Why am I not happy, you ask?  

Because today, which is “Liberation Day” according to the Trump Administration, a war began.   A trade war. 

Welcome to this week’s Steak House Index update.

If you are new to my blog, or you need a refresher on the SHI10, or its objective and methodology, I suggest you open and read the original BLOG: https://www.steakhouseindex.com/move-over-big-mac-index-here-comes-the-steak-house-index/

Why You Should Care:   The US economy and US dollar are the bedrock of the world’s economy.   But is the US economy expanding or contracting?

Expanding … according the ‘advanced’ reading just released by the BEA, Q3, 2024 GDP grew — in ‘current-dollar‘ terms — at the annual rate of 4.7%.

The ‘real’ growth rate — the number most often touted in the mainstream media — was 2.8%.   In current dollar terms, US annual economic output rose to $29.35 trillion.

According to the IMF, the world’s annual GDP  expanded  to over $105 trillion in 2023.   Further, IMF expects global GDP to reach almost $135 trillion by 2028 — an increase of more than 28% in just 5 years.

America’s GDP remains around 25% of all global GDP.  Collectively, the US, the European Common Market, and China generate about 70% of the global economic output.  These are the 3 big, global players.   They bear close scrutiny.

The objective of this blog is singular.

It attempts to predict the direction of our GDP ahead of official economic releases.  Historically, ‘personal consumption expenditures,’ or PCE, has been the largest component of US GDP growth — typically about 2/3 of all GDP growth.  In fact, the majority of all GDP increases (or declines) usually results from (increases or decreases in) consumer spending.  Consumer spending is clearly a critical financial metric.  In all likelihood, the most important financial metric. The Steak House Index focuses right here … on the “consumer spending” metric.  I intend the SHI10 is to be predictive, anticipating where the economy is going – not where it’s been.

Taking action:  Keep up with this weekly BLOG update.  Not only will we cover the SHI and SHI10, but we’ll explore “fun” items of economic importance.   Hopefully you find the discussion fun, too.

If the SHI10 index moves appreciably -– either showing massive improvement or significant declines –- indicating growing economic strength or a potential recession, we’ll discuss possible actions at that time.

The Blog:

Look.   I get it.   This trade thing is screwed up.   It’s been screwed up for decades.   Trust me on this.   We don’t need to look much beyond the annual American “trade deficit” to see bad the problem really is.  

A trade deficit, frankly, when you’re a rich country like the US is not overly surprising.  But the sheer size and speed are staggering.  Again, this problem has been embedded for decades.  

Will this “reciprocal tariff” solve the problem?

Probably not.  At least, not today, in 2025.   It took decades to evolve; it can’t be fixed in this way.  

It might have done the trick … frankly … had the US implemented a policy similar to this about 30 years ago.   Back when the US actually had a manufacturing base.  Back before so many US manufacturing industries closed their doors, laid off all their staff, and moved manufacturing facilities to other low cost countries like China, Vietnam, Mexico, etc.  Had the administration in power in 1995 handled this problem then, this would not have happened:

Apparel and textiles were decimated by US trade policies in place during the 1990s.   There’s no easy fix for this today. 

No, I’m sorry to say, today’s action — in my opinion — is kind of like closing the barn doors after all the horses have already left.

But even if I agreed this is good policy, the implementation itself is problematic for me.   To repeat:  the sheer size and speed of the CHANGE is staggering and will, without a doubt, adversely impact global market participants.

In what way, you ask?   You got me.  The last time a president tried something like this was about 100 years ago.   Just after the stock market crash in 1929, the Smoot-Hawley Tariff Act was passed in 1930. 

The Smoot-Hawley Tariff Act raised tariffs on approximately 20,000 imported goods.   The intent then, as now, was to protect American industries and jobs.   Unfortunately, it didn’t work then … and I don’t think it will work now.   The impacts back in 1930?

     >> The act made all imports more expensive for all Americans. 

     >> Other countries imposed more tariffs on US exports, further disrupting markets.

     >> Global trade PLUMMETED by 65% between 1929 and 1934.

By 1932, US exports had fallen from $7 billion to $2.5 billion.  Farm exports declined by about 1/3.   Many attribute the length and depth of the Great Depression to the Smoot-Hawley Tariff Act.   All in all, the outcome was dismal. 

Will the same happen this time?   It’s hard to say.   This is a very different world.  

My 2 cents, folks.   My opinion only.   Time will tell. 

Here’s the full list of countries impacted by today’s actions:

Let’s go to the steakhouses and get a drink.   I need one.

Interestingly enough, while we see a lot more red in today’s chart, this week’s SHI10 of -59 isn’t too bad.   Especially by historic perspective:

As we see, the “spread” is almost identical to that on 3/19, so no red flags there. 

In the coming weeks, I’m guessing, we will see significant declines in the SHI.   Again, time will tell.   I’ll discuss it in more detail should this occur.   Hang in there.

<: Terry Liebman :>