Here's the Deal with the Economy - February 16, 2025

Economy: In Slowdown

Market Cycle: Bullish

_{Week 7 of 52 for 2024: 13.46% of the way through 2025}

Table of Contents

• Weekly Note:

• Inflation continues to trend higher.

• Trump slaps tariffs on all steel and aluminum comi …

  • How Will This Affect Steel Prices?

  • What About Aluminum?

• No more pennies.

• Significant Economic Data from the week:

Weekly Note:

There has never been a better time to set yourself up for long-term success in the U.S. than right now.

This is especially true if you're in your 20s or early 30s.

After spending Saturday morning communicating with some of the best salespeople, managers, and executives from various industries across the country, one thing became even clearer:

The key to success isn’t a secret. It comes down to a few core principles:

1. Be personable.

2. Focus on results.

3. Take pride in your performance.

4. Constantly improve at your craft.

5. Put in the effort required to reach your goals.

Right now, the bar for over-achievement is very low. That means the opportunity to stand out is massive. But don’t let a lack of competition make you complacent. Your future self will thank you for the work you choose to put in today.

At the same time this is also a critical time for business owners and managers. If you have employees who embody these traits, take care of them. Show appreciation, invest in their growth, and make sure they have reasons to stay. Because if you don’t, another company will. In today’s job market, your best employees have more options than ever.

Ironically, this is exactly what pushed me out of the workforce and into self-employment. Looking back, I now realize just how cheaply I had given away my loyalty. Especially compared to what I’ve experienced before and since. And when I finally decided that it was time to correct that, it still was met with a potential fight.

Here’s the problem for employers in this situation: once an employee is forced to step back, research and evaluate their worth, and put a price on their contributions and future potential, they’ve already got one foot out the door. And if the gap between their current situation and the opportunities available elsewhere is too wide, why would they stay? Who in their right mind would stay with an employer that knowingly undervalued them, only to then make them fight for scraps?

The labor market today is drastically different from what it was before 2017, and it continues to shrink. At the same time, the gap between top performers and mediocre workers is growing wider than ever. The sooner both employees and employers recognize this generational shift, the better off they’ll be.

The reality is simple: not all employees are built the same. Mostly due to the fact that not everyone is committed to improving their craft.

If you want success, work for it.

If you have great people, reward them.

And if there’s someone in your life who doesn’t yet see the opportunities in front of them, let them know.

Sometimes, the right insight at the right time can change everything.

Inflation continues to trend higher.

The big story this week was the continued rise in inflation, with both the Consumer Price Index (CPI) and Producer Price Index (PPI) coming in hotter than expected. Both PPI and Core-PPI rates for December were also revised higher than initially reported last month.

The silver lining? PPI may be stabilizing at 3.5%. This is important because PPI is considered a leading indicator of inflation as it tracks the costs producers face before those costs get passed on to consumers.

Looking ahead, the Federal Reserve’s preferred inflation measure, the Personal Consumption Expenditures (PCE) index, will be released at the end of the month. Since PCE tends to lag behind CPI and PPI, it’s likely to move higher as well. However, don’t expect it to overshoot forecasts as much as analysts use CPI and PPI data to refine their PCE estimates, making big surprises less likely.

Trump slaps tariffs on all steel and aluminum coming into the country.

This week, President Trump announced new tariffs on all steel and aluminum imports into the U.S., set to take effect on March 12, 2025.

How Will This Affect Steel Prices?

The U.S. has the capacity to produce up to 110 million tons of steel per year, but actual production typically ranges between 70 and 97 million tons. Just enough to meet domestic demand, which also falls within that range. Most of this steel is consumed by the construction and automobile industries.

Currently, about a quarter of the steel used in the U.S. is imported, primarily from Canada, Brazil, and Mexico.

Looking back, a similar round of steel tariffs in 2018 successfully boosted domestic production, pushing U.S. steel output higher. However, this came at a steep cost as steel prices moved higher, surging over 150% higher during the Pandemic. However, it should also be noted that much of that surge was due to the drastic negative effects of the Pandemic responses on the supply chain, and not just due to the tariffs.

So while you should not see as large as a price increase this time around, best to expect higher prices in the future as a result of the increased tariffs.

What About Aluminum?

The U.S. has a total aluminum production capacity of 4.05 million metric tons. About a quarter of which comes from newly produced aluminum, and recycled aluminum making up the rest of the three quarters. US consumption ranges between 10 and 12 million metric tons, meaning the U.S. heavily relies on imports to fill the gap.

Before these new tariffs take effect, U.S.-produced aluminum is already 10-20% more expensive than imported aluminum.

Expect to see increasing costs for industries that rely on aluminum, such as aerospace, automotive, construction, manufacturing, and packaging. As their costs go up, so will your prices.

No more pennies.

The U.S. is officially ending penny production as President Trump and the D.O.G.E. team have identified it as a cost-cutting measure.

This move isn’t surprising. It’s been discussed for years, as the cost of producing pennies has long outweighed their actual value.

There’s no need to worry about major disruptions. Canada stopped producing pennies in 2012 and phased them out of circulation by 2013 with minimal issues. While there were some minor inconveniences at first, businesses and consumers quickly adapted, and everyday transactions continued as usual.

This change was inevitable, and it makes sense to implement it now before the cost-benefit ratio worsens further. Removing pennies from circulation will save taxpayer dollars in the long run.

Significant Economic Data from the week:

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