Macro Briefing: 21 May 2025

Policy uncertainty has a ‘meaningful’ impact on the US economic outlook, said St. Louis Federal Reserve Bank president Alberto Musalem. “To the extent that the economy requires capital expenditure to continue to occur, that it requires hiring to continue to occur, and if all those decisions have been somewhat paused because of the uncertainty, it would affect the economic outlook I would expect.” An index tracking policy uncertainty has spiked recently, but is starting to fall, although it remains elevated vs. the pre-tariff period.

Days after the announcement of a US-China trade truce, Beijing lashed out at Washington for warning firms against using AI chips made by China-based Huawei. Beijing has also accused the Trump administration of “undermining” the agreement reached at the trade talks in Geneva.

Nvidia’s chief executive says US export controls on computer chips to China have backfired. Jensen Huang said the restrictions fueled “the spirit, the energy and the government support to accelerate [the] development” of chips in China, said Mr. Huang… All in all, the export control was a failure.”

The Port of Los Angeles, the busiest in the nation, is adapting to challenges created by US tariffs, said the port’s executive director Gene Seroka. “These tariff policies are more widespread and sweeping than any we’ve ever seen in our lifetime. What probably comes out of this are lower inventory levels across the board, less selection for American consumers and maybe higher prices.” “This now marks five consecutive months of declining exports. With retaliatory tariffs now in play, we’ll continue to see significant challenges on that side of the ledger, particularly in the agriculture and manufacturing sectors for the foreseeable future.”

The US continues to struggle to fill open employment roles at manufacturing firms. There are nearly half a million open manufacturing jobs at the moment, according to the Bureau of Labor Statistics. “The hardest skills to find are the ones that maintain and fix equipment,” said Carolyn Lee, president and executive director of the Manufacturing Institute. “Every company we speak with is trying to hire technicians. Every single one.”>

The retailer Target cut its full-year sales outlook, citing weaker consumer spending and elevated uncertainty about tariffs, along with a backlash to the company’s rollback of diversity, equity and inclusion efforts. CEO Brian Cornell blamed several of the retailer’s problems on the economy. Meanwhile, retail stocks (XRT) continue to trade well above their recent lows, but moderately below the previous high, which was set in December.