Finally some peace on the import duties front?

Now that President Trump has presented his reciprocal import duties, hopefully things will calm down on that front. We will first get the possible countermeasures from the trading partners, but I look forward to people sitting down together and resolving the trade war there instead of fighting it in the media. I will leave the duties for what they are here for now, more than enough has been said and written about them elsewhere.

One thing I have to say is that the way the Americans calculated the percentages is downright appalling. Countries apply import duties, but there are also all sorts of other things that hinder trade, sometimes intentionally, but often not intentionally. We call these rules non-tariff barriers. When he made the announcement, Trump waved a thick book. I thought it had attempted to convert these non-tariff barriers into import duties. But that is apparently not the case. The way Trump determined the level of the duties is simplistic and devoid of any economic basis. That makes negotiating the duties even more difficult.

It is clear that not everyone has confidence in the new protectionist policy. The stock markets are turning red and you wonder whether the financial markets can make Trump see the light. Consumers are also not holding back, even before the presentation of the actual levies. American families bought 17,8 million cars in March (annualized), much more than the 15,8 million in January/February on average. The number in March was the highest monthly figure since March 2021. It is inevitable that people fear that prices will rise sharply due to the levies. They probably wanted to get ahead of that. In that case, the number of cars sold will suffer a setback in the foreseeable future.

It is not yet clear that the levies will boost the number of jobs in industry. According to the ISM index, business confidence in industry has fallen from 50,3 in February to 49,0 in March. The sub-index for employment even fell from 47,6 to 44,7. In the services sector (ISM services), the sub-index for employment fell even more sharply: from 53,9 in February to 46,2 in March.

DOGE layoffs increase dramatically
While Elon Musk’s role in the Trump administration’s DOGE initiative may diminish in the short term, the DOGE layoffs are clearly visible in the numbers. According to Challenger, Gray & Christmas, 275.000 people were laid off in March, up from 172.000 in February. The March figure was the third-highest monthly number since the series began in 1994—higher than any recession! The large number of layoffs was largely in the federal government.

Chinese business confidence actually improved in April. Heavenly cheers it is far from it, but both the sub-index for industry and the sub-index for services are now above 50. Next month will show to what extent Trump's tariffs are affecting confidence.

Dutch purchasing managers less optimistic just ahead of new import duties
According to NEVI, the confidence of purchasing managers in the Netherlands actually weakened in March. The index fell from 50,0 in February to 49,6 in March. This is consistent with the previously published producer confidence index of CBS. It is not all a drama, but not strong either. International orders in particular failed to materialise, wrote NEVI.

Persistent inflation
Dutch inflation remains stubborn. In February, the figure was already disappointing when inflation rose from 3,3% in January to 3,8%. In March, a decrease was expected. That was also disappointing: 3,7%. In the 'quick estimate', CBS publishes a limited amount of details. Energy prices pushed inflation down. In February, they were still 1,9% lower than a year ago, in March it was a decrease of 3,4%. Given the development of international oil and gas prices, I think that the depressing effect of energy prices on inflation will not continue.

The category 'food and tobacco' also depressed inflation. In February, the price increase of this combined category was still 7,5%, in March this had fallen to 7,1%. This figure conceals that tobacco is the main culprit because of the sharp increase in tobacco excise duty as of 1 April last year. Since excise duties will not be increased further this year, the price development of tobacco will have less upward influence on inflation as a whole. This will happen gradually, because after the excise duty increase last year, old stocks were still allowed to be sold at the old price. But ultimately this will make a difference of around 0,5 percentage points to the inflation figure.

Perhaps more importantly, food price increases have increased in recent months. The figures published by Statistics Netherlands this week suggest that the acceleration of food price inflation stopped in March. That would be good news. Caution is advised, because in most other euro countries food price inflation actually increased further in March.

The pace of price increases for services and industrial goods actually accelerated slightly. In both cases, this was only 0,1 percentage points, but that is in the wrong direction.

Inflation in the eurozone as a whole fell from 2,3% in February to 2,2% in March. Core inflation fell from 2,6% in February to 2,4%. In most other countries, energy prices depressed inflation, as they did here. Food price inflation accelerated.

Russian business confidence under pressure
I get the impression that the pressure on the Russian economy is increasing. Of course, we have to be careful with the interpretation of Russian figures, but the country's purchasing managers index (industry) fell from 50,2 in February to 48,2 in March, the lowest figure in almost three years.

Closing
President Trump has unveiled his reciprocal tariffs. That was certainly not easy. American consumers tried to beat the tariffs on cars in March by quickly buying a car.

The Trump administration's DOGE activities are beginning to gain traction. The federal government and various agencies are being cleaned up considerably in terms of staff numbers.

Business confidence in China improved slightly prior to the announcement of reciprocal tariffs. Whether this cyclical recovery can continue remains to be seen.

Dutch inflation was again slightly disappointing in March. Inflation in services and industrial goods in particular rose slightly. CBS will not publish the detailed figures until next week.

Hans de Jong

Han de Jong is a former chief economist at ABN Amro and now a resident economist at BNR Nieuwsradio, among others. His comments can also be found on Crystalcleareconomics.nl

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