Jennifer Lee, Senior Economist and Managing Director at BMO Capital Markets, talks tariffs and immigration's effects on the economy. She explores the potential inflationary impact of new policies, considering the uncertainty surrounding economic growth projections for 2025. The conversation highlights resilient consumer spending and the influence of a strong U.S. dollar. Lee also delves into the trade dynamics between the U.S. and Canada, emphasizing the importance of monitoring crucial economic indicators during these shifts.
The new U.S. administration's implementation of broad tariffs could significantly disrupt economic stability and consumer goods pricing across the market.
Despite inflation concerns, resilient consumer spending in the U.S. continues to support economic growth, contradicting predictions of a downturn.
Deep dives
Impact of Tariffs on the U.S. Economy
The introduction of blanket tariffs by the new U.S. administration is expected to have a significant impact on the economy. Plans include a 10 to 20 percent tariff on $3 trillion worth of imports and a potential increase to 25 percent on goods from Canada and Mexico. This broad approach contrasts sharply with previous targeted tariffs, signaling a more aggressive trade policy that raises uncertainties for businesses and consumers alike. The outcomes of these tariffs are yet to be seen, but they are anticipated to influence everything from pricing to availability of goods within the U.S. market.
Resilience of U.S. Consumer Spending
Despite economic challenges and uncertainty due to inflation and market fluctuations, U.S. consumer spending continues to remain robust. Recent data indicates that consumers are maintaining expenditure even in non-essential sectors, such as recreational vehicles, suggesting strong underlying confidence. This consumer resilience has been critical in driving economic stability amid predictions of downturns post-COVID. Economists emphasize that underestimating the consumer's role could lead to misaligned forecasts regarding economic growth, with expectations for 2024 remaining surprisingly optimistic amidst adversity.
BMO Capital Markets Senior Economist Jennifer Lee discusses the potential inflationary impact of tariffs and changes in immigration policy with Bloomberg's Paul Sweeney and Jess Menton