Hey friends - happy Friday. I don’t think much happened this week…

Have a great weekend!

🌎 The Big Picture

To be clear: this is unprecedented. This is not normal. There are so many things going on right now that are breaking the common fundamentals of global economics and financial markets.

You probably don’t want to hear much more about tariffs, but it’s hard to discuss anything else. These policies, and the way they’re being announced/reversed/changed, are driving the global economy. The global financial system is built on trust and confidence. Money is only what we say it is. Borrowing and lending are based on reputation. How you do things matters.

Let’s break it all down at least a little bit:

Why do it:

• Shipping US manufacturing overseas has raised billions out of poverty worldwide, but at the cost of many American jobs and communities. (Though not the only cause)

• The US has a budget problem and needs tax revenue.

• Global supply chains are increasingly vulnerable to war, extreme weather, changing climates, and disease.

• Incentivizing more US manufacturing can boost jobs, investment, and national security.

  • (Between the lines: the people who are talking about how Americans won’t work in factories aren’t paying attention to the exponential advancement in AI and robotics that will disrupt the entire workforce over the next few years. Amazon and Walmart want their manufacturing here so they can own their full supply chains. They’re already filling warehouses with robots.)

Problems with the implementation:

• Variability: Abrupt changes and reversals make business planning nearly impossible. Uncertainty creates caution, slows investment, hiring, and spending.

• Hastily oversimplified: Tariffs seem to be calculated with a simple formula, applied broadly even to uninhabited islands, and missing the nuances of each individual trade relationship, implying these policies also aren't final.

• Blanket approach: Penalizes industries that can't or shouldn't move to the US.

• Antagonistic: Announcements have spurred some negotiations but have strained our greatest allies and trading partners.

• Timing: The US economy as a whole is steady at best, and massive import taxes and trade wars will, at minimum, create a lot of short-term pain for any long-term gains, and it's not clear the economy can handle it.

• Taxes: It seems like this revenue is meant to pay for tax cuts, negating the revenue benefit to the US debt problems.

Problems this will create:

• Small businesses rely heavily on imported supplies. It's not just multinational corporations. Import taxes increase costs for both. Higher supply costs typically lead firms to raise their prices as much as their customers will let them (optimistically, maybe not much right now) and cut staff.

• Switching suppliers takes time and costs money. US alternatives may not be cheaper or even exist. It could take years for US production to fill the gaps.

• Lower/middle Americans who are already stretched will feel this the most. Goods take up more of their budget. Consumer spending powers the economy. Less spending risks recession.

What’s going to happen with China? Who knows. But let’s break that down too.

Here's an oversimplification of the battle right now:

The US is largely the world's consumer, especially Chinese stuff.

The US is also the world's borrower.

Japan and China are the biggest lenders to the US.

The US wants "fair" trade, since we have the buying power.

The US also wants to change the structure so we're building and buying more of our own stuff.

So China needs the US to buy its stuff.

(It has other customers, but not like the US)

The US needs China to keep lending it money.

(It could find other lenders, but if China backs out, that gets harder)

The less attractive the US looks as a borrower, the more expensive borrowing gets.

The US is already borrowing way too much money.

We now pay more on debt interest payments than on our military.

Interest is one of the biggest portions of the annual budget.

I won't pretend to have a solution or prediction on what happens,

but that's the trade war negotiation that's going on right now.

Restructuring the entire global economy and financial system isn't simple.

Get the full breakdown of all the trends affecting your home, wallet, and career in the new Weekend Scoop on the Scoops app!

🏭 The Companies Everyone’s Talking About

Dig into more scoops and vote on company approval ratings in the Scoops app!

❔ The Big Question of the Week

Challenge your perspectives and learn from the community voting on the Scoops app!

🔦 Feature Spotlight

Are you checking your Trends dashboard?

Head to the Big Picture page, then tap trends at the top right. You’ll have easy access to all the numbers affecting your spending, savings, home, and work.