| I’m Michael Sasso, an economics reporter in Atlanta. Today we’re looking at the impact of US trade policy on small businesses. Send us feedback and tips to ecodaily@bloomberg.net or get in touch on X via @economics. And if you aren’t yet signed up to receive this newsletter, you can do so here. - President Donald Trump and aides are increasingly focusing on revenues from tariffs, ominously for countries trying to avoid a trade war.
- The Bank of Japan chief signaled readiness to intervene in the bond market, and inflation there quickened more than expected.
- A Bloomberg analysis of how global trade has rewired since Trump’s first presidency shows how Vietnam, Mexico and Canada are exposed.
Scores of US small businesspeople cheered Trump onto victory in November, but his new tariff strategy is proving to be a skunk at the garden party. For supporters, part of the president’s appeal last fall were his pledges to improve the economy and nuke pesky business and environmental regulations. And, in fact, small-business optimism surged the most on record after his election, according to the National Federation of Independent Business optimism index. Many small businesspeople, though, likely weren’t prepared for the flurry of tariffs Trump would quickly unveil once in office, including a 10% levy on Chinese goods already in place, 25% tariffs on Canadian and Mexican goods on hold until next month and others in the cards. Today, small businesses say they have no way to hide from the new tariffs and often no way to absorb them. In California, lighting products maker LEDtronics sources some of its components from China, which will be subject to the new tariff. Yet, one 40-year customer of the firm “won’t allow me increase my prices,” company President Pervaiz Lodhie said. “I may lose the customer.” Other companies, like Sanitube of Florida, have put their expansion plans on hold. Sanitube makes steel tubing, valves and fittings for food manufacturers, and company president Todd Adams figures he’ll see rising costs from at least the new China levy and possibly the coming tariffs on metals and Canadian goods. Said Adams, “Until we have an idea of what tomorrow, next month or this year holds, we’re just sort of in a holding pattern.” One silver lining to the tariff turmoil is that new levies could give US-made goods an edge over imports. It's been a rough year in the upholstered furniture business, given the weak US housing market, and Mississippi's Kevin Charles Fine Upholstery had to eliminate some positions through attrition and retirements. A share of its lower-end pieces are cut and sewn in China, so they'll feel the extra 10% tariff, company President Rusty Berryhill said. On the other hand, he'll see some price advantage over his Chinese competitors shipping finished goods. “It is what it is,” he says. “We’ve got to run our business accordingly.” The Best of Bloomberg Economics | - Euro-area business activity hardly grew again in February, reinforcing fears that the economy remains mired in stagnation.
- UK retail sales grew more strongly than expected at the start of the year, as consumers spent more on food to eat at home.
- New Zealand’s central bank is welcoming a weaker exchange rate, saying it will help to revive economic growth this year.
- From coal mines to dairy farms, Ukrainian women have stepped into tough jobs as men have been called up.
- France’s budget minister criticized a proposed 2% wealth tax, saying the measure — which is unlikely to become law — would hurt investment and jobs.
- Australia’s central bank is monitoring the labor market as persistent tightness may signal a stronger economy, Governor Michele Bullock said.
Treasury Secretary repeated this week that, by 2028, he wants the US fiscal deficit ratio to start with a 3 — 3% or 3.5%, say, of GDP — matching what he says is its long-term average. That’s not going to happen “even under the most optimistic scenario,” according to Bloomberg Economics. “The fiscal deficit most likely will remain at least twice as large as Bessent’s 3% target in the next decade,” Anna Wong, chief US economist, wrote in an analysis Thursday. The key limitation is the surge in debt interest costs, a byproduct of selling new Treasuries at much higher yields than the securities issued back when rates were ultra-low, pre-2022. Some $10.6 trillion of debt that includes coupon payments will mature over the 2025-28 period, and it has an average interest rate of 2.8%, Bloomberg Economics estimates. By comparison, current 7-year note yields are about 4.42%, or more than 1 ½ percentage points higher. Still, it’s possible that the overall debt-to-GDP ratio could stabilize even with a deficit above 3%, Wong wrote. “It would require faster economic growth, aggressive cuts to fiscal spending, and lower long-term interest rates.” Bessent has his work cut out for him. - To see the full note on the Bloomberg terminal, click here.
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