US stocks (^DJI, ^GSPC, ^IXIC) end the trading session higher as President Trump indicates he won't drop tariffs on imports from China. Yahoo Finance Senior Columnist Rick Newman joins Market Domination Overtime with Julie Hyman and TheBigSkinny.com founder and Prairie Operating company's executive vice president of market strategy, Lou Basenese, to discuss the latest.
To watch more expert insights and analysis on the latest market action, check out more Market Domination Overtime here.
Well, President Trump says, "Tariff is the most beautiful word." He knows well many Americans wish it were banned from the language. Here with this week's rendition of Trump economics is Yahoo Finance's Rick Newman. Or maybe people didn't hate tariffs so much, but if they didn't before, they sure seem to now, Rick. Uh, we saw those latest consumer sentiment numbers and they continue to be not great.
Right, and the thing that's really striking is uh people's expectation for inflation one year from now. Uh consumers in this Michigan survey stated they expect inflation to get all the way up to 6.5% a year from now. It's only 2.4% right now. And just to put that in context, first of all, that's the that's the worst outlook since 1981 when inflation really did go into double digits. Um, and it's actually considerably worse than in the middle of Biden inflation, which was uh in June and July of '22. Back then, they thought uh they had a lower expectation for uh 12-month inflation than they do have now. So, that what that tells you is that um consumers actually expect higher inflation under Trump than they expected under Biden. I mean, go figure. And Trump knows this. Trump, the whole reason Trump won in large part last year was uh Americans were sick of inflation. He told Americans he was going to get prices down in just three or four months into his presidency. Uh Americans are very concerned that his his tariffs are going to push prices back up. So, um who knows where it's going to end up where we'll actually end up a year from now, but I will note that in the Time interview uh Time Magazine interview out recently, the reporter asked, uh "How would you feel if if a year from now, the the average tariff rate was 30% or 50%?" And Trump said, "I would consider that a total victory." So, I think it makes sense that consumers are worried.
So, Rick, do you see any other way out of this besides resolution on the tariff front? Is there a way where consumers anticipating higher inflation change spending habits and that brings us a different solution to the problem versus just waiting for the impact that everyone fears seeing a lot more higher prices, higher higher tariff rates?
I mean, here's the real head scratcher. Uh we learned a lesson in 203, 2023 and 2024 that we forgot, which is that inflation wrecks consumer confidence and it really uh puts it puts uh Americans in a foul mood. Uh and we saw that uh in, let's say, in 2024 as the inflation rate was coming down, and it actually got pretty close to normal levels, but uh Americans remained really pissed off about inflation. And we learned about this kind of a phenomenon known as inflation fatigue or price shock fatigue. And uh people rightly pointed out, "Well, the the rate of inflation might be down, but those initial price hikes are still there and still paying more." And Trump is now, you know, we almost we almost got through that, and here Trump is basically pushing us right back into that phenomenon while Americans still have inflation fatigue. It's not like they ever got over inflation. Maybe that's one of the reasons they're so sensitized to it now. But uh I mean, the only way out uh is for Trump to back down on his tariffs, and I think it he's made pretty clear he's not going to do that. He is a true believer in this fallacy that higher taxes on imports somehow revive uh the US economy.