has long been known as Sin City for its 24/7 access to all kinds of indecencies.”
“America is quickly becoming Sin Nation. Or, as President Trump put it while discussing prediction markets in the Oval Office last month: ‘The whole world, unfortunately, has become somewhat of a casino.’”
“Once-forbidden vices — weed, gambling and porn — are no longer confined to back alleys or the desert. They’re ubiquitous, digital and spreading at a pace that has outstripped the country’s social and regulatory guardrails.”
“Governments didn’t turn a blind eye to most of this behavior. They encouraged it. We’re scaling sin in real time.”
Steel Tariffs Are Raising the Price of Canned Foods
“The simple tin can is proving to be one of the toughest tests for President Trump’s tariffs,” the New York Times reports.
“Just over a year ago, Mr. Trump imposed high tariffs on steel to try to stifle imports of the metal and bolster domestic production.”
“But imports of the kind of steel used to make cans surged in 2025, and American can makers say they will remain heavily dependent on foreign supplies — now made more expensive by the tariffs — for a long time.”
Inflation Soared to 3.8% in April
Wall Street Journal: “Consumer prices rose 3.8% in April from a year earlier, a clear impact of higher gas prices since the start of the war with Iran.”
“The figures, reported Tuesday by the Labor Department, surpassed the previous month’s reported increase of 3.3%. Economists polled by The Wall Street Journal had expected inflation of 3.7%.”
Washington Post: Iran war pushed inflation to highest rate in nearly three years.
