One way to cut through the fog of conflicting information is to apply the tool of “yes, but”. Here’s how it works. We have agreed a trade deal with China that lowers tariffs and allows its airlines to take deliveries of Boeing airliners. Yes, but the tariffs remain high, the deal expires in 90 days, and China has refused to open its markets to all save a few US companies, or to stop dumping government-subsidised products in America.
The Wall Street Journal says “the China deal is more [US] surrender than Trump victory”.
We have agreed a trade deal with Britain. Yes, but it is explicitly non-binding, more a framework than a deal, that retains bans on chlorine-washed chickens and genetically enriched beef, and leaves tariffs on British goods significantly higher than they once were.
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Consumer spending in the US remains strong, with non-necessities such as Disney World, cruises and concerts doing just fine. Yes, but Walmart, McDonald’s and other retailers are reporting that data of the recent past does not reflect how consumers are behaving now.
Inflation is coming down. Yes, but it has yet to reach the Federal Reserve’s 2 per cent target, and does not reflect any price increases that Walmart and other firms have announced they will impose to cope with the new tariffs.
The unemployment rate is a low 4.2 per cent and layoffs are few, indicating a healthy labour market. Yes, but recent graduates are having difficulties finding work, and workers who jumped from existing jobs to greener pastures during the pandemic say they are now earning more than potential replacements, and fear being top of any lay-off list.
Sales by small businesses rose 3 per cent last month to the highest level since September 2023. Yes, but the Small Business Optimism Index is at its lowest level since before the election, putting a hold on hiring and investment plans.
The credit-card delinquency rate is at its highest level since 2012. Yes, but that is not significantly different from the pre-pandemic norm.
All of which “yeses” and “buts” remind us of the balance required to reach sensible conclusions. Here are a few.
President Trump has learnt that he needs deals to avoid a Republican wipe-out at the 2026 mid-terms. Soaring prices, with no Joe Biden to blame, and empty shelves and stockings at Christmas are not likely to prove popular. Voters will draw a straight line from higher prices to the man who promised he would lower them: “tariff man”, Donald Trump.
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We are headed towards a 10 per cent global tariff and other arrangements making the new global trading order more favourable to many US producers, although costly to its consumers. Deals made and likely to emerge from negotiations, or as unilateral impositions, make it clear that the president views this global tariff as bedrock; to abandon it would be to concede that his 50-year belief — that trade deficits are making America less great, or worse — is wrong.
In his usual pattern of two lunges forward and one step back, he will have quadrupled the average US tariff rate, allowing him to claim victories, pyrrhic or otherwise.
The yeses and buts about the American economy also combine to lead to a reasonable conclusion: the American economy is in good shape. Tariffs, at levels towards which they are heading, might cut into growth by raising businesses’ supply costs sufficiently to reduce margins and investment in expansion, and raise consumer prices. But the large, flexible economy will survive, perhaps with growth slowed.
But only perhaps. There will be headwinds as well as tariff tailwinds. Many of Biden’s costly regulations are being unwound, including those designed to raise banks’ capital requirements, reducing their ability to lend, and those aimed at reducing global warming by ending the reign of petrol-powered vehicles and forcing consumers to install energy-saving, drippy shower heads and ineffective appliances.
Planned tax cuts should increase incentives to work and invest, and if even a fraction of the trillions in foreign investment promised to the president by foreign companies and Middle East countries materialises, the economy will receive a rather large boost.
Yes, that is good news. But worry about the deficit. Yes, the bond vigilantes continue to lend the US money at reasonable rates, but many are moving some of their cash to non-dollar assets. Yes, we are not facing capital flight, but neither are we seeing a ringing affirmation of American exceptionalism, or of the Maga, protectionist, industrial policy that has replaced relatively free markets.
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Yes, the American Treasury can still borrow at reasonable rates. But the bond vigilantes have fired a few warning shots, which got the attention of Trump and Treasury secretary Scott Bessent. The vigilantes are saddled up, twitchy trigger fingers on the “sell” buttons of their computers.
Yes, Trump bestrides the world like a colossus. But so did Lyndon Johnson after creating the Great Society, but before Vietnam; Richard Nixon after opening China, but before Watergate; and Margaret Thatcher after the Falklands war, but before the poll tax. All self-imposed falls from favour. Like tariffs.
Irwin Stelzer is a business adviser
