“Total U.S. consumer credit growth slowed to a $5.1 billion gain in May, down from a $16.9 billion rise in the prior month, the Federal Reserve said Tuesday.
That translates to a 1.2% annual rate in May, down from a 4% rise in the prior month.” Greg Robb, MarketWatch
President Trump waited for stocks to rally before announcing his latest tariff broadsides on world markets, such as the 50 percent tariff on Brazilian imports. But the result is consumers are shopping less and less. So Trump shouldn’t be paying attention just to the financial markets if he wants to know what might happen over the rest of his term.
Retail sales fell 0.9% in May, the biggest drop in two years. Car sales spiked earlier this year as consumers sought to avoid higher prices from planned tariffs. But sales have slowed sharply since April, said MarketWatch.
The labor market is also slowing. Initial unemployment claims, an early indicator of its direction, have been increasing. The number of people receiving unemployment benefits increased 10,000 to a seasonally adjusted 1.965 million during the week ending June 28, the highest level since November 2021.
Consumer spending drives most economic growth (70%), so if they falter economic growth will slow. And stagnant growth is the component of a possible stag-flation that will result, just as it did in the 1970s with the oil shortages.
We now must wait for the other shoe to drop, which is the effect of the tariff taxes on inflation, which will surely increase later this year, given the supply shortages to follow.
Everyone now knows that TACO Trump is using the shock and awe tactics of so-called reciprocal tariffs, which are blatantly illegal per the Foreign Trade Court ruling now on appeal, to get more concessions from trading partners.
Trump’s problem is that neither consumers nor businesses like uncertainty, yet this is the only way Trump has ever known how to negotiate. His long history of lawsuits and bankruptcies have been the result. And once again he leaves it to the courts to sort out the messes he is now creating for all Americans.
Will it be worth it to those that elected Trump, and will be the most affected by their incompetence?
Harlan Green © 2025
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
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