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Today on Real Estate Backstage … NAR announces changes to its Clear Cooperation Policy … Rocket announces its acquisition of Mr. Cooper … The Federal Reserve holds rates steady … HUD announces it will begin requiring proof of permanent resident status for FHA loans … And Donald Trump’s sweeping new tariff policy goes into place, sending markets tumbling … All that and more, today on Real Estate Backstage.
Alabama passes new law that contradicts the NAR Settlement
According to RISMedia:
“Back in November, as a judge considered final approval of the National Association of REALTORS®’ (NAR) landmark settlement agreement, NAR attorney Ethan Glass warned of the possibility that REALTORS® could be put in a position where complying with the terms of that deal could conflict with other laws.
That has proved prescient, as earlier this week, Alabama Governor Kay Ivey signed a bill that explicitly bans any requirement for buyer agreements before agents tour properties with a client.
Notably, the bill was shepherded through the legislature by the Alabama REALTORS®, which has previously criticized NAR and highlighted legal threats to the industry.
‘With (the new law) in place, potential buyers cannot be forced to sign a binding agreement just to view a property. Instead, a written agreement is required before submitting an offer, ensuring greater transparency and consistency in real estate transactions statewide,’ the association wrote on Facebook.
In response to an emailed inquiry, Alabama REALTORS® CEO Jeremy Walker emphasized the law was supported by members, and that they ‘had a voice for the first time in this process through a democratically elected body.’
‘State Associations have a First Amendment right to organize, engage in the political process, and pursue legislation that benefits their members and consumers- and importantly, state legislatures are the appropriate body to govern laws affecting real estate matters,’ Walker wrote. ‘We are excited that (the new law) will provide greater transparency for consumers in their first interaction with an agent in the home buying process and allow them the opportunity to build a relationship with an agent before entering into a buyer’s agreement.’
Walker did not respond to a specific question regarding what kind of guidance Alabama REALTORS® was providing to members in relation to the law and the settlement, or whether he had been in contact with NAR. An NAR spokesperson deferred specific questions regarding to Alabama REALTORS®, but pointed to previously released guidance saying that state law takes precedence over the settlement.
‘Written buyer agreements will be required of all MLS Participants working with buyers prior to touring a home, unless state law requires a written buyer agreement earlier in time,’ the guidance also reads.
But it remains unclear exactly how direct conflicts between a state law and the legally binding settlement agreement will play out.
Other states have taken very different approaches, with Ohio passing a bill last summer to directly align state law with the NAR settlement by requiring buyer agreements before buyers can tour a property.
More proposed bills have challenged the NAR policy changes in other ways, including a proposed bill in Oklahoma, which would explicitly allow agents or brokers to compensate each other.”
(Source: RISMedia.com)
NAR Announces Clear Cooperation exemption
According to Inman:
“The National Association of Realtors on Tuesday announced it would keep its divisive Clear Cooperation Policy while rolling out an exemption to the rule, ending months of speculation on the changes and their impact on brokerages.
The ‘Multiple Listing Options for Sellers’ policy introduces a new category of listings called ‘delayed marketing exempt listings,’ NAR announced. The MLOS policy took effect on Tuesday and must be implemented by Sept. 30, NAR said.
The new exemption would allow sellers to have their listing agent delay putting a listing on the Internet Data Exchange (IDX) for a set period of time that would be determined by each multiple listing service.
‘The new policy does not change an MLS’s local mandatory submission deadlines or CCP and its requirement to file a listing with the MLS within one (1) business day from public marketing,’ NAR said.
NAR board members first approved Clear Cooperation in 2019. The rule required Realtors to submit their listings to NAR-affiliated multiple listing services within 24 hours after they began marketing those listings. Critics of the rule — including high-profile figures such as Mauricio Umansky and Gary Gold — were vocal from the beginning. But proponents argued that, among other things, getting rid of pocket listings would cut down on discrimination.
The news followed months of wrangling and positioning by brokerages that had strongly opposing views on what to do with CCP, which requires agents to put a listing on the MLS within one business day of marketing the property. …
NAR made clear on Tuesday that CCP has not been changed and remains in effect.
With the creation of the new policy, NAR will leave it up to hundreds of MLSs across the country to determine how long agents can delay marketing a property.
‘NAR is also clarifying its policy interpretation that one-to-one, broker-to-broker communications about listings do not trigger CCP requirements,’ NAR wrote. ‘However, multi-brokerage communications about a listing will constitute public marketing under CCP.’
Agents must obtain a signed disclosure document showing the seller’s intent to ‘waive the benefits of immediate public marketing through IDX and syndication,’ NAR wrote in an FAQ it released on Tuesday.
That disclosure is required for both delayed marketing and for office exclusive exempt listings, NAR said.
NAR said it wasn’t setting a nationwide delayed marketing period because MLSs were better positioned to determine that timeframe.
Those MLSs would also determine whether the number of days a seller delays marketing their property under the MLOS policy counts toward total days on market.
NAR also noted that other MLS subscribers would have access to the delayed properties.
‘A delayed marketing exempt listing will still be available to other MLS Participants and Subscribers through the MLS platform so they can inform their consumers about the property,’ NAR said.“
(Source: Inman.com)
The Redfin experiment is over
According to Mike DelPrete:
“With its acquisition by Rocket, Redfin’s saga as an independent company is coming to a close. Launched in 2002, Redfin could be considered the original real estate disruptor, featuring discounted commissions, employed agents, and innovative technology – but the business model just never clicked. Redfin was rarely profitable, accumulated a large debt load, and was acquired for the same value as when it went public over seven years ago.
After its first day of trading as a public company in 2017, Redfin was valued at $1.73 billion – just shy of its acquisition price of $1.75 billion seven years later. After Redfin’s first day of trading in 2017 each share was valued at $21.72, significantly higher than Rocket’s acquisition offer of $12.50 per share. If you owned $100 of Redfin shares in 2017, they would be worth $58 today – a decline of 42 percent … due to dilution…
Since its IPO, Redfin had two profitable years vs. five unprofitable ones, for a combined loss of $368 million (again, this is actual cash flow and not ‘net loss’ which includes non-cash expenses like stock-based compensation). Redfin innovated in so many areas, from agent compensation to groundbreaking tech products, but at the end of the day it just didn’t make money.
Not only is Redfin consistently unprofitable, but it has a high debt load – $815 million – with steadily dwindling cash reserves of just $125 million at the end of 2024. Much of that debt, totaling over $1.2 billion by the end of 2021, was used to fund a pair of expensive acquisitions. Redfin acquired Rentpath for $608 million in 2021, and Bay Equity Home Loans for $138 million in 2022.
It’s fair to say the acquisitions didn’t pan out as expected. Redfin recently announced a deal that effectively outsourced its rentals business to Zillow for $100 million. And in contrast to Zillow’s growing mortgage business, Redfin had to cut costs; its mortgage headcount declined from over 450 mortgage loan officers in 2023 to 275 in March 2025.
Redfin tried to do a lot: web portal, brokerage, iBuying, mortgage, rentals, title insurance, and more … In the end, it might be that lack of disciplined focus that prevented Redfin’s success.“
(Source: mikedp.com)
Rocket to acquire Mr. Cooper
According to Inman:
“In a massive deal between two of the biggest names in the mortgage business, Rocket Companies is set to acquire Mr. Cooper Group Inc. in an all-stock deal for $9.4 billion in equity, the companies announced on Monday.
Rocket is one of the largest lenders in the U.S. (the second by originations, according to the latest data available from 2023) and Mr. Cooper is the largest mortgage servicer in the country. The move comes just a few weeks after Rocket announced that it would be acquiring Redfin for $1.75 billion in equity.
The combined company will service more than $2.1 trillion in loan volume across about 10 million clients, which is equal to about one in every six mortgages across the nation, a press release stated.
‘Servicing is a critical pillar of homeownership — alongside home search and mortgage origination,’ Varun Krishna, CEO of Rocket, said in a statement. ‘With the right data and AI infrastructure we will deliver the right products at the right time. That’s how we build lifelong relationships, by proactively unlocking benefits and meeting needs before they arise. We look forward to welcoming Mr. Cooper’s nearly 7 million clients.’
Rocket Mortgage currently has an 83 percent recapture rate, and with a larger servicing portfolio through the acquisition, the company expects that to at least hold steady. In gaining about 7 million new clients through the acquisition, the company will also grow its data set, which it believes will allow it to improve automation, personalization and efficiency across processes.
When the deal is closed, Mr. Cooper Group Chairman and CEO Jay Bray will become president and CEO of Rocket Mortgage, and report to Krishna. Dan Gilbert will continue to serve as chairman of Rocket Companies. The combined company’s board will include 11 members, nine of whom will be from Rocket’s board and two of whom will be from Mr. Cooper’s board.
With the acquisition, Mr. Cooper shareholders will receive a fixed exchange ratio of 11.0 Rocket shares for each share of Mr. Cooper common stock, a press release explained. Based on the closing price as of March 28, 2025, each share will represent $143.33 — a premium of 35 percent over the volume weighted average price (VWAP) of Mr. Cooper’s common stock for the 30 days end on March 28.
Once the transaction is closed, Rocket shareholders will own about 75 percent of the combined company and Mr. Cooper shareholders will own about 25 percent.”
(Source: Inman.com)
Federal Reserve Press Conference
According to Connect CRE:
“The Federal Reserve underscored a sharp rise in uncertainty regarding the economic outlook, even as it maintained an optimistic tone about current conditions. The March FOMC statement noted that economic activity was still growing at a ‘solid pace’ and that the unemployment rate had ‘stabilized at a low level.’ However, the Fed acknowledged that inflation remained ‘somewhat elevated.’
What stands out in the latest Summary of Economic Projections is the surge in uncertainty surrounding the forecasts for growth, unemployment, and inflation. Compared to the December 2024 update, the current outlook reflects a broader range of potential outcomes that the Fed must now account for.
While the FOMC decided to hold rates steady, officials lowered their growth forecast for real gross domestic product (GDP) to 1.7%, down from the previous estimate of 2.1%. Meanwhile, it raised its projection for core Personal Consumption Expenditures (PCE) inflation to 2.8%, up from 2.5%, and increased its unemployment forecast to 4.4% from 4.3%.
‘The Fed’s decision to hold rates steady came as no surprise. While most investors are continuing to underwrite a soft landing from a macro standpoint, we all have our eyes trained on the potential inflationary impact of heightened tariffs, especially as it relates to the cost and availability of building materials,’ Marion Jones, principal, executive managing director of U.S. Capital Markets at Avison Young shared with Connect.
Federal Chair Jay Powell addressed the challenge of disentangling the sources of inflation, particularly in relation to President Trump’s aggressive tariff policies. Powell admitted that pinpointing how much inflation stems from tariffs is complex, stating, ‘clearly some of it’ is attributable, but emphasized it’s premature to determine whether the Fed can simply ‘look through’ tariff-related price increases.
Powell avoided directly mentioning President Trump but pointed to the upheaval in Washington as a key factor unsettling economic sentiment. ‘We understand that sentiment is quite negative at this time and that probably has to do with turmoil at the beginning of an administration that’s making big changes in policy,’ he remarked in the press conference.
‘Earlier this year, the U.S. economy showed positive signs with solid hiring and growth, along with declining inflation. However, challenges such as ongoing inflation, tariff threats, and reduced consumer and business confidence have emerged,’ Michael Underhill, CIO of Capital Innovations, told Connect.
‘These factors raise concerns about stagflation, a troubling mix of stagnant economic growth and high inflation. This scenario is particularly challenging for the Fed, as traditional approaches to managing inflation or unemployment may conflict in such conditions,’ Underhill added.
Despite the heightened uncertainty, most officials still anticipate interest rates will fall by year-end to a range of 3.75% to 4%, consistent with the projections from December 2024. However, views among policymakers diverged notably: eight of them now predict either no further rate cuts or just a single reduction, while only two expect a more significant drop of 0.75 percentage points.
‘We know in the near term to expect some continued volatility in the cost of capital, but the rate cut conversation is giving way to a larger dialogue around trade wars, rising costs, and potential supply-chain disruption. This confluence of factors can affect the rebounding office market – where every TI dollar is scrutinized heavily,’ added Jones.
Looking further ahead, most officials expect interest rates to drop an additional half a percentage point by the end of 2026, bringing the federal funds target range to 3.25% to 3.5%. By 2027, most foresee rates settling around 3%.
‘The Fed is likely to remain on hold over the near-term future given renewed inflation concerns and what had been until recently a relatively steady pace of economic growth,’ Bryan Jordan, chief strategist at Cycle Framework Insights, Inc told Connect.
‘Looking further ahead, the recent spike in uncertainty and the early signs of knock-on effects in investment, hiring, and consumption should mean a resumption of the easing cycle in the months ahead,’ said Jordan.
The Fed also announced adjustments to its balance sheet strategy. Starting in April, the Fed will reduce the speed of its ongoing reduction of its approximately $6.8 trillion portfolio of Treasury securities and mortgage-backed securities. This shift signals a more gradual approach to unwinding its massive holdings.
(Source: ConnectCRE.com)
Bill Pulte confirmed as the new FHFA Director
According to RISMedia:
“Private equity executive Bill Pulte, whose family founded and runs one of the largest homebuilders in the country, was officially confirmed by the Senate on March 13 to head up the Federal Housing Finance Agency (FHFA), by a vote of 56 to 43.
In separate statements, the National Association of REALTORS® (NAR), the National Association of Home Builders (NAHB) and the Mortgage Bankers Association (MBA) congratulated Pulte and emphasized the importance of his role in overseeing the GSEs, which he is likely to guide toward an end of their long conservatorship.
‘On behalf of the National Association of REALTORS®, I want to extend our sincere congratulations to Bill Pulte on his confirmation as Director of the Federal Housing Finance Agency. His leadership comes at a pivotal time as we face historic housing challenges, including affordability concerns and a nationwide housing shortage,’ wrote NAR Chief Advocacy Officer Shannon McGahn in a statement.
‘Our members stand ready to work with Director Pulte and his team, Fannie Mae and Freddie Mac staff, the Federal Home Loan Banks and other industry stakeholders,’ wrote MBA President and CEO Bob Broeksmit in a statement, ‘to increase affordable and sustainable homeownership and rental housing opportunities for all Americans while ensuring a robust secondary mortgage market for single-family and multifamily lenders of all sizes and business models.’
‘We stand ready to work with Director Pulte to help address the nation’s housing affordability crisis by promoting policies that ensure stable and liquid mortgage markets for single-family and multifamily housing,’ said Buddy Hughes, NAHB chair. ‘Providing builders and homebuyers better access to financing will enable homebuilders to boost the supply of attainable, affordable housing to meet market demand and keep the economy strong.’
Pulte, whose grandfather founded the mega-hombuilder that bears his name (Pulte Group), has worked in private equity—including in sectors close to housing—and is a longtime Republican donor. His nomination was widely supported in the housing industry.
‘FHFA oversees a housing finance system that is uniquely American, but whose reform is long delayed,’ McGahn continued. ‘It is of the utmost importance that we take a measured and thoughtful approach to any GSE reforms. We are confident that Director Pulte’s experience and commitment will help strengthen the housing finance system and support sustainable homeownership for all Americans. We look forward to working with him to ensure a stable, accessible and thriving housing market for generations to come.’”
(Source: RISMedia.com)
Shortly after stepping into the new role, Pulte is already shaking things up. According to RISMEdia:
“Several of Freddie Mac’s top officials, including CEO Diana Reid, were fired yesterday by new FHFA Director Bill Pulte. President Michael Hutchins is to act as interim CEO.
A longtime leader in the banking industry, Reid was hired to lead Freddie in September 2024, having previously led the real estate division of PNC Financial Services Group. Hutchins previously served as an interim CEO before Reid was hired, having been named president of the organization in 2020.
It was previously reported on Monday that Pulte had removed eight members from the Fannie Mae board and introduced four new ones, including himself. He also removed six members from the board of Freddie, adding four new members, including himself. FHFA General Counsel Clinton Jones was also added to Fannie’s board.
Two separate filings with the Securities and Exchange Commission confirmed Pulte is now serving as chairman of both the Fannie and Freddie board.
The Trump Administration and Pulte have both expressed the sentiment of privatizing the GSEs (aka Fannie and Freddie). It is unclear whether these leadership changes relate to this plan or not.“
(Source: RISMedia.com)
HUD to require proof of citizenship for FHA loans
According to RISMedia:
“The U.S. Department of Housing and Urban Development (HUD) announced Wednesday it will no longer allow non-permanent residents or non-U.S. citizens to obtain FHA-insured mortgages. This significant policy shift aligns with the Trump administration’s tougher stance on illegal immigration.
The changes, published in Mortgagee Letter 2025-09 and Title I Letter 490, take effect May 25 and remove eligibility for non-permanent resident aliens who previously qualified with valid Social Security numbers and work authorization documents.
Under the new guidelines, only U.S. citizens, lawful permanent residents with green cards and citizens from the Federated States of Micronesia, the Republic of the Marshall Islands or the Republic of Palau will be eligible for FHA-insured financing. This includes FHA loans and Home Equity Conversion Mortgages (HECMs), or FHA-insured reverse mortgages for senior homeowners.
The letters cite concerns about non-permanent residents’ ability to repay their loans over the long term due to the uncertainty of their residency status.
‘Currently, non-permanent residents are subject to immigration laws that can affect their ability to remain legally in the country,’ the letters note. ‘This uncertainty poses a challenge for FHA as the ability to fulfill long-term financial obligations depends on stable residency and employment.’
The change follows President Donald Trump’s executive orders prioritizing government resources for American citizens, part of his broader crackdown on illegal immigration since returning to office in January.
In a series of posts on X on Wednesday, HUD Secretary Scott Turner doubled down on the new policy.
‘Today, HUD terminated Biden’s taxpayer-backed FHA mortgages for illegal aliens. American taxpayers will no longer subsidize open borders by offering home loans to those who enter our nation illegally,’ Turner wrote. ‘HUD is prioritizing Americans, not illegal aliens. @POTUS promised to end taxpayer subsidies for illegals, and today, we put an end to illegals receiving FHA home loans. HUD-backed mortgages should benefit Americans who play by the rules and work hard, not those who enter our country illegally.’ …
For mortgage lenders and applicants, the new guidelines emphasize that a Social Security card alone is insufficient to prove immigration status. Evidence of lawful permanent residence must be documented with additional verification from U.S. Citizenship and Immigration Services.
HUD’s change represents one of the most significant restrictions on FHA lending criteria in recent years and is likely to force non-permanent residents to seek conventional financing options. These loans typically require larger down payments and higher credit scores and are generally harder to qualify for than government-backed loans.
(Source: RISMedia.com)
Consumer Confidence Dropping
According to Inman:
“The Trump administration’s plan to bring jobs back to the U.S. by imposing tariffs on imported goods has a growing number of Americans worried that soon they’ll not only be paying higher prices but could also end up unemployed, according to a closely watched survey of consumers released Friday.
The University of Michigan Surveys of Consumers for March showed Americans expect inflation to surge to 4.9 percent in the year ahead — the highest reading since 2022 — and that the net balance of households who expect unemployment to increase is at levels not seen since the Great Recession of 2007-09.
Although the survey showed that Republicans are less worried about inflation and unemployment than Democrats and Independents, ‘consumers from all three political affiliations are in agreement that the outlook has weakened since February,’ Surveys of Consumers Director Joanne Hsu said.
At 57.9 in March, the University of Michigan Index of Consumer Sentiment has fallen for three consecutive months, dropping 10.5 percent from February to March and 22 percent from December.
‘While current economic conditions were little changed, expectations for the future deteriorated across multiple facets of the economy, including personal finances, labor markets, inflation, business conditions, and stock markets,’ Hsu said in a statement.
‘Many consumers cited the high level of uncertainty around policy and other economic factors,’ Hsu said ‘Frequent gyrations in economic policies make it very difficult for consumers to plan for the future, regardless of one’s policy preferences.’”
(Source: Inman.com)
Builder Confidence Lowest Level in Seven Months
According to RISMedia:
“Homebuilder confidence came in at 39 (out of 100) in March, its lowest reading in seven months, as recorded by the latest Housing Market Index (HMI) reported by the National Association of Home Builders (NAHB) and Wells Fargo.
As measured by the index, current sales conditions for single-family homes fell three points month-over-month to 43. Traffic from prospective buyers also dropped from 29 to 24. However, sales expectations for the next six months stood unchanged at 47.
Close to one-third (29%) of homebuilders cut prices in March, compared to 26% in February. However, the average price reduction of 5% was unchanged month-over-month.
NAHB’s press release says that despite builder optimism about the cutting of regulations, economic uncertainty has caused many builders to take a more cynical outlook.
NAHB Chairman Buddy Hughes and NAHB Chief Economist Robert Dietz both attributed the drop in confidence to high cost pressure from tariffs. Hughes added that there are ‘other supply-side challenges that include labor and lot shortages.‘
While the Trump administration’s tariffs have seen false starts, the uncertainty of their implementation leaves builders needing to prepare for, as an example, price hikes on lumber from tariffs imposed on Canada.
‘Data from the HMI March survey reveals that builders estimate a typical cost effect from recent tariff actions at $9,200 per home,’ said Dietz. ‘Uncertainty on policy is also having a negative impact on homebuyers and development decisions.’
Hughes’ statement echoes Dietz’s, but he also stressed the lifting of regulations as a cause for optimism.
‘Builders are starting to see relief on the regulatory front to bend the rising cost curve, as demonstrated by the Trump administration’s pause of the 2021 IECC building code requirement and move to implement the regulatory definition of ‘waters of the United States’ under the Clean Water Act consistent with the U.S. Supreme Court’s Sackett decision,’ referring to a National Association of REALTORS®-backed challenge to a Biden administration revision to the Clean Water Act.”
(Source: RISMedia.com)
Tariff “Liberation Day”
On Wednesdsay, April 2nd, Donald Trump’s new tariff regime went into effect. He called it “Liberation Day”, claiming that these policies will liberate the United States from the economic oppression that other Countries have been exerting on us in the form of “unfair trade practices” – Others are calling it “Recession Day”, predicting that this will put us on a path to the next economic downturn. According to the Wall Street Journal:
“U.S. markets suffered their steepest declines since 2020, as investors grappled with the threat that President Trump’s new tariff plan will trigger global retaliation and hurt the economy.
Major stock indexes dropped as much as 6% on Thursday. Stocks lost roughly $3.1 trillion in market value, their largest one-day decline since March 2020. Stock-index futures continued to drift lower Thursday evening.
The Dow industrials dropped 1679 points, or 4%. The tech-heavy Nasdaq, which powered the market higher for years, was down 6%, pulled lower by big declines in Nvidia, Apple and Amazon.com. The S&P 500, which fell 4.8%, and the other benchmarks suffered their sharpest declines since the early days of the Covid-19 pandemic.
The dollar meanwhile tumbled, with the WSJ Dollar Index suffering its sharpest decline since 2023. The 1.3% fall brought the greenback to its lowest level since October, a sign of unease over the growth outlook and fears that the flow of funds into the country will be sharply curtailed. The dollar sank more than 1% against the euro, Japanese yen and Swiss franc.
Some of America’s allies came out swinging after the details of the U.S. president’s tariff plans were disclosed late Wednesday. French President Emmanuel Macron said Europe is weighing retaliation against U.S. tech firms, while Canadian Prime Minister Mark Carney said his country will match President Trump’s auto tariffs with 25% tariffs of its own.
Trump took the selloff in stride. ‘I think it’s going very well,’ Trump said in response to a question about his tariffs Thursday afternoon. ‘The markets are going to boom.’ Later Thursday, he left the door open to making deals to lower tariffs, while also promising new ones on pharmaceuticals and semiconductors.
Dozens of household-name stocks posted double-digit declines, including HP, Nike and Target. Stellantis also fell sharply. The Jeep maker said it is temporarily halting production at its auto assembly factories in Mexico and Canada.
The turmoil spread beyond stocks, with oil prices dropping more than 6% and investors selling gold after its sharp run over the past year to fresh records. Inflation expectations rose, but so did fears that the tariffs will tip the economy toward recession, sending investors to the safety of Treasurys.
So far, traders said, selling has been orderly and, though the scale of U.S. tariffs came as a shock, few investors are surprised to see stocks pull back following their gains over the past two years.
Still, the decline sets up financial markets for one of their most precarious periods in recent years, as the tariffs and international reaction test that faith of investors used to sticking with stocks.“
(Source: wsj.com)
According to the Wall Street Journal:
“The new U.S. tariffs rattling markets and promising globe-spanning trade barriers reflect a fixation of President Trump’s: the difference between how much stuff the U.S. buys from and sells to each of its trading partners.
The White House laid out new tariffs on more than 200 countries in two main ways. For more than half, it imposed a flat reciprocal tariff of 10%. For the rest, it added an additional levy based on a basic formula.
In these instances, the Trump administration determined costs it said countries imposed by taking the amount of a nation’s 2024 goods-trade imbalance with the U.S., then dividing that by the value of the goods America imports from that nation.
A White House handout called these costs a tariff charged to the U.S., ‘Including Current Manipulation and Trade Barriers.’ From there, in nearly all cases, the Trump administration imposed new ‘Discounted Reciprocal Tariffs’ of roughly half that result.
‘Drop your trade barriers…and start buying tens of billions of dollars of American goods,’ Trump said Wednesday.
Several economists said that basing tariffs off of bilateral goods deficits is confusing and illogical …
Goods deficits are a normal feature of healthy trade and ‘do not imply that anything is wrong,’ said Gian Maria Milesi-Ferretti, a senior fellow at the Brookings Institution.
Take a relatively poor country that mostly exports coffee to the U.S. Its citizens might lack the wealth to buy the kinds of high-value goods, such as Boeing aircraft or Tesla SUVs, that American factories specialize in. But that is no reason to discourage that country’s coffee from reaching American consumers—especially because few places in America have the right climate to grow coffee domestically, Milesi-Ferretti said.
The U.S. added reciprocal tariffs on several less-wealthy coffee exporters such as Guatemala and Honduras.
The White House figures initially confused economists because they didn’t seem to correspond with what foreign countries actually charge against imports from the U.S.
For example, Chinese tariffs against the U.S. were about 23% overall as of last month, according to the Peterson Institute for International Economics. The White House chart said China’s tariffs and trade barriers were 67%. In response, the White House added new tariffs of 34% atop levies already charged to that country.
Data sleuths on social media soon reverse-engineered the formula behind the White House’s calculations, zeroing in on the trade-related math. Dividing the U.S.’s 2024 goods-trade deficit with China—$295 billion—by the amount the U.S. imported from China resulted in the White House’s 67%.
(Source: wsj.com)
Trump warned automakers not to raise prices … According to the Wall Street Journal:
“When President Trump convened CEOs of some of the country’s top automakers for a call earlier this month, he issued a warning: They better not raise car prices because of tariffs.
Trump told the executives that the White House would look unfavorably on such a move, leaving some of them rattled and worried they would face punishment if they increased prices, people with knowledge of the call said.
Instead, Trump said, they should be grateful for his elimination of what he called former President Joe Biden’s electric-vehicle mandate, which involved subsidies and emissions requirements to encourage electric-car production. He made a lengthy pitch for how they would actually benefit from tariffs, two people on the call said, adding that he was bringing manufacturing back to the U.S. and was better for their industry than previous presidents.
… On Wednesday, Trump announced a 25% tariff on all imported vehicles and parts starting April 2, a move almost certain to force American carmakers to raise prices on customers. Most automakers depend on parts and materials from other countries to make cars, including vehicles assembled in the U.S.
‘You’re going to see prices going down, but going to go down specifically because they’re going to buy what we’re doing, incentivizing companies to—and even countries—companies to come into America,’ he said at the event.
Trump’s relationship with automakers since taking office has been a rocky one, illustrating one of the challenges so far to his economic orthodoxy. The president is trying to curb inflation—voters’ cost-of-living concerns helped fuel his 2024 victory and are now one of his top vulnerabilities, experts say—while imposing tariffs on industries such as auto manufacturing that he says will remake the U.S. trade order.
… ‘It is difficult to see how imposed tariffs over time would not have some impact on prices,’ said Matt Blunt, president of the American Automotive Policy Council, which represents General Motors, Jeep-parent Stellantis and Ford Motor.
… An executive at one of the automakers said they were baffled by the desire to both impose tariffs—but also tell car companies they couldn’t raise prices. ‘The math would tell you, that’s going to cost us multibillions of dollars,’ the executive said. ‘So who pays for that?’”
(Source: wsj.com)
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