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TheBRRR’s Thoughts 

GM.

CPI and PPI both came in lower than expectations this week, easing inflation fears. The fall in producer prices was significant, as it actually went negative month on month and is viewed as a leading indicator.

But markets have refused to rally, all because of the ongoing trade war.

It’s a complex issue - the Trump admin is attempting to unwind longstanding norms that have driven an exceptionally large trade deficit for the US.

While American consumers benefit from cheap imports, American manufacturing has struggled as many of the US’ largest allies and trade partners have long imposed prohibitively expensive tariffs and regulations on goods produced in the US.

Trump is threatening largely reciprocal tariffs to level the playing field with the caveat that he will remove the tariffs if the other country agrees to do the same.

A landmark example of imbalanced structural trade effects the automotive industry - the EU charges a 10% tariff on cars from American manufacturers while the US only inflicts a 2.5% fee on European cars.

I created a deepdive podcast on the history of the trade war, you can listen here on Spotify.

Economic Data Positive, but Trump's Tariff Threats Spark Market Volatility

SYNOPSIS

Recent U.S. economic indicators reveal a deceleration in inflation and a robust labor market, with core CPI inflation dropping to 3.1% YoY and initial jobless claims decreasing to 220,000.

However, President Trump's threat to impose a 200% tariff on European alcoholic beverages in response to the EU's planned 50% tariff on American whiskey has overshadowed these positive developments, leading to significant market volatility and a nearly 5% decline in the Nasdaq since last Friday.​

THE DETAILS

• Inflation Trends:

  • Core Consumer Price Index (CPI) inflation decreased to 3.1% year-over-year, marking the lowest rate since April 2021. This reduction is primarily attributed to declines in energy prices and airfares.​

  • Producer Price Index (PPI) remained unchanged month-over-month, with core PPI declining by 0.1%, indicating easing cost pressures for producers. ​

• Labor Market Strength:

  • Initial jobless claims fell by 2,000 to 220,000 for the week ending March 8, 2025, reflecting a resilient labor market despite broader economic uncertainties.

• Tariff Threats and Market Impact:

  • President Trump announced plans to impose a 200% tariff on European wines and spirits unless the EU rescinds its planned 50% tariff on American whiskey, set to take effect on April 1, 2025. ​

  • This escalation in trade tensions has led to increased market volatility, with the Nasdaq declining nearly 5% from last Friday's close.​

WHY IT MATTERS

• Consumer Impact:

  • The proposed tariffs could lead to significant price increases for consumers. For example, a $15 bottle of European wine could rise to $45, affecting both consumers and businesses. ​

• Industry Disruption:

  • The U.S. spirits industry, which has benefited from zero-for-zero tariffs with the EU since 1997, is urging for negotiations to avoid economic harm and preserve jobs within the American hospitality sector.

• Market Volatility:

  • The escalating trade tensions have induced significant stock market volatility, overshadowing positive economic indicators and raising concerns about a potential recession. ​

In summary, while recent economic data indicates a healthy U.S. economy with cooling inflation and a strong labor market, the looming threat of a trade war with the EU is causing investor anxiety and market instability.

Geopolitical Tensions Fuel Market Volatility

SYNOPSIS

Recent geopolitical developments have intensified market volatility. Russian President Vladimir Putin has set stringent conditions for a potential ceasefire with Ukraine, demanding comprehensive resolutions to the conflict's root causes.

THE DETAILS

• Russia-Ukraine Ceasefire Negotiations:

  • President Putin has expressed conditional support for a U.S.-backed 30-day ceasefire in Ukraine.​

  • He emphasized that any ceasefire must address the underlying reasons for the invasion, warning that without a comprehensive settlement, a ceasefire could allow Ukrainian forces to regroup and rearm. ​

  • Putin's demands include Ukraine recognizing Russia's annexation of certain regions, committing to never join NATO, and implementing military restrictions. ​

WHY IT MATTERS

• Market Volatility:

  • The combination of geopolitical tensions and trade disputes has led to increased market volatility, with the Nasdaq declining nearly 5% from last Friday's close.​

• Geopolitical Stability:

  • The stringent conditions set by Russia for a ceasefire in Ukraine suggest prolonged instability in the region, potentially affecting global markets and international relations. ​

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The BRRR is meant for informational purposes only. It is not investment advice. Please consult with your investment, tax, or legal advisor before making any investment decisions.