Welcome to our May 2025 Viewpoints, a monthly bulletin from PDS Planning to our valued clients and friends. Our goal with each issue of Viewpoints is to provide you with a wide variety of perspectives on life and wealth. Feel free to share with others.
The New Maximum…Maybe
If you have a google alert for the word tariff, you’ve probably had a really busy few months. At the moment, it seems the tariff volatility is taking a break after a number of pauses or agreements to negotiate. In addition, the estimated max tariff has come down considerably after an immense amount of pushback. JPMorgan estimated the current maximum at just under 15% now compared to 30% at the beginning of April. The US stock market has responded nicely to this reduced estimate. Historically speaking, just under 15% would still be the highest since the 1940s and, despite the market rebound, has already been impacting GDP.
Impact on GDP
Tariffs have been a constant back and forth. They’re on. Now they’re off. The actual impact of them on the economy has been marginal because of this on and off but businesses have still been forced to act. Their action HAS impacted the economy as shown by the first quarter Real GDP reading of -0.3%. The bulk of this as seen on the far right is due to a -4.8% economic drag from net exports.
Expectations vs Reality
Inflation has been another hot-button topic for the first half of the year. Many economists have predicted year-over-year increases to inflation as a result of prices going up reacting to newly implement tariffs. This can be seen in the chart below represented by the blue and yellow lines. These are the short term and longer-term inflation expectations. The green line, continuing to trend down, is the actual inflation change. The uncertainty and impacted expectations dramatically, but the hard data, the actual metric, has continued to move lower.
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