Daily Commentary

MarketMinder’s View: One practicality that goes overlooked about the Trump administration’s ostensible new tariff regime: Who is going to enforce it? Our research shows US Customs and Border Protection (CBP) employs about 2,500 tariff officers to police hundreds of locations, which isn’t nearly enough to inspect the millions of new items now facing import taxes. Then, on the other side are customs brokers, who require a license to practice—and an arduous exam to get one. “A minimum score of 75% is required to pass, but don’t let the C-grade threshold fool you. The last six exams, which are held twice a year, have an average pass rate of 21% prior to appeal decisions. One exam in 2019 had a pass rate of 4.2%. ... The U.S. Customs and Border Protection, the agency that administers the exam, said it gets an average of about 1,000 test takers for each exam. The CBP mandates that each customs business—or entity that helps companies ship goods internationally—employ at least one licensed broker. Brokers don’t have to be physically located at each port. They file paperwork about the incoming cargo to the CBP electronically, and after the goods get cleared, they may also collect the tariffs from importers and pay the CBP.” Moreover, automation isn’t likely to streamline this process in the near future. “Logistics service providers said they don’t see artificial intelligence and other technology tools replacing customs brokers anytime soon. These tools are only as good as the input, and it is uncertain if they can discern intent, said Krish Iyer, vice president at Easyship and an expert in e-commerce logistics.” For investors, the CBP’s and shippers’ lack of staffing and capacity underscore one reason why tariffs probably aren’t the huge economic headwind many think. The infrastructure to effectively collect duties en masse simply doesn’t exist. This, along with other mitigating factors (including legal challenges and ongoing trade negotiations) reduce tariffs’ severity, in our view.

MarketMinder’s View: As this article wades into politics, please note, MarketMinder is nonpartisan and prefers no politician or political party over another. We share this update to highlight a broader theme: Ongoing trade negotiations indicate the Trump administration may be softening its approach to China. After imposing tariffs on China, raising them in successive rounds to 145% (with some exceptions)—and all the while telling China (and everyone else) not to retaliate—China appeared to call its bluff, reciprocating with tariffs of its own. Now both sides appear open to talks. “‘It will come down substantially but it won’t be zero,’ Trump said Tuesday in Washington, following earlier comments from Treasury Secretary Scott Bessent that the standoff was unsustainable. Trump added that ‘we’re going to be very nice and they’re going to be very nice, and we’ll see what happens.’” Not that politicians’ words are anything to go by, but we have seen this movie before during Trump’s first administration—which didn’t appreciably dent trade. As the article further explains, “A White House official said Trump wasn’t considering unilaterally lowering tariffs, but could do so in concert with discussions with the Chinese that the administration is hoping to jump start. [Meanwhile, Chinese President] Xi [Jinping] still hasn’t spoken to Trump since his US counterpart returned to office, with no public indication that talks between the world’s largest economies are taking place, even at lower levels. ... the Treasury chief said a comprehensive deal could take two to three years to hammer out.” Any developments here will be worth monitoring, but this episode argues against the dread that escalating tariffs are inevitable and will automatically lead to the next Great Depression.

MarketMinder’s View: First, the numbers: “New home sales jumped 7.4% to a seasonally adjusted annual rate of 724,000 units last month, the highest level since September 2024, the Commerce Department’s Census Bureau said on Wednesday. The sales pace for February was revised down to a rate of 674,000 units from the previously reported 676,000 units. Economists polled by Reuters had forecast new home sales, which make up about 14% of U.S. home sales, climbing to a rate of 680,000 units.” On a regional basis, the South—the largest homebuilding market—saw a surge after inclement weather depressed sales the prior month. Also apparently helping sales: March’s median new home price fell -7.5% y/y, and if new home inventory is any indication, its 0.6% m/m rise to 503,000 units is the highest since 2007 and suggests favorable pricing for buyers continues. New home sales, the main entry feeding into residential investment, are a small slice of GDP, but against overall economic gloom, they are a bright spot.