Drivers of Volatility: War, Tariffs, and China

A Quick Economic Tour: GDP, Housing, Oil, Material, Labor

Manufacturing on a Surprising Global Upswing

Economic Tour, Continued: Inflation, Supply Chain, and Industrial Production

The textbook definition of volatile just about says it all: Likely to change rapidly and unpredictably, especially for the worse. It has been a volatile year, and so was last year. Business leaders adapt to unforeseen change, of course, but when one adds in a series of essentially “man-made” issues, the landscape gets difficult to navigate. 

Navigating the politics of trade has been more than vexing. Tariffs are deployed more as political weapons than economic incentives, and for many manufacturers, the result has been negative. That has certainly been the case for consumers. The oil crisis is obviously front and center now, but the bigger issue will be Taiwan and what this could mean regarding China.

At one point earlier in the quarter the numbers looked promising, and some asserted that 2.5% was possible. That was before the Iran war and the oil crisis, and now the economy as a whole is limping at the slowest pace seen since Q1 2025.

There is still evidence of growth, but weakness is clear as most of the numbers have started to show mild contraction. The crucial problem is that politics has become the driver. Consumers are still willing to spend, and businesses are still willing to expand, but there are too many political unknowns.

The manufacturing sector, including sectors like machinery and even fabricated metal, are on a noticeable upswing. The S&P Global PMI has been pointing in a very positive direction from nearly every nation as only six countries (out of 30) are in contraction, and even these are only barely in that category.

There has long been a debate over whether the U.S. should pursue some kind of national industrial policy. Many nations have, with mixed results. The support from government has often been useful to those countries, especially in areas like export promotion or support for research and development. On the negative side, there is the chance for ossification as it becomes harder to deviate from the established path. Generally, U.S. business is more flexible and responsive.

Lately the economy has been akin to weather in the Midwest. If you don’t like it, just wait 10 minutes and it will change. It has long been asserted that the only function of economic forecasting is to make astrology look respectable. That’s rarely been as true as it is right now. There have been constant questions regarding the status of tariffs, geopolitical storms that have engulfed the oil market, and trade wars that have set longtime allies at one another’s throats. In the face of this, can anything be said that is close to definitive? Sort of. 

You know that adage about a glass half full or half empty? That sums up the situation now, as some sectors are doing well and others are struggling. Data has been showing solid growth in machinery, aerospace, and even fabricated metal in general. Automotive is not doing all that well, but electronics has continued to surge. The real looming threat is the supply chain. Another few weeks of the Iran war will severely affect oil as well as many other commodities.

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