The remains uncertainty surrounding tariffs even after the Trump Administration announced exemptions for popular tech products made in China. Tariff exemptions announced Friday on electronics like smartphones and laptops are only a temporary reprieve until the Trump administration develops a new tariff approach specific to the semiconductor industry, U.S. Commerce Secretary Howard Lutnick said Sunday.
White House officials, including President Donald Trump himself, spent Sunday downplaying the significance of exemptions that lessen but won’t eliminate the effect of U.S. tariffs on imports of popular consumer devices and their key components.
Paul Vaaler with the Carlson School of Management at the University of Minnesota tells the WCCO Morning News with Vineeta Sawkar that there's still a lot to solve over the next three months.
"Companies like Apple just can't change their supply chains overnight," Vaaler says. "In fact, over months, it's going to take years for them to shift, for example, sourcing components from China to say India. So we got a 90-day reprieve, but the big decisions are still coming. And it's going to be a decision that could be really detrimental to high tech companies like Apple."
That is leaving businesses are feeling the strain of uncertainity when it comes to not only tariffs, but the rhetoric that comes with those tariffs according to Vaaler.
"Particularly small businesses," he say. "Here in Minnesota, I think there are over 50 million of them employing a million people. They all buy aluminum from Canada and their establishments, they all use networking equipment from China. Uncertainty about those prices and their availability, that's really detrimental."
Vaaler says that toning it down that rhetoric could help bring more certainty over the course of several months.
EYES TURN TO WALL STREET FOR REACTION
And once again, all eyes are turning to Wall Street for reaction, and they're rallying worldwide Monday early after the relaxing some of the tariffs, for now at least.
The markets were higher in early trading Monday but have leveled off midday. It’s coming off a chaotic week where it careened through historic swings as financial markets struggled to catch up with Trump’s moves on tariffs, which investors fear could lead to a recession if not reduced.
The Dow Jones Industrial Average was up 96 points, or 0.24%, as of 12:00 p.m. Eastern time, and the Nasdaq composite was 0.23% higher.
But that uncertainty - particularly in China where tariffs are up to 145 percent in some cases, that has Minneapolis Federal Reserve Bank president Neel Kashkari concerned. He spoke to CBS News' Face the Nation about is Sunday.
"I think investors in the U.S. and around the world are trying to determine what is the new normal in America, "Kashkari explains. "We don't know where that new normal level is going to be, and we at the Fed have no ability, zero ability, to affect that destination."
The U.S. tariff and the retaliatory 125% tariff from China are putting businesses doing trade between the two countries on edge. They're fretting not only about their next orders but also the viability of their business if there’s no relief soon.
"Investors around the world say one country is the best place to invest, the math works out that that country will have a trade deficit," Kashkari told CBS News. "If we're not going to have a trade deficit going forward, then investors must conclude that there are other attractive places to invest too."
IS A RECESSION A POSSIBILITY?
CBS News business analyst Jill Schlesinger told WCCO that on Friday, the the University of Michigan released a new report detailing U.S. consumer sentiment is now weaker than it was during the 2008 financial crisis.
"Now, what I take away from that is a couple of things," Schlesinger says. "Number one, we human beings, we are not good at processing so much information that comes at us so quickly. And certainly this has been a period where not only do we get information, but we get starts and stops to the information. Like the tariffs are on, the tariffs are off, the tariffs are higher, the tariffs are lower. This is a product is this way, then it's this way. So I think what has happened is a couple of things. Number one, remember 2008, that's just one year after the iPhone was introduced. We were not living on our phones in 2008 in the same way that we are today. And I think this deluge of information is kind of freaking with us, and I think it is why our confidence levels are dropping."
Schlesinger adds that the "freezing up" of consumers has business leaders thinking recession now.
"It makes sense, if you think about it, if we're really worried we stop spending as much, businesses stop spending as much, and that can hurt growth," she says. "That is why you are seeing more economists increase the chances, not that they we are in it, the chances for a recession this year, and that's kind of like the overarching worry that is kind of clouding everyone's judgment right now."
Another new survey says more than 60% of CEOs expect a recession, and they're saying it is possible in the next six months. Schlesinger notes that things can change quickly.
"We had a period of time when, I remember at the end of 2022, we had a lot of economists and CEOs saying, 'you know what, the effects of inflation, high interest rates, it's all going to cause a recession.' And there was a lot of certainty that 2023 would be this year of a recession and you know that didn't happen," Schlesinger says. "So, again, it's not a foregone conclusion."
Schlesinger also adds last week's big selloff in the bond market likely led to President Trump backing off a lot of the tariffs and announcing a 90-day reprieve outside of China.