How strong is the economy?

I’m Isaac Saul, and this is Tangle: an independent, nonpartisan, subscriber-supported politics newsletter that summarizes the best arguments from across the political spectrum on the news of the day — then “my take.”

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Tomorrow.

This Friday, Tangle’s newest member and Editor-at-Large Kmele Foster will be contributing his first written piece. Kmele’s essay tackles America’s 2020 racial reckoning and describes his philosophy about the country’s racial movements; it’s a thought-provoking Friday edition, and we can’t wait to share it with you.

Quick hits.

1. A passenger jet carrying 242 people bound for London crashed shortly after takeoff in Ahmedabad, India. Indian authorities believe there are no survivors, though local police reported that at least one passenger survived. (The crash)
2. The United States began directing non-essential staff to depart embassies in the Middle East due to the threat of regional unrest. (The directive) Separately, Oman’s foreign minister confirmed that the United States and Iran will meet for a sixth round of nuclear talks in Oman on Sunday. (The meeting)
3. Health Secretary Robert F. Kennedy Jr. named eight doctors and researchers to the Advisory Committee on Immunization Practices for the Centers for Disease Control and Prevention. Kennedy had fired all of the panel’s 17 members on Monday. (The announcement)
4. Protests against the Trump administration’s immigration-enforcement raids continued in Los Angeles and spread to at least 15 major U.S. cities, including San Francisco, New York, Chicago, Dallas, and Washington, D.C. Texas Governor Greg Abbott (R) said that National Guard troops will be deployed to protest locations in his state. (The protests)
5. The entire Fulbright Foreign Scholarship Board, which oversees the State Department’s academic study abroad program, resigned, citing purported political interference by members of the Trump administration. (The resignations)

Today’s topic.

The latest on the economy. In the past week, the latest metrics for several key economic indicators have been released amid global uncertainty over the impact of President Donald Trump’s tariffs. In May, the Bureau of Labor Statistics’s (BLS) inflation report showed prices rising at a lower rate than many economists expected, while the bureau’s jobs report showed hiring slowed slightly from the month prior but also came in higher than projections. Separately, negotiators from the Trump administration and the Chinese government met in London this week to negotiate a trade agreement, and President Trump announced on Wednesday that the sides had reached a deal. 

On Monday, the BLS reported that the overall Consumer Price Index (CPI), along with the core measure that excludes food and energy prices, both rose 0.1% from April to May, slower than the previous monthly increase of 0.2%. The CPI also increased 2.4% annually; these rates were slightly under economists’ projections, though the annual CPI rate remains higher than the Federal Reserve’s 2% target. Energy prices drove some of the cooling CPI in May, decreasing 1%, while food prices ticked up 0.3% after decreasing 0.1% in April.

Last Friday, the BLS released its jobs report for May, which showed nonfarm payrolls increasing by 139,000 and the unemployment rate holding at 4.2%. This job growth was lower than the 147,000 nonfarm payrolls added in April but higher than economists’ estimates. Wage growth also increased; hourly earnings rose 0.4% (compared to 0.2% growth the month prior) and have increased 3.9% from May 2024. 

The relative stability in the job market combined with slowing inflation has led some economists to speculate that the Federal Reserve could soon cut interest rates. Analysts do not expect the central bank to announce a rate cut at its June meeting next week but forecast a reduction by September. The Federal Reserve last cut the interest rate — by a quarter of a point — in December.

On Wednesday, President Trump announced some details of a trade agreement between the U.S. and China, writing on Truth Social that the deal would include China supplying magnets and “any necessary rare earths” to the U.S. in exchange for lifting some technology export controls and recent limitations on Chinese students attending American universities. 

“WE ARE GETTING A TOTAL OF 55% TARIFFS, CHINA IS GETTING 10%. RELATIONSHIP IS EXCELLENT!,” Trump wrote. The White House says the 55% effective tariff on Chinese imports is a sum of the administration’s 10% baseline tariff on all trading partners, the 20% punitive tariff associated with fentanyl shipments into the U.S., and the 25% tariffs on China implemented during Trump’s first term. The deal is subject to final approval from Trump and Chinese President Xi Jinping. 

Major stock market indices in the U.S. initially rose on news of the deal but fell later on Wednesday. On the day, the S&P 500 lost 0.27%, the Nasdaq Composite decreased roughly 0.5%, and the Dow Jones Industrial Average was virtually unchanged.

Today, we’ll explore perspectives on the economy and trade from the right and left, followed by my take.

What the right is saying.

• The right celebrates the latest inflation data and criticizes the media’s coverage of the economy under Trump.
• Some say Trump can continue helping the economy by pulling back on tariffs.
• Others say the trade agreement with China seems favorable but also leaves key questions unresolved. 

In The Federalist, Jacqueline Annis-Levings argued “low inflation numbers refuse to match the media narrative on Trump’s economy.”

“Trump’s tariffs appear to be having a negligible impact on inflation, with year-over-year inflation rates hitting lows not seen since 2021. The stock market, which tanked following Trump’s Liberation Day announcement, has also recovered and is close to the highest it’s been since Trump was inaugurated,” Annis-Levings wrote. “CNN, which has been fear-mongering about the economy since Trump’s election, was forced to admit Wednesday that inflation rose ‘less than expected last month’ and that ‘tariff impacts weren’t prevalent’ in the CPI report. Nonetheless, the outlet still insisted the CPI report ‘was lightly pockmarked with potential indications of price hikes.’

“On Tuesday, NPR published an article titled ‘Wall Street CEOs are cycling through the five stages of tariff grief.’ The article warned about ‘the potential loss of America’s superpower status’ and claimed the ‘tariff tug-of-war is already hiking prices for both consumers and businesses,’” Annis-Levings said. “ABC, BBC, and The Guardian each ran headlines that inflation was a little higher than last month, downplaying the fact that April’s rate was the lowest it’s been since 2021.”

In The Washington Examiner, Tiana Lowe Doescher wrote “real wages up 1.3%, inflation down 20% since Trump took office.”

“Despite widespread anticipation that the president’s universal 10% tariff on imports would soon trickle down into consumer prices, inflation continued to decelerate in May, with Consumer Price Index inflation down 20% since President Donald Trump took office. That has translated to a pay raise for workers,” Doescher said. “It’s possible that businesses have a limited ability to eat the cost of tariffs and will eventually have to pass them on to consumers in the form of increased prices. Furthermore, rebound inflation would be nearly guaranteed if Trump reverts to his ill-advised menu of ‘reciprocal tariffs’ after the July end date of the 90-day post-‘Liberation Day’ pause.”

“The Fed will want some clarity in the White House‘s long-term tariff plans. If Trump does revert to raising import levies across the board, the central bank will correctly want to wait before cutting the federal funds rate from its current level, which is already slightly below the historical average. Given the continued strength of the labor market, Trump would be wise to consider this a blessing in disguise from the Fed,” Doescher wrote. “But for the White House, it’s not too early to claim victory over the first phase of obliterating Bidenomics’ inflationary scourge.”

In Hot Air, Ed Morrissey said the “US beats China 55-10 in [the] tariff bowl final.”

“If this is the final form of a deal, it raises some questions about why Xi would assent to it. A 55/10 tariff imbalance on trade is provocative, to say the least, and will likely be high enough to force relocation of supply chains for American businesses. For instance, Trump publicly scolded Apple's Tim Cook for saying that iPhones sold in America would be built in India rather than China, and threatened to apply a 25% tariff to such imports,” Morrissey wrote. “If a 55% tariff applied to those sourced in China, it still would make sense for Apple to shift manufacturing and assembly to India, especially since the infrastructure may not exist in the US yet to fully rehome that supply chain.”

“The part about student visas seems interesting in this context. If Xi is willing to be on the losing side of a 55/10 tariff imbalance just to get Chinese students access to American universities, that proves what an impressive amount of leverage we have with China on that point,” Morrissey said. “Now it seems the reality is that China really needs access specifically to US higher-ed institutions — and we should be asking why, and what Xi uses that access to accomplish. Xi is paying a high price for that access, if Trump's claims are accurate, and relate to final terms rather than transitional policy.”

What the left is saying.

• Many on the left suggest that the inflationary effects of Trump’s tariffs are still to come.
• Some concede that the tariffs’ negative impact on the economy may not be as significant as expected.
• Others say the agreement with China does not actually address trade issues.

In Yahoo Finance, Rick Newman argued “inflation isn't gone. It's just dormant.”

“If anyone other than Donald Trump were president, inflation would be yesterday's problem. Since peaking at 9% in 2022, the overall inflation rate has declined steadily, hitting a tame 2.4% in May. That's almost at the 2% level the Federal Reserve considers ideal,” Newman wrote. “Under normal circumstances, consumers should be enjoying some newfound purchasing power, given that incomes are now growing more than prices. The Federal Reserve should be poised to restart a cycle of gradual interest rate cuts, which it halted last December, lowering borrowing costs for everybody. But inflation isn't licked. It's just dormant.

“Trump's tariffs on imports are bound to have some inflationary effect, beginning any day now. Trump has raised the average tax on imports from 2.5% to about 16%. That will inevitably raise the cost of some $3 trillion worth of goods Americans buy every year,” Newman said. “After three years of elevated prices, consumers seem unusually sensitive to any price hikes. And survey data shows they're girding for higher prices caused by Trump's tariffs. The current reprieve is certainly welcome, but it's too early to celebrate inflation's demise.”

In Bloomberg, Jonathan Levin asked “why is inflation defying tariff fears?”

“It’s premature to assume that tariffs won’t push up inflation, but the developments have been pretty encouraging thus far. Inflation worrywarts (including yours truly) appear to have overestimated the degree to which companies would rush to raise prices in an environment of ever-changing trade policy and softening consumer demand,” Levin wrote. “Odds are that we’ll still get some rocky inflation reports over the summer, but I’m less inclined to believe that they’ll lead to unanchored inflation expectations and sustainably higher interest rates.”

“March and April data were somewhat flattered by consumers and businesses ‘front-running’ — essentially trying to lock in purchases before expected tariffs hit. In that sense, May represented the initial comedown from a sugar high of sorts, and we’ll have to watch closely to see if consumption returns to just so-so or collapses,” Levin said. “Overall, tariffs have been more lousy for consumer demand than for inflation — still unfortunate, just a different kind of bad. Given that, it’s logical to expect that the Federal Reserve will get back to cautiously cutting policy rates in the months ahead to protect the employment side of its mandate.”

In CNN, David Goldman said “Trump’s China ‘truce’ is nothing of the sort.”

“Trump said both countries agreed to ease export restrictions, per the prior arrangement agreed upon in Geneva in May… But in reality, the trade truce — if that’s really what was accomplished this time around — is mostly just a return to the already-tense state of affairs from before April 2,” Goldman wrote. “Tariff rates from both countries remain historically high, and significant export restrictions remain in place. The United States has not opened its doors to China’s autos, nor is it going to sell its high-end AI chips anytime soon. And, in Trump’s parlance, China isn’t treating America much more ‘fairly’ after this agreement than it did before.”

“The compounding tariffs create significant trade barriers with America’s second-largest trading partner, raising prices for American businesses and consumers with no easy fixes or clear market alternatives. Some gigantic companies, such as Apple, have complex supply chains that can withstand some of the price pressures. But even Apple… said it would face a $900 million quarterly cost increase because of tariffs,” Goldman said. “A trade truce may be better than the alternative — if it lasts this time. But if the deal leads to reduced trade barriers, that could boost both economies.”

My take.

Reminder: “My take” is a section where I give myself space to share my own personal opinion. If you have feedback, criticism or compliments, don't unsubscribe. Write in by replying to this email, or leave a comment.

• The trade deal with China is very much incomplete, and is more bad news than good news.
• The jobs report and inflation data are more of a mixed bag.
• Less inflation is unambiguously good news; long-term tariff effects are still unknown, but May’s report is a very good sign.

To unpack all the latest economic news from the last week, I’m going to sort everything into three buckets: bad, mixed bag, and good. Let me start with the bad news and work my way to (what I think is) the good news.

The bad: The trade deal with China. I still don’t think that President Trump has an actual trade strategy. The “deal” with China has not been approved by President Xi, and publicly available details are still sparse, so my best read is that the administration is just signaling that something is happening — but it’s hard to say what that is. That’s generated loads of positive-sounding headlines, though, which I suppose was the point. The Trump administration is celebrating, but I’m just not sure what, exactly. 

What we do know so far isn’t really all that encouraging. As The Wall Street Journal editorial board put it, “Details are few, but the countries appear to be resetting their trade relationship to where it was a few months ago before a tit-for-tat escalation.” In other words: After months of uncertainty and tumult that has disrupted businesses and created volatility in global markets, the “deal” is effectively going back to what we had before all this started. 

The absolute biggest target in these negotiations was restrictions on exports of China’s rare earth minerals and magnets; the Trump administration says they negotiated a six-month reprieve on those, but (if agreed to) that is only a short-term out that still gives China plenty of leverage down the road. It also appears that in order to get there, the U.S. is easing its own export controls on the most advanced computer chips; those controls have enjoyed bipartisan support, and dropping them could eliminate an important technological advantage we currently have over China. 

Again: The recent agreement is more of a handshake deal between the two countries to walk back from the brink of an all-out, unconstrained trade war. This isn’t some big win for us, and it doesn’t fundamentally change anything about our position before “Liberation Day.” 

Now onto the mixed bag: the jobs report and the trade deficit. The unemployment rate stayed the same at 4.2%, which is a healthy number and a good signal that all the uncertainty from the last few months hasn’t been so disruptive that it’s caused mass layoffs. What concerns many economists about the jobs report is that the prior months’ employment numbers were revised downward (following a trend that we saw under Biden), manufacturing jobs ticked lower (the opposite of what the administration said would happen), and the labor-participation rate fell, too. So while unemployment didn’t rise, the job market is still flashing some warning signs. 

In a similar vein, the administration is celebrating the fact that the trade deficit has fallen by more than half — from $140 billion to $61 billion. What they don’t mention is that the trade deficit spiked in the first quarter because consumers and businesses feared tariffs and loaded up on foreign goods and products, so the numbers are a bit inflated. As I’ve been saying, Trump’s tariff policy has been very on-again/off-again, so the real impact of his moves is hard to measure — there’s still a lot of mud to clear to get to an answer. Reducing our trade deficits was one stated goal of the administration, so they can certainly point to this trend as a positive outcome (though whether a policy pursuit of reducing trade deficits is worthwhile is very much up for debate).

And, finally, the good news: Inflation continues to trend downward. This trend began toward the end of Biden’s term and has continued into the first few months of Trump’s term, and it's starting to look like tariff-induced inflation is not a guarantee. One reason for that might be that many of the Trump tariffs are paused or never went into effect (obviously), but Trump has still imposed broad-based tariffs across our global trading partners and major imports like steel and aluminum — and so far the cost of those haven’t hit home. If this holds, it’ll be one of the biggest rebukes of “mainstream consensus” that I can remember in some time. 

While the inflation rate continues to fall, Trump is basking in the glow of some other positive economic indicators: Stock prices are once again approaching record levels, having fully rebounded since the initial tumult of Liberation Day. In May, U.S. tax receipts rose 6% from the previous year (and 15% since April), meaning the IRS is collecting more money now than it did this time last year despite vast cuts to the agency. And, finally, Trump can still look forward to more good news that seems poised to come in the months ahead: interest rate cuts, more trade deals, or even an unambiguously strong jobs report.

A lot of this stuff is simply “too early to tell” — as I’ve said before, it could be six months or a couple years or a decade before we really understand the economic impacts of Trump’s tariff rollout. No serious analyst can claim Trump has failed or succeeded yet, and many good arguments hold that the negative impacts of tariffs are just around the corner; but right now, it’s hard to argue that the president’s policies have been the major disruptor many people predicted. 

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Your questions, answered.

Q: If the "common" person understands that the national debt is destroying America, why is it so difficult for the Congress and Administration to "get it"?

— James from Yreka, CA

Tangle: I think it’s true that the average American understands the national debt is a problem — and I think most politicians believe this to be the case, too. The hardest part about solving the problem isn’t whether Americans, this administration, or even the majority of national politicians understand it; the hardest part is prioritizing it above other electoral issues.

The national debt is driven by annual deficits. As we say all the time, the only two ways to eliminate a deficit are to increase revenue or decrease spending. As we say almost as frequently, the biggest sources of spending are on the military, healthcare and Social Security (as well as servicing the debt itself), and a majority of Americans don’t want cuts to any one of those programs. The government can only increase its revenue by taking in more through taxes, and whether that’s through income taxes or tariffs, Americans don’t like it when their taxes go up. 

In those terms, the bind we find ourselves in is pretty obvious: Solutions to the debt are deeply unpopular.

While economists agree that the national debt is a problem, they are somewhat divided over when the problem becomes a screaming, five-alarm, totally existential problem. The Wall Street Journal recently put out a great video on this, with the upshot that solving the debt may not be 100% absolutely necessary right now.

That’s not to say that we shouldn’t solve it; obviously, we should — our current borrowing rates, the country’s credit solvency, and future generations all depend on that. That’s just to say that politicians will always want to avoid making hard, unpopular choices whenever they don’t absolutely have to.

This may be cynical, but think of the last couple decades as a big game of hot potato. Each party wants to hold onto power for as long as they can when they win control of government, which means prioritizing policies that help them with voters in the short term. They can then put off solving the debt, because they know they won’t be the ones blamed for the disaster if they’re not the ones holding the potato when the music cuts out.

Want to have a question answered in the newsletter? You can reply to this email (it goes straight to our inbox) or fill out this form.

Under the radar.

Amid civil unrest in Los Angeles over the past week, U.S. Customs and Border Protection (CBP) has begun flying Predator B drones over parts of the city to support Immigration and Customs Enforcement in their operations. The drones, also known by their MQ-9 Reaper military variant designation, have rarely been deployed to urban environments in the United States, and CBP says they are not being used to surveil “First Amendment activities.” CBP’s Predator B fleet consists of about eight unarmed drones, which, according to the agency, are not equipped with facial recognition technology that could be used to identify protestors. However, their deployment has raised concerns among civil liberties advocates, who say it could undermine constitutional protections against unlawful searches. The War Zone has the story.

Numbers.

• +2.9%. The 12-month change in food prices, according to the May 2025 Consumer Price Index (CPI) report. 
• –3.5%. The 12-month change in energy prices.
• +0.4%. The 12-month change in new vehicle prices.
• +3.9%. The 12-month change in shelter prices.
• +3.0%. The 12-month change in medical care services prices.
• –34.5%. The 12-month change in Chinese exports to the United States, according to Wind Information.
• –18.0%. The 12-month change in U.S. exports to China. 
• –41.6%. The percent change in China’s year-over-year trade surplus with the U.S. 

The extras.

• One year ago today we wrote about Israel’s hostage rescue.
• The most clicked link in yesterday’s newsletter was the announcement of a trade deal with China.
• Nothing to do with politics: In memoriam of Brian Wilson, whose death was announced yesterday, here’s a video about the Beach Boys founder’s lasting impact.
• Yesterday’s survey: 4,131 readers answered our survey on Robert F. Kennedy removing members of the Advisory Committee for Immunization Practices with 68% predicting he’d replace them with vaccine skeptics. “How do we stop this being ‘just another Tuesday?,’” one respondent asked.

Have a nice day.

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