Weekly Economic Update: August 12, 2025

Trump follows through

With the Aug. 1 tariff deadline looming last week, some traders were banking on President Donald Trump extending the deadline once again. But he followed through for the most part, saying the deadline “will not be extended” and making the tariffs effective at midnight on Aug. 7.¹

Markets rallied after the tariffs went into effect, sensing some certainty had arrived.² The logic right now is any tariff-related developments will most likely be tariffs going down or away altogether, and the worst is already out there. The difference this time is that Trump has made deals with some major players, so the situation doesn’t appear as chaotic or dire as it did in April.

Now the dance begins. Trump will single out individual countries and push them into negotiations, similar to what we saw when the president bore down on India.³ Tariffs have become Trump’s tool for just about everything. Word is he will meet with Russian President Vladimir Putin soon to discuss ending the Ukraine war, but as that was developing, he put “secondary” tariffs on India because they were buying Russian oil in violation of the sanctions put on Russia to deprive them of much-needed war funding.⁴

How effective any of this will be has yet to be seen, but this much is true: The first 200 days of Trump’s second term have been anything but typical, and a lot of the pundits and analysts have been very wrong in their predictions. There’s a classic Orson Welles movie called “The Third Man,” set in the immediate aftermath of World War II Vienna. The lead character, Harry Lime (Welles), a black marketeer, comments on the chaotic state of things and the jockeying of the various occupying powers, saying:

“Like the fella says, in Italy for 30 years under the Borgias they had warfare, terror, murder and bloodshed, but they produced Michelangelo, Leonardo da Vinci and the Renaissance. In Switzerland, they had brotherly love — they had 500 years of democracy and peace, and what did that produce? The cuckoo clock.”⁵

Maybe that’s what we have here. It could feel like mayhem and chaos to those who support the status quo, or it could look like an evolution in governance and policymaking. But however you view it, it’s nearly impossible right now to make predictions and try to outguess this administration.

Markets stay strong as rate cut expectations rise

Markets regained their losses from the prior week, as the weak jobs number reignited expectations for a rate cut in September.⁶ The market seemed to take the tariff news in stride, but stumbled a bit as the president announced a 100% tariff on chips if they’re not made in the U.S.⁷ Then Apple got back on Trump’s good side by making a $600 billion commitment to produce iPhones here at home.⁸

President Trump nominated Stephen Miran, the head of the White House Council of Economic Advisers, to fill a vacancy on the Federal Reserve’s board of governors on a short-term basis.⁹ Miran is likely closely aligned with the president’s view on rates, so the next meeting will potentially feature three governors who will almost certainly vote for a cut in September. Odds are currently putting the chances of a quarter-point cut just under 90%.¹⁰

Now we wait for this coming week’s inflation data. Consensus expectations are calling for a rise in core inflation from 2.9% to 3.1%.¹¹ That would bolster Fed Chair Jerome Powell’s side of the argument that Trump’s tariff battles are making inflation rise, but what happens if the consensus is off? Powell already had a rebellion on his hands with 25% of the committee members calling for cuts sooner. If inflation is tame, we may have more defections.

The Fed’s Jackson Hole symposium a few weeks from now will set a major tone for markets through the rest of 2025.¹² Right now, the market is expecting a cut in September. If the Consumer Price Index (CPI) comes in at consensus or, worse yet, hotter than expected and the cut is delayed, then we could be in for a messy September for the markets and the Fed.

Coming this week

• We’ll get the last inflation reading prior to the Jackson Hole economic symposium on Aug. 21-23. The event’s theme this year is “Labor Markets in Transition: Demographics, Productivity and Macroeconomic Policy.” Given last week’s weak jobs report and the firing of the Bureau of Labor Statistics (BLS) chief, it should make for a spirited meeting.
• There’s no regular Fed meeting in August, so Tuesday’s CPI report will go a long way in determining if we’ll see a rate cut in September.
• Besides CPI and Core CPI on Tuesday, we’ll get MBA mortgage applications (Wednesday). Then we’ll see weekly unemployment claims and the latest Producer Price Index (PPI) numbers on Thursday. We’ll close out the week with retail sales data for July and consumer sentiment on Friday.
• Second-quarter earnings are beginning to wind down and have been pretty decent.¹³ With 90% of S&P 500 companies reporting as of Aug. 8, 81% have reported positive earnings per share (EPS) and the same number have reported positive revenue. Earnings growth for the S&P 500 in the second quarter is 11.8%, marking the third consecutive quarter of double-digit growth for the index.
• For the current quarter, 38 S&P 500 companies have issued negative EPS guidance, and 40 have issued positive. Valuation is grinding higher for the index, with the forward 12-month price-to-earnings (P/E) ratio at 22.1 vs. 20.5 last quarter. This P/E ratio is much higher than the 5-year average (19.9) and the 10-year average (18.5).

Sources:

¹ Rob Wile. NBC News. Aug. 6, 2025. “New tariffs snap into effect, raising import taxes to highest level since Great Depression.” https://www.nbcnews.com/business/business-news/trump-tariffs-latest-round-takes-effect-thursday-august-7-2025-rcna223461. Accessed Aug. 10, 2025.

² Amalya Dubrovsky, Brett LoGiurato and Ines Ferré. Yahoo! Finance. Aug. 7, 2025. “Stock market today: Dow slides, Nasdaq jumps to record as tariffs kick in, Trump nominates Miran to Fed board.” https://finance.yahoo.com/news/live/stock-market-today-dow-slides-nasdaq-jumps-to-record-as-tariffs-kick-in-trump-nominates-miran-to-fed-board-200253275.html. Accessed Aug. 10, 2025.

³ Nikhil Inamdar. BBC. Aug. 7, 2025. “India has 20 days to avoid 50% Trump tariffs – what are its options?” https://www.bbc.com/news/articles/c1w83j35jjjo. Accessed Aug. 10, 2025.

⁴ John R. Puri. National Review. Aug. 8, 2025. “Trump to Meet with Putin in Alaska Next Friday to Discuss Ending War in Ukraine.” https://www.nationalreview.com/news/trump-to-meet-with-putin-in-alaska-next-friday-to-discuss-ending-war-in-ukraine/. Accessed Aug. 11, 2025.

⁵ Wikipedia. “The Third Man.” https://en.wikipedia.org/wiki/The_Third_Man. Accessed Aug. 10, 2025.

⁶ U.S. Bureau of Labor Statistics. Aug. 1, 2025. “Employment Situation Summary.” https://www.bls.gov/news.release/empsit.nr0.htm. Accessed Aug. 10, 2025.

⁷ Bailey Schulz. USA Today. Aug. 8, 2025. “Trump announces 100% tariff on computer chips. Here’s what it could mean for your wallet.” https://www.usatoday.com/story/money/2025/08/08/trump-tariff-chip-semiconductor-consumer-prices-impact/85562097007/. Accessed Aug. 10, 2025.

⁸ Apple. Aug. 6, 2025. “Apple increases U.S. commitment to $600 billion, announces American Manufacturing Program.” https://www.apple.com/newsroom/2025/08/apple-increases-us-commitment-to-600-billion-usd-announces-ambitious-program/. Accessed Aug. 10, 2025.

⁹ Bryan Mena. CNN. Aug. 8, 2025. “Trump is nominating Stephen Miran to temporarily fill vacancy at the Fed.” https://www.cnn.com/2025/08/07/business/stephen-miran-fed-trump-nominate. Accessed Aug. 10, 2025.

¹⁰ CME Group. “FedWatch.” https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html. Accessed Aug. 10, 2025.

¹¹ MarketWatch. “U.S. Economic Calendar.” https://www.marketwatch.com/economy-politics/calendar. Accessed Aug. 10, 2025.

¹² Federal Reserve Bank of Kansas City. “About the Jackson Hole Economic Policy Symposium.” https://www.kansascityfed.org/research/jackson-hole-economic-symposium/about-jackson-hole-economic-symposium/. Accessed Aug. 10, 2025.

¹³ John Butters. FactSet. Aug. 8, 2025. “Earnings Insight.” https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_080825.pdf. Accessed Aug. 10, 2025.

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