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WHAT YOU NEED TO KNOW!

A PLUNGING ATLANTA FED GDPNow OUTLOOK

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2025 is -3.7 percent on April 1, down from -2.8 percent on March 28. The alternative model forecast, which adjusts for imports and exports of gold as described here, is -1.4 percent.

Jan - 1.5%

Feb - 2.8%

Mar - 3.7%

RESEARCH - MARKET DRIVERS

1- DOES TRUMP WANT (AND NOW NEEDS) A RECESSION?

• The Honeymoon is nearly over for the Trump Administration, because of major delays that, though should be expected, were dismissed in campaign rhetoric as insignificant. Resistance to Trump's Art of the Deal" is intensifying not diminishing!
• Trump is well aware that a US Recession is long overdue and potentially close at hand.
• Trump knows the exposure he has to the mIdterm elections, now 18 months away, where historically he can expect to lose seats. A lost House means a halt to his political agenda, making him a lame duck president with the full likelihood of impeachment proceedings in the first few minutes that the Democrats resume control of the House - a fact!
• What would a politician do in a situation like that?

DECISION: GET THE RECESSION UNDERWAY IMMEDIATELY!

"The more you listen to the current US administration the more you appreciate that they are prepared to sacrifice near-term market performance and economic growth if it's required to meet their longer-term objectives...

this is now the 28th worst out of 98 years." (DB's Reid) Trump needs and wants a US Recession NOW!

2- EVEN THE DOGS TAIL HAS STOPPED WAGGING!

• We believe stocks were slammed Friday with traders fearful of equities approaching circuit breaker levels. This distorted reponses and contributed to after cash close selling in offshore markets.
• However, what is clear is Recession is now the base case for a surging number of economists.
• China's 34% Tariff announcement on imported goods signaled China is ready to fight - not prepared to negotiate until it modifies its current position.
• Global markets on Friday began pricing in:

• TRADE WARS HAVE BEGUN.
• A RECESSION HAS BEGUN & IS BEING PRICED IN WITH REDUCED EARNINGS & PE VALUATIONS.
• CURRENCY WARS FOLLOW FROM TRADE WARS.

DEVELOPMENTS TO WATCH - POLICY DRIVERS

1- AMERICA FIRST TRADE POLICY

• In 2017, my Administration pursued trade and economic policies that put the American economy, the American worker and our national security first. This spurred an American revitalization marked by stable supply chains, massive economic growth, historically low inflation, a substantial increase in real wages and real median household wealth, and a path toward eliminating destructive trade deficits.
• My Administration treated trade policy as a critical component to national security and reduced our Nation’s dependence on other countries to meet our key security needs.
• Americans benefit from and deserve an America First trade policy. Therefore, I am establishing a robust and reinvigorated trade policy that promotes investment and productivity, enhances our Nation’s industrial and technological advantages, defends our economic and national security, and — above all — benefits American workers, manufacturers, farmers, ranchers, entrepreneurs and businesses. 

2- TRUMP'S TARIFF TURMOIL

• Be careful when you call Trump Tariffs "Reciprocal". The Trump Administration's view of what is included in Reciprocal is likely to be quite different than most would think!
• "The numbers [for tariffs by country] have been calculated by the Council of Economic Advisers … based on the concept that the trade deficit that we have with any given country is the sum of all trade practices, the sum of all cheating,” calling it “the most fair thing in the world.”
• Using US census bureau trade data for 2024, the ratio of a country's goods trade deficit with the US over that country's exports to the US yields the same results.
• The bigger the nominal trade deficit a country has with the US adjusted for the absolute size of that country's imports, the bigger the tariff (and reciprocal tariff).

GLOBAL ECONOMIC INDICATORS - ECONOMIC DRIVERS

LABOR REPORT (NFP) - Unemployment Rate

• The March jobs report ended up being far stronger than expected, as the US added a whopping 228K jobs, the highest since December and more than double the 117K in February (revised lower from 151K).
• Beating the consensus estimate of 140K by 3 sigma
• The number was also above the highest estimate from Wall Street analysts, which was 200K.

RESEARCH - MARKET DRIVERS

1- DOES TRUMP WANT (AND NOW NEEDS) A RECESSION?

THE TRUMP ELECTION HONEYMOON IS NEARLY OVER

The Honeymoon is nearly over for the Trump Administration, because of major delays that, though should be expected, were dismissed in campaign rhetoric as insignificant. Resistance to Trump's Art of the Deal" in intensifying not diminishing!

CHART RIGHT: One of the worst market starts of any US President.

• "I'll end the Ukraine War very quickly", which as we enter Q2 has no signs of ending:
• Trump: "I'm pissed off at Putin"
• Trump: "Zelinski is now going back on his Precious Minerals Agreement."
• EU has allowed the authorization of the "Escape Clause" to allow the raising of 800B to "Re-Arm Europe" to continue the Ukraine War and fight Russia.
• Germany has approved the biggest expense since the Reunification of Germany to spend 800B in expansion of a German Military to fight in the Ukraine and Russia.
• "I'll have a Nuclear peace agreement in 60 days with Iran."
• Iran rejected even talking to the US, as Iran increases the intensity of the conflicts with the Houthis, Hamas and Hezbollah.
• The US now has two Aircraft Battlegroups in the Middle East and has armed Diego Garcia to the hilt with the lastest Bomber strike capabilities and told Iran there will be military actions and "Hell to be Paid' if no agreement is reached.
• "I'll end the "Biden Inflation."
• Inflation has stalled at high levels and there are strong indications of it only now increasing further (especially with the impact of Tariffs).
• I'll dramatically reduce Waste, Fraud and Corruption in the Federal Government."
• Over 100 court actions with Federal injunctions have stopped or forced reversal of DOGE and Trump Executive Orders.

.... and the list of major election deliverables continues to go unfilled as confusion and policy uncertainty reigns supreme!

THE CLOCK IS TICKING - TRUMP IS QUICKLY RUNNING OUT OF TIME!

The low - and increasingly medium - consumer is broke and struggling to make ends meet from month to month. And while the high-income consumer is anecdotally still doing well, they are increasingly trading down and, judging by the market, this will be the next shoe to drop. In any case, if and when the US consumer finally falters - bearing some 70% of US economic growth on his back - that will be the trigger for the next recession. While all the pieces were put in place by the Biden admin for the next economic contraction, it will be Trump who will be the object of the mainstream media's propaganda ire. 

Which brings us to the question: is Trump trying to push the US into a recession, one which he will blame on Biden, then promptly stimulate out of, and set both the economy and market on the correct footing into the midterms? 

If so, Trump better make up his mind fast, because every day that the US economy does relatively well without grinding to a halt, is one day that will make blaming Biden for the current dismal economic picture that much more difficult.

THE RIGHT POLITICAL STRATEGY

Trump is well aware that a US Recession is long overdue and potentially close at hand.

As a politician Trump is certainly acutely aware that the GOP control of the House and Senate is tenuous at best. So tenuous that he was forced in an unprecedented fashion to withdraw Congresswoman Elise Stefanik's appointment as a Trump cabinet member and UN delegate simply to protect the house seat.

Trump knows the exposure he has to the mIdterm elections, now 18 months away, where historically he can expect to lose seats. A lost House means a halt to his political agenda, making him a lame duck president with the full likelihood of impeachment proceedings in the first few minutes that the Democrats resume control of the House - a fact!

What would a politician do in a situation like that?

GET THE RECESSION UNDERWAY IMMEDIATELY

"The more you listen to the current US administration the more you appreciate that they are prepared to sacrifice near-term market performance and economic growth if it's required to meet their longer-term objectives...

this is now the 28th worst out of 98 years." (DB's Reid)

A POLICY DRIVEN RECESSION

CHART RIGHT: The Prediction Markets were early and highly accurate in predicting a Trump victory. They are rapidly seeing the betting increase for a Recession ahead!

This is not a typical recessionary cycle driven by macro-financial imbalances. Rather, it's a policy-driven shock from government decisions to shrink the federal workforce. “Normal recessions usually have their roots in some underlying macro-financial imbalance” the firm explains. While job cuts may dampen overall spending, a 50bps rise in unemployment —concentrated in the public sector — is unlikely to trigger broader private-sector retrenchment.

A 50bps rise in unemployment would push the labor market into Sahm rule territory — a threshold that typically signals the start of a recessionary trend.

CHART RIGHT: Recession probabilities remain elevated and could well rise further

“Once joblessness increases that much, it usually keeps rising—at least by another 150bps.”

With both layoffs and hiring already at very low levels, the labor market is in a fragile equilibrium. Former federal workers may struggle to find new jobs, and even a modest uptick in job separations could tip the balance.

The DOGE initiative is beginning to show real economic impact through federal layoffs.

“This is one area where we are starting to see tangible economic effect.”

THE DRIVERS: GOVERNMENT UNEMPLOYMENT RATE, HOUSING & GOVERNMENT SPENDING



1- GOVERNMENT UNEMPLOYMENT RATE

CHART RIGHT: US employers have announced 497K of jobs cuts so far this year, the highest YTD since 2009. 279K (56%) came from DOGE.

FEDERAL EMPLOYEE & CONTRACTOR LAYOFFS -

Will Push Unemployment Through the 4.5% Threshold Mark

Around 80,000 federal workers have already accepted buyouts, resigning now, but staying on payroll until September. This is reflected in labor data, with government job losses spiking by 62,000 in February — the largest jump on record. DOGE is also targeting another 220,000 probationary employees by September. TS Lombard estimates the initial impact may be modest — a 20bps rise in unemployment that the private sector could likely absorb. But if indirect job losses (contractors, “shadow” workers) are included, total losses could exceed 800,000, pushing unemployment up by 50bps—“that’s where things start to get interesting.”

Looking at official data from the U.S. Treasury — which shows no significant deviation in government spending from the pre-DOGE trend — there’s little to ease our skepticism (though the data may simply be lagging). For now, we’re sticking with our assumption — and it is just an assumption — that DOGE will ultimately fall short of its goals, and fiscal austerity won’t become a meaningful recessionary force.



A MASSIVE SPREAD IN CLAIMS v EVIDENCE

The big question is whether DOGE is truly as effective as Elon Musk and its advocates claim. While DOGE publishes some “receipts,”

they account for only a small fraction — around $9 billion — of the cost savings it allegedly delivers.

Musk’s plan goes much further, aiming to cut $1 trillion in federal spending by September. If successful, that would represent a fiscal tightening of roughly 3.5% of GDP — likely enough to trigger a recession, even assuming a modest fiscal multiplier. DOGE is claiming cost savings of around $130bn or 0.6% of GDP. That would be quite an achievement, particularly as DOGE has been in operation only for a couple of months.

2- GOVERNMENT SPENDING

DOGE is proving quite aggressive – at least in terms of its rhetoric – and has been given a wider mandate than most expected. Elon Musk seems determined to reduce the deficit , even at a cost to his other endeavors. A look at Tesla’s share price will show the commitment and capacity for pain.

TS Lombard says that they have always been sceptical that DOGE could generate deep cuts in government spending. "Trump campaigned on the promise not to reduce US entitlements, which means the areas under DOGE scrutiny are just a small fraction of overall outlays. The hard fact is that fiscal austerity based only on reducing “government waste” or on finding “efficiency gains” rarely gets very far."

NOT LACKING AGGRESSIVENESS OR DETERMINATION

CHART BELOW:

Goldman provided clients with a telling chart. Federal Grants Have Largely Stagnated at a Below-Trend Level Since Inauguration Day. The broader macro risk for DC is that DOGE-related cuts may exert downward pressure on the region through increased job losses, sagging consumer sentiment, or a softening labor market.

QUESTION: Why has Trump not yet exercised the Presidential policy levers (to stop Biden passed spending legislation) such as:

1. IMPOUNDMENT: The Impoundment Control Act of 1974 is the main legal mechanism for the President to seek to delay or permanently cancel federal funding once it has been enacted by Congress.
2. RECISSION: Refers to the cancellation or annulment of a contract, effectively returning the parties to their pre-contractual positions as if the agreement never existed. 

QUESTION: Why did the republican congress pass the Continuing Resolution (CR) which carried ~$2T of Biden Debt ceiling increases when they campaigned about reducing spending?

• SHORT ANSWER: To keep the government open and not be blamed for shutting it down!

3- HOUSING - NOT JUST WASHINGTON ITSELF

TRUMP IS LIKELY TO HIDE BEHIND THE NEED FOR DOGE CUTS

WHICH MAY TRIGGER AN OVERDUE RECESSION

4- THE TARIFF IMPACT

RECESSION ALREADY NEAR THE PRECIPICE

CHANGING PERCEPTION ON AMERICAN "EXCEPTIONALISM"



• Markets have responded strongly to concerns over potential slower growth due to the Trump Administration's plans to reduce government employment and general policy uncertainty. 
• We may see softer growth, but while we wait, the conviction of the rates and FX market is being tested.
• Since the start of the year, consensus view has transitioned from a strong belief in US exceptionalism to growth fears.
• After a series of declines, the consensus probability (%) of a US recession in the next 12 months has started to move higher again. (CHART RIGHT ABOVE)

CHART BELOW:

Is the US economy on the brink of a recession?

2- EVEN THE DOG'S TAIL HAS STOPPED WAGGING!

Our long time subscribers are well aware that we believe CREDIT always leads!

The credit market has been steadily cracking but not breaking. This ended Friday with HY dropping hard. This is because .....

... THERE ARE CONSEQUENCES OF $5T BEING "EVAPORATED"!

The S&P 500 saw its worst two-day plunge since March 2020 in a selloff that slashed over $5 trillion in value.

CREDIT MARKET

Donald Trump’s “liberation day” tariff blitz has sparked the biggest sell-off in the US junk bond market since 2020, signalling growing angst among investors that an economic slowdown will hit corporate America.

The premium investors demand to hold speculative-rated corporate debt compared to that offered by US government bonds — a proxy for default risk — has shot up by 1 percentage point to 4.45 percentage points since Wednesday, ICE BofA data shows. That is the biggest rise since coronavirus triggered widespread lockdowns in 2020.

“Credit is obviously a canary in the coal mine. Credit tends to go first . . . if the economy’s going to roll over, the odds of a recession pick up and then you’re going to see spreads blow out.”

Brian Levitt, global market strategist at Invesco.

On Friday, JPMorgan slashed its US economic forecasts, predicting:

• A contraction of 0.3 per cent in 2025 — down from an earlier growth estimate of 1.3 per cent.
• It also said the jobless rate would rise to 5.3 per cent, from 4.2 per cent in March.

COMMODITIES MARKET

WHAT IS THE ABOVE SUGGESTING?

• We believe stocks were slammed Friday with traders fearful of equities approaching circuit breaker levels. This distorted reponses and contributed to after cash close selling in offshore markets.
• However, it has highly likely (due to credit worries with credit spreads surging) a De-grossing or Risk reduction.
• What is clear is that Recession is now the base case for a surging number of economists.
• China's 34% Tariff announcement on imported goods signaled China is ready to fight - not prepared to negotiate until it modifies its current position.(Remember China's US Import Tariffs are now 10% +10% + 34% = 54%.)
• Global markets on Friday began pricing in:

• TRADE WARS HAVE BEGUN.
• A RECESSION HAS BEGUN AND IS BEING PRICED IN WITH REDUCED EARNINGS & PE VALUATIONS.
• CURRENCY WARS FOLLOW FROM TRADE WARS.
• COMMODITIES WILL BE HURT ON TRADE MORE THAN GAINING ON A POTENTIAL WEAKER DOLLAR.

• The MATASII Elliott Wave Fractal Pattern of "WXYXZ" is still the count, but SOONER (shorter duration) and FASTER ((Increased rate / steepness).
• There is still a strong possibility of a large degree ending diagonal labeled an ABCDE with A, C & E replacing the down legs of W,Y, & Z.
• The three down legs (W,Y, Z) are likely to be:

• Leg W: TARIFFS (near completion)
• Leg Y: STAGFLATION - Increasing worry of Growth + Inflation
• Leg Z: RECESSION - Historically Long Overdue

WHAT COMES AFTER TARIFFS

If President Trump is following the playbook laid out in a recent paper by Stephen Miran — Chairman of the President’s Council of Economic Advisers — it could be a Dollar devaluation. We featured the Miran roadmap "A User’s Guide to Restructuring the Global Trading System" in last weekend's newsletter. A roadmap for upending the post-war global economic order.

REMEMBER: TRUMP APPOINTED STEPHEN MIRAN HIS CHAIRMAN OF THE POWERFUL

COUNCIL OF ECONOMIC ADVISORS.

According to Miran’s plan, Trump would:

1. Hike tariffs sharply (as he just did), then

2. Convene a “Mar-a-Lago Accord” with U.S. trading partners to push through a coordinated 

DOLLAR DE-VALUATION — in an attempt to boost U.S. competitiveness and manufacturing.

• Foreign investors now hold $57 trillion of U.S. Dollar-denominated financial assets. It won’t take much for panic to set in once they realize a devaluation may be coming.
• That’s how a Run On The Dollar could begin. And not just by foreign investors — Americans may also begin dumping their Dollar holdings as trust in U.S. economic policy erodes.

A sudden collapse in the Dollar could be the catalyst for the next leg down in global stock prices.

BE SURE TO STUDY WEEKLY SPX cfd DETAIL (PLUS ENLARGEMENT) IN YOUR

TECHNICAL ANALYSIS NEWSLETTER.

DEVELOPMENTS TO WATCH - POLICY DRIVERS

1- AMERICA FIRST TRADE POLICY

Section 1. Background 

In 2017, my Administration pursued trade and economic policies that put the American economy, the American worker and our national security first.  This spurred an American revitalization marked by stable supply chains, massive economic growth, historically low inflation, a substantial increase in real wages and real median household wealth, and a path toward eliminating destructive trade deficits.

My Administration treated trade policy as a critical component to national security and reduced our Nation’s dependence on other countries to meet our key security needs.

Americans benefit from and deserve an America First trade policy.  Therefore, I am establishing a robust and reinvigorated trade policy that promotes investment and productivity, enhances our Nation’s industrial and technological advantages, defends our economic and national security, and — above all — benefits American workers, manufacturers, farmers, ranchers, entrepreneurs and businesses. 

Sec. 2. Addressing Unfair and Unbalanced Trade 

(a) The Secretary of Commerce, in consultation with the Secretary of the Treasury and the United States Trade Representative, shall investigate the causes of our country’s large and persistent annual trade deficits in goods, as well as the economic and national security implications and risks resulting from such deficits, and recommend appropriate measures, such as a global supplemental tariff or other policies, to remedy such deficits.

(b) The Secretary of the Treasury, in consultation with the Secretary of Commerce and the Secretary of Homeland Security, shall investigate the feasibility of establishing and recommend the best methods for designing, building, and implementing an External Revenue Service (ERS) to collect tariffs, duties, and other foreign trade-related revenues.

(c) The United States Trade Representative, in consultation with the Secretary of the Treasury, the Secretary of Commerce, and the Senior Counselor for Trade and Manufacturing, shall undertake a review of, and identify, any unfair trade practices by other countries and recommend appropriate actions to remedy such practices under applicable authorities, including, but not limited to, the Constitution of the United States; sections 71 through 75 of title 15, United States Code; sections 1337, 1338, 2252, 2253, and 2411 of title 19, United States Code; section 1701 of title 50, United States Code; and trade agreement implementing acts.  

(d) The United States Trade Representative shall commence the public consultation process set out in section 4611(b) of title 19, United States Code, with respect to the United States-Mexico-Canada Agreement (USMCA) in preparation for the July 2026 review of the USMCA. Additionally, the United States Trade Representative, in consultation with the heads of other relevant executive departments and agencies, shall assess the impact of the USMCA on American workers, farmers, ranchers, service providers, and other businesses and make recommendations regarding the United States’ participation in the agreement. The United States Trade Representative shall also report to appropriate congressional committees on the operation of the USMCA and related matters consistent with section 4611(b) of title 19, United States Code.

(e) The Secretary of the Treasury shall review and assess the policies and practices of major United States trading partners with respect to the rate of exchange between their currencies and the United States dollar pursuant to section 4421 of title 19, United States Code, and section 5305 of title 22, United States Code. The Secretary of the Treasury shall recommend appropriate measures to counter currency manipulation or misalignment that prevents effective balance of payments adjustments or that provides trading partners with an unfair competitive advantage in international trade, and shall identify any countries that he believes should be designated as currency manipulators.

(f) The United States Trade Representative shall review existing United States trade agreements and sectoral trade agreements and recommend any revisions that may be necessary or appropriate to achieve or maintain the general level of reciprocal and mutually advantageous concessions with respect to free trade agreement partner countries. 

(g) The United States Trade Representative shall identify countries with which the United States can negotiate agreements on a bilateral or sector-specific basis to obtain export market access for American workers, farmers, ranchers, service providers, and other businesses and shall make recommendations regarding such potential agreements.

(h) The Secretary of Commerce shall review policies and regulations regarding the application of antidumping and countervailing duty (AD/CVD) laws, including with regard to transnational subsidies, cost adjustments, affiliations, and “zeroing.” Further, the Secretary of Commerce shall review procedures for conducting verifications pursuant to section 1677m of title 19, United States Code, and assess whether these procedures sufficiently induce compliance by foreign respondents and governments involved in AD/CVD proceedings. The Secretary of Commerce shall consider modifications to these procedures, as appropriate.

(i) The Secretary of the Treasury, the Secretary of Commerce, the Secretary of Homeland Security, and the Senior Counselor for Trade and Manufacturing, in consultation with the United States Trade Representative, shall assess the loss of tariff revenues and the risks from importing counterfeit products and contraband drugs, e.g., fentanyl, that each result from the current implementation of the $800 or less, duty-free de minimis exemption under section 1321 of title 19, United States Code, and shall recommend modifications as warranted to protect both the revenue of the United States and the public health by preventing unlawful importations.

(j) The Secretary of the Treasury, in consultation with the Secretary of Commerce and the United States Trade Representative, shall investigate whether any foreign country subjects United States citizens or corporations to discriminatory or extraterritorial taxes pursuant to section 891 of title 26, United States Code.

(k) The United States Trade Representative, in consultation with the Senior Counselor for Trade and Manufacturing, shall review the impact of all trade agreements — including the World Trade Organization Agreement on Government Procurement — on the volume of Federal procurement covered by Executive Order 13788 of April 18, 2017 (Buy American and Hire American), and shall make recommendations to ensure that such agreements are being implemented in a manner that favors domestic workers and manufacturers, not foreign nations.

Sec. 3. Economic and Trade Relations with the People’s Republic of China (PRC)

(a) The United States Trade Representative shall review the Economic and Trade Agreement Between the Government of the United States of America and the Government of the People’s Republic of China to determine whether the PRC is acting in accordance with this agreement, and shall recommend appropriate actions to be taken based upon the findings of this review, up to and including the imposition of tariffs or other measures as needed.

(b) The United States Trade Representative shall assess the May 14, 2024, report entitled “Four-Year Review of Actions Taken in the Section 301 Investigation: China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation” and consider potential additional tariff modifications as needed under section 2411 of title 19, United States Code — particularly with respect to industrial supply chains and circumvention through third countries, including an updated estimate of the costs imposed by any unfair trade practices identified in such review — and he shall recommend such actions as are necessary to remediate any issues identified in connection with this process.

(c) The United States Trade Representative shall investigate other acts, policies, and practices by the PRC that may be unreasonable or discriminatory and that may burden or restrict United States commerce, and shall make recommendations regarding appropriate responsive actions, including, but not limited to, actions authorized by section 2411 of title 19, United States Code. 

(d) The Secretary of Commerce and the United States Trade Representative shall assess legislative proposals regarding Permanent Normal Trade Relations with the PRC and make recommendations regarding any proposed changes to such legislative proposals.

(e) The Secretary of Commerce shall assess the status of United States intellectual property rights such as patents, copyrights, and trademarks conferred upon PRC persons, and shall make recommendations to ensure reciprocal and balanced treatment of intellectual property rights with the PRC.

Sec. 4. Additional Economic Security Matters

(a) The Secretary of Commerce, in consultation with the Secretary of Defense and the heads of any other relevant agencies, shall conduct a full economic and security review of the United States’ industrial and manufacturing base to assess whether it is necessary to initiate investigations to adjust imports that threaten the national security of the United States under section 1862 of title 19, United States Code. 

(b) The Assistant to the President for Economic Policy, in consultation with the Secretary of Commerce, the United States Trade Representative, and the Senior Counselor for Trade and Manufacturing, shall review and assess the effectiveness of the exclusions, exemptions, and other import adjustment measures on steel and aluminum under section 1862 of title 19, United States Code, in responding to threats to the national security of the United States, and shall make recommendations based upon the findings of this review. 

(c) The Secretary of State and the Secretary of Commerce, in cooperation with the heads of other agencies with export control authorities, shall review the United States export control system and advise on modifications in light of developments involving strategic adversaries or geopolitical rivals as well as all other relevant national security and global considerations. Specifically, the Secretary of State and the Secretary of Commerce shall assess and make recommendations regarding how to maintain, obtain, and enhance our Nation’s technological edge and how to identify and eliminate loopholes in existing export controls -– especially those that enable the transfer of strategic goods, software, services, and technology to countries to strategic rivals and their proxies. In addition, they shall assess and make recommendations regarding export control enforcement policies and practices, and enforcement mechanisms to incentivize compliance by foreign countries, including appropriate trade and national security measures. 

(d) The Secretary of Commerce shall review and recommend appropriate action with respect to the rulemaking by the Office of Information and Communication Technology and Services (ICTS) on connected vehicles, and shall consider whether controls on ICTS transactions should be expanded to account for additional connected products.

(e) The Secretary of the Treasury, in consultation with the Secretary of Commerce and, as appropriate, the heads of any other relevant agencies, shall review whether Executive Order 14105 of August 9, 2023 (Addressing United States Investments in Certain National Security Technologies and Products in Countries of Concern) should be modified or rescinded and replaced, and assess whether the final rule entitled “Provisions Pertaining to U.S. Investments in Certain National Security Technologies and Products in Countries of Concern,” 89 Fed. Reg. 90398 (November 15, 2024), which implements Executive Order 14105, includes sufficient controls to address national security threats. The Secretary of the Treasury shall make recommendations based upon the findings of this review, including potential modifications to the Outbound Investment Security Program.

(f) The Director of the Office of Management and Budget shall assess any distorting impact of foreign government financial contributions or subsidies on United States Federal procurement programs and propose guidance, regulations, or legislation to combat such distortion.

(g) The Secretary of Commerce and the Secretary of Homeland Security shall assess the unlawful migration and fentanyl flows from Canada, Mexico, the PRC, and any other relevant jurisdictions and recommend appropriate trade and national security measures to resolve that emergency.

Sec. 5. Reports

The results of the reviews and investigations, findings, identifications, and recommendations identified in:

(a) sections 2(a), 2(h), 3(d), 3(e), 4(a), 4(b), 4(c), 4(d), and 4(g) shall be delivered to me in a unified report coordinated by the Secretary of Commerce by April 1, 2025;

(b) sections 2(b), 2(e), 2(i), 2(j), and 4(e) shall be delivered to me in a unified report coordinated by the Secretary of the Treasury by April 1, 2025;

(c) sections 2(c), 2(d), 2(f), 2(g), 2(k), 3(a), 3(b), and 3(c) shall be delivered to me in a unified report coordinated by the United States Trade Representative by April 1, 2025; and

(d) section 4(f) shall be delivered to me by the Director of the Office of Management and Budget by April 30, 2025.

Sec. 6. General Provisions

(a) Nothing in this memorandum shall be construed to impair or otherwise affect:

(i)  the authority granted by law to an executive department or agency, or the head thereof; or

(ii) the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.

(b) This memorandum shall be implemented consistent with applicable law and subject to the availability of appropriations.

(c) This memorandum is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.

2- TRUMP'S TARIFF TURMOIL

Be careful when you call Trump Tariffs "Reciprocal". The Trump Administration's view of what is included in Reciprocal is likely to be quite different than most would think!

There was widespread confusion initially how exactly the Trump admin calculated the "Tariffs charged to the USA" number, which carried the odd subheader "Currency Manipulation and Trade Barriers."

(See the red circled area on the header of all charts.)

According to White House official,

"the numbers [for tariffs by country] have been calculated by the Council of Economic Advisers … based on the concept that the trade deficit that we have with any given country is the sum of all trade practices, the sum of all cheating,” calling it “the most fair thing in the world.”

And how that number was calculated was important since it also drove the specific “reciprocal” tariff rate imposed by the US, which is roughly half of the current trade imbalance, because “the president is lenient and he wants to be kind to the world,” a Trump aide told reporters.

So clearly an important number. But what made things especially confusing is that at least at first glance, it made no sense how it was calculated that countries charged the US tariffs well above the previously widely accepted levels, where most countries have total trade barriers which max out around 25%.

But while analysts were trying to reverse engineer the number, assuming some complicated formula was behind it, Deutsche Bank's George Saravelos first pointed out that that the method of calculating these tariff rates "was reliant on a rather more simple approach." 

As Saravelos wrote, we can indeed confirm that using US census bureau trade data for 2024, the ratio of a country's goods trade deficit with the US over that country's exports to the US yields the same results.

Put simply, the bigger the nominal trade deficit a country has with the US adjusted for the absolute size of that country's imports, the bigger the tariff (and reciprocal tariff).

And that's what Trump used to base its reciprocal tariff to any given nation, hardly the kind of deep rigor one would expect from a policy that changed the shape of global trade overnight. Saravelos drew three conclusions from this analysis:

First, the US administration is squarely focused on penalizing countries with larger trade deficits in goods (services are ignored).  This determination is highly mechanical, rather than a sophisticated assessment of tariff and non-tariff barriers. It is also in line with the declaration of a national emergency on the trade deficit used as a legal justification for the tariffs.

Second, there is a very large disconnect between communication in recent weeks of an in-depth policy assessment of bilateral trade relationships with different countries versus the reality of the policy outcome. Ominously, Saravelos - who in a subsequent note would go so far as to worry about the future of the US Dollar's reserve status - said that "this risks lowering the policy credibility of the administration on a forward-looking basis" as "the market may question the extent to which a sufficiently structured planning process for major economic decisions is taking place. After all, this is the biggest trade policy shift from the US in a century. Crucially, major additional fiscal decisions are lining up over the next two months."

Third, the tariff calculation approach arguably makes for a more free-wheeling and open-ended nature to potential trade negotiations in coming months.  That's because according to the German banker:  "there are no specific and identifiable policy asks per se but ultimately a desire to reduce bilateral trade imbalances."

Which, for a country that is reliant on its trade deficit to keep the world supplied with trillions in debt every year, is a huge gamble as it is an explicit bet on the fate of the USD as a reserve currency. It could work out, and eventually reduce the amount of debt the US needs to issue every year proportionally to how much the US trade deficit shrinks... or it could all blow up spectacularly.

Judging by where gold has been trading in recent weeks, we don't need to tell you which outcome is increasingly more likely.

GLOBAL ECONOMIC INDICATORS - ECONOMIC DRIVERS

What This Week's Key Global Economic Releases Tell Us

LABOR REPORT (NFP) - Unemployment Rate

The March jobs report ended up being far stronger than expected, as the US added a whopping 228K jobs, the highest since December and more than double the 117K in February (revised lower from 151K).

Beating the consensus estimate of 140K by 3 sigma (chart right)

• The number was also above the highest estimate from Wall Street analysts, which was 200K.
• The change in total nonfarm payroll employment for January was revised down by 14,000, from +125,000 to +111,000, and the change for February was revised down by 34,000, from +151,000 to +117,000. With these revisions, employment in January and February combined is 48,000 lower than previously reported.
• The unemployment rate rose from 4.1% to 4.2%, above the estimate of an unchanged print...
• ... as the number of unemployed workers rose modestly to 7.083 million from 7.052 million, even as the labor force rose fractionally from 170.359 million to 170.591 million.
• And tied to that, while the Establishment survey rose by 228K, the Household survey also improved by a similar amount, with the number of employed workers rose by 201K, to 163.508 million.
• Turning to wages, there was some more good news in the report, at least for those hoping for a fed rate cut. While the monthly average hourly earnings rose 0.3%, as expected and the same as last month, the annual increase in wages was 3.8%, down from 4.0% last month and below the 4.0% estimate, suggesting the wage growth continues to cool sharply, allowing the Fed to resume rate cuts.

Some more detailed from the jobs report: 

• The number of people employed part time for economic reasons, at 4.8 million, changed little in March. These individuals would have preferred full-time employment, but were working part time because their hours had been reduced or they were unable to find full-time jobs.
• The number of people not in the labor force who currently want a job was essentially unchanged at 5.9 million in March. These individuals were not counted as unemployed because they were not actively looking for work during the 4 weeks preceding the survey.
• Among those not in the labor force who wanted a job, the number of people marginally attached to the labor force, at 1.7 million, was essentially unchanged in March. These individuals wanted and were available for work and had looked for a job sometime in the prior 12 months, but had not looked for work in the 4 weeks preceding the survey. The number of discouraged workers, a subset of the marginally attached who believed that no jobs were available for them, changed little at 509,000 in March.

GLOBAL

WHAT DOES YOUR SCAN OF THE DATA BELOW TELL YOU? - THE MEDIA AVOIDS BAD NEWS!

We present the data in a way you can quickly see what is happening.

THIS WEEK WE SAW

Exp. =Expectations, Prev. =Previous

UNITED STATES

• US Chicago PMI (Mar) 47.6 vs. Exp. 45.4 (Prev. 45.5)
• US Dallas Fed Manufacturing Bus Index (Mar) -16.3 (Prev. -8.3)
• US ISM Manufacturing PMI (Mar) 49.0 vs. Exp. 49.5 (Prev. 50.3)
• US ISM Manufacturing New Orders Index (Mar) 45.2 (Prev. 48.6)
• US ISM Manufacturing Employment Index (Mar) 44.7 (Prev. 47.6)
• US ISM Manufacturing Prices Paid (Mar) 69.4 vs. Exp. 65.0 (Prev. 62.4)
• US Construction Spending MM (Feb) 0.7% vs. Exp. 0.3% (Prev. -0.2%, Rev. -0.5%)
• US JOLTS Job Openings (Feb) 7.568M vs. Exp. 7.616M (Prev. 7.74M, Rev. 7.762M)
• Atlanta Fed GDPNow (Q1 25): -3.7% (Prev. -2.8% on March 28th)
• US Factory Orders MM (Feb) 0.6% vs. Exp. 0.5% (Prev. 1.7%, Rev. 1.8%)
• US Durable Goods, R MM (Feb) 1.0% (Prev. 0.9%)
• US ADP National Employment (Mar) 155.0k vs. Exp. 115.0k (Prev. 77.0k, Rev. 84k)
• US S&P Global Services PMI Final (Mar) 54.4 (Prev. 54.3)
• US S&P Global Composite PMI Final (Mar) 53.5 (Prev. 53.5)
• US ISM N-Mfg PMI (Mar) 50.8 vs. Exp. 53.0 (Prev. 53.5)
• US ISM N-Mfg New Orders Idx (Mar) 50.4 (Prev. 52.2)
• US ISM N-Mfg Employment Idx (Mar) 46.2 (Prev. 53.9)
• US ISM N-Mfg Price Paid Idx (Mar) 60.9 (Prev. 62.6)
• US ISM N-Mfg Bus Act (Mar) 55.9 (Prev. 54.4)
• US International Trade (Feb) -122.7B vs. Exp. -123.5B (Prev. -131.4B, Rev. -130.7B)
• US Challenger Layoffs (Mar) 275.24k (Prev. 172.017k)
• US Initial Jobless Claims 219.0k vs. Exp. 225.0k (Prev. 224.0k, Rev. 225k)
• US Continued Jobless Claims 1.903M vs. Exp. 1.87M (Prev. 1.856M, Rev. 1.847M)
• Atlanta Fed GDPNow (Q1 25): -2.8% (prev. -3.7% on 1st April)

CHINA

• Chinese NBS Manufacturing PMI (Mar) 50.5 vs. Exp. 50.5 (Prev. 50.2)
• Chinese NBS Non-Manufacturing PMI (Mar) 50.8 vs. Exp. 50.5 (Prev. 50.4)
• Chinese Composite PMI (Mar) 51.4 (Prev. 51.1)
• Chinese Caixin Manufacturing PMI Final (Mar) 51.2 vs. Exp. 51.1 (Prev. 50.8)
• Chinese Caixin Services PMI (Mar) 51.9 vs. Exp. 51.5 (Prev. 51.4)
• Chinese Caixin Composite PMI (Mar) 51.8 (Prev. 51.5)

JAPAN

• Japanese Industrial Production MM (Feb P) 2.5% vs. Exp. 2.3% (Prev. -1.1%)
• Japanese Retail Sales YY (Feb) 1.4% vs. Exp. 2.0% (Prev. 3.9%, Rev. 4.4%)
• Japanese Tankan Large Manufacturing Index (Q1) 12.0 vs. Exp. 12.0 (Prev. 14.0)
• Japanese Tankan Large Manufacturing Outlook (Q1) 12.0 vs. Exp. 9.0 (Prev. 13.0)
• Japanese Tankan Large Non-Manufacturing Index (Q1) 35.0 vs. Exp. 33.0 (Prev. 33.0)
• Japanese Tankan Large Non-Manufacturing Outlook (Q1) 28.0 vs. Exp. 29.0 (Prev. 28.0)
• Japanese Tankan Large All Industry Capex Estimate (Q1) 3.1% vs. Exp. 2.9% (Prev. 11.3%)
• Japanese Unemployment Rate (Feb) 2.4% vs. Exp. 2.5% (Prev. 2.5%)
• Australian Balance on Goods (AUD)(Feb) 2.97B vs. Exp. 5.40B (Prev. 5.62B)
• Australian Goods/Services Exports (Feb) -3.60% (Prev. 1.30%)
• Australian Goods/Services Imports (Feb) 1.60% (Prev. -0.30%)
• Japanese RENGO trade union third-round data: average wage increase 5.42% for fiscal 2025 vs. 5.40% in the second-round.
• Japanese All Household Spending MM (Feb) 3.5% vs. Exp. 0.5% (Prev. -4.5%)
• Japanese All Household Spending YY (Feb) -0.5% vs. Exp. -1.7% (Prev. 0.8%)

AUSTRALIA

• Australian Building Approvals (Feb) -0.3% vs. Exp. -1.5% (Prev. 6.3%, Rev. 6.9%)

EU

• EU HICP Flash YY (Mar) 2.2% vs. Exp. 2.2% (Prev. 2.3%); Services Y/Y 3.4% (prev. 3.7%); HICP-X Food, Energy, Alcohol, Tobacco Flash MM (Mar) 1.00% (Prev. 0.50%); HICP-X Food, Energy, Alcohol & Tobacco Flash YY (Mar) 2.40% vs. Exp. 2.50% (Prev. 2.60%); HICP-X F&E Flash YY (Mar) 2.4% vs. Exp. 2.5% (Prev. 2.6%)
• EU Unemployment Rate (Feb) 6.1% vs. Exp. 6.2% (Prev. 6.2%)
• EU HCOB Manufacturing Final PMI (Mar) 48.6 vs. Exp. 48.7 (Prev. 48.7)
• EU Producer Prices YY (Feb) 3.0% vs. Exp. 3.0% (Prev. 1.8%, Rev. 1.7%); Producer Prices MM (Feb) 0.2% vs. Exp. 0.1% (Prev. 0.8%, Rev. 0.7%)
• EU HCOB Services Final PMI (Mar) 51.0 vs. Exp. 50.4 (Prev. 50.4); HCOB Composite Final PMI (Mar) 50.9 vs. Exp. 50.4 (Prev. 50.4)
• EU HCOB Construction PMI (Mar) 44.8 (Prev. 42.7); Italian HCOB Construction PMI (Mar) 52.4 (Prev. 48.2); HCOB Construction PMI (Mar) 40.3 (Prev. 41.2); HCOB Construction PMI (Mar) 43.8 (Prev. 39.8)

GERMANY

• German Retail Sales YY (Feb) 4.9% vs. Exp. 3.1% (Prev. 2.9%)
• German CPI Prelim MM (Mar) 0.3% vs. Exp. 0.4% (Prev. 0.4%)
• German CPI Prelim YY (Mar) 2.2% vs. Exp. 2.2% (Prev. 2.3%)
• German HICP Prelim MM (Mar) 0.4% vs. Exp. 0.5% (Prev. 0.5%)
• German HICP Prelim YY (Mar) 2.3% vs. Exp. 2.4% (Prev. 2.6%)
• German HCOB Manufacturing PMI (Mar) 48.3 vs. Exp. 48.3 (Prev. 48.3)
• German HCOB Services PMI (Mar) 50.9 vs. Exp. 50.2 (Prev. 50.2); HCOB Composite Final PMI (Mar) 51.3 vs. Exp. 50.9 (Prev. 50.9)
• Germany's VDMA says February orders +8% Y/Y (domestic +11%, foreign +7%)
• German Industrial Orders MM (Feb) 0.0% vs. Exp. 3.5% (Prev. -7.0%)

FRANCE

• French HCOB Manufacturing PMI (Mar) 48.5 vs. Exp. 48.9 (Prev. 48.9)
• French HCOB Services PMI (Mar) 47.9 vs. Exp. 46.6 (Prev. 46.6); HCOB Composite PMI (Mar) 48 vs. Exp. 47 (Prev. 47)
• French Industrial Output MM (Feb) 0.7% vs. Exp. 0.4% (Prev. -0.6%, Rev. -0.5%)
• Spanish Ind Output Cal Adj YY (Feb) -1.9% (Prev. -1.0%, Rev. -1.2%)

ITALY

• Italian HCOB Manufacturing PMI (Mar) 46.6 vs. Exp. 48 (Prev. 47.4)
• Italian HCOB Composite PMI (Mar) 50.5 (Prev. 51.9); HCOB Services PMI (Mar) 52.0 vs. Exp. 52.5 (Prev. 53)
• Italian Retail Sales NSA YY (Feb) -1.5% (Prev. 0.9%); Retail Sales SA MM (Feb) 0.1% (Prev. -0.4%)

SPAIN

• Spanish HCOB Manufacturing PMI (Mar) 49.5 vs. Exp. 49.9 (Prev. 49.7)
• Spanish HCOB Services PMI (Mar) 54.7 vs. Exp. 55.5 (Prev. 56.2)

SWEDEN

• Swedish PMI Manufacturing Sect (Mar) 53.6 (Prev. 53.5)
• Swedish CPIF Flash YY (Mar) 2.30% vs. Exp. 2.60% (Prev. 2.90%); CPIF Flash MM (Mar) -0.50% vs. Exp. -0.20% (Prev. 0.90%)

SWITZERLAND

• Swiss Manufacturing PMI (Mar) 48.9 vs. Exp. 50.5 (Prev. 49.6)
• Swiss CPI YY (Mar) 0.3% vs. Exp. 0.5% (Prev. 0.3%); CPI MM (Mar) 0.0% vs. Exp. 0.1% (Prev. 0.6%)

UK

• UK Lloyds Business Barometer (Mar) 49 (Prev. 49)
• UK Nationwide House Price MM (Mar) 0.0% vs. Exp. 0.2% (Prev. 0.4%); YY 3.9% vs. Exp. 4.1% (Prev. 3.9%)
• UK S&P Global Manufacturing PMI (Mar) 44.9 vs. Exp. 44.6 (Prev. 44.6)
• UK S&P Global Services PMI (Mar) 52.5 vs. Exp. 53.2 (Prev. 53.2); S&P Global Composite PMI (Mar) 51.5 vs. Exp. 52 (Prev. 52)
• UK S&P Global Composite PMI - Output (Mar) 51.0 (Prev. 50); S&P Global Construction PMI (Mar) 46.4 vs. Exp. 46 (Prev. 44.6)

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