A Method to the Madness

Layoffs surge to crisis-era levels... Tariffs are front of mind... It's all directed at China... 'Any other type of war' sounds serious... The better news... Crypto reserve plans and an important jobs report tomorrow...

This is not company you want to keep...

Picking up where we left off on the jobs-market front yesterday, some concerning numbers made a few headlines today...

Today, a report came out that noted U.S.-based employers announced 172,017 job cuts last month, the highest monthly total since July 2020's 262,649. And layoff announcements are rising, according to the report from hiring firm Challenger, Gray & Christmas...

So far this year, employers have announced 221,812 job cuts, the highest year-to-date (YTD) total since 2009 when 428,099 job cuts were planned. It is up 33% from the 166,945 cuts announced during the same period in 2024.

Whenever you see comparisons to 2020 during the COVID-19 pandemic... and 2009 during the great financial crisis... that'll grab some attention. It's not exactly great company to keep if you're interested in a stable labor market or economy, at least.

Now, here are some important details...

The report attributes more than a third (37%, or 63,583) of these announced cuts to Elon Musk's Department of Government Efficiency ("DOGE"). You may think this is a one-off anomaly, and it might end up that way. But the rise in layoffs is not isolated to government work.

Roughly 36,000 are because of "market/economic conditions," according to this monthly report, while another 63,500 are linked to a combination of bankruptcies, restructuring, or closing of businesses. The retail sector followed DOGE with about 39,000 job-cut plans announced in February, followed by the tech sector with roughly 14,500.

The better news is that if you strip out the layoff announcements attributed to DOGE – many of which are presently held up as part of federal court judgments – America's layoff numbers are in line with this time last year.

In the meantime, though...

Throw the state of the jobs market into the pile of uncertainties that the market is digesting. According to Bloomberg today, the Trump administration's rapid efforts to reduce the size of the federal government have mainstream economists rethinking forecasts for 2025...

Comerica Bank, Evercore ISI and Barclays are among firms who say total job losses could top half a million by the end of the year.That number, which includes knock-on effects in the private sector, would effectively reverse a quarter of all job growth in 2024. The government's monthly report on US employment for February due Friday may show limited signs of the damage, though the impact is set to become more apparent in March and April."If these numbers on federal workers turn out to be accurate, and if you include the grantees and the contracts, these numbers are going to be significant," said Harry Holzer, a Georgetown University professor and former Labor Department chief economist.

That's a big first "if," of course... But the point is that the uncertainty around the path and scope of the labor market – and other matters, like tariffs – appears to be rattling an increasing number of folks with money in the markets.

'Numbskull' and 'dumb': The latest on tariffs...

President Donald Trump said today he's pausing tariffs on Mexican and Canadian goods and services covered by the trade agreement that the countries agreed to under Trump's first term. This delay, lasting until April 2, covers half of Mexican imports and about 40% of Canadian imports, according to the White House.

However, that announcement didn't do anything to soothe a down market. The benchmark S&P 500 Index dropped almost 2% today – right near the key technical "support" level of 5,700 we mentioned this week – and the tech-heavy Nasdaq Composite Index lost 2.6%.

Meantime, Treasury Secretary Scott Bessent called Canadian Prime Minister Justin Trudeau a "numbskull" during an Economic Club of New York event today. That comes two days after Trudeau told Trump that he agreed with a recent Wall Street Journal piece suggesting "even though you're a very smart guy," tariffs on Canadian imports were "a very dumb thing to do." (Name-calling can be fun to listen to, of course, but not all that productive.)

Broadly, the idea of tariffs on major U.S. trading partners remains on the table. Trump has threatened to impose "reciprocal tariffs" starting April 2 on imports from countries that have tariffs on U.S. goods or services. (According to Trump, he'd have picked April 1, but he doesn't want anybody to be confused because it's April Fools' Day.)

This brings us to China, the world's second-largest economy, which has a trade relationship with U.S. that hasn't made big waves in the market yet. That could be changing soon. Just yesterday, Chinese officials, in a statement posted on social media, said...

If war is what the U.S. wants, be it a tariff war, a trade war or any other type of war, we're ready to fight till the end.

Any other type of war? That's a signal of the tone you may want to expect around U.S.-China trade relations once attention is focused there rather than Mexico or Canada.

The U.S.-China relationship will take center stage soon...

Once described as the "rock star" of Chinese debt analysis by the famed Edward Chancellor, Charlene delivered a wealth of knowledge to and me about what's happening in China right now... from the state of the property crisis there, to insight about Chinese investor behavior, and, of course, tariffs...

A lot of what the Trump administration is doing, even when it looks like it is directed at other countries, it is actually indirectly targeted at China, and they are going to be impacted significantly... There is a method in the madness...

First off, the U.S. has already taken some aim at China, levying 20% in additional tariffs in the past two months, plus broad 25% tariffs on all steel and aluminum imports to the U.S. As Charlene said...

On steel and aluminum, China is the largest exporter in the world and the U.S. is the largest importer in the world. If you read the executive orders on this, they're basically saying we tried to put tariffs in 2018 to deal with these problems and we gave a bunch of countries who were allies exclusions – but what happened was China rerouted a lot of the exports to other countries and [they] would up back in the U.S., and we are actually producing less steel and less aluminum today than we were back then. That is the exact opposite outcome of what we wanted.

She continued, generally speaking...

The U.S. administration is trying to address this issue of what we do about a country [like China] when they are overproducing so much relatively to what the domestic economy can absorb, dumping it in global markets, and then it winds up here at very low prices, undercutting our manufacturers.This is a really blunt approach they're taking, but at the same time I can understand why they're doing this. And I do think it's going to be interesting to see – will they open the door to allies being able to get some exclusions or some relief, or are they really going to hold the line on this?

We're seeing some of this already in the past few days. It may be a sign of things to come from the Trump administration with China. I asked Charlene what would be up for negotiation, like during Trade War I with China during Trump's first term...

The first thing I would say, if we go back, because we went through a tariff war with China in 2018 and '19, and then we got a deal actually in early 2020 right before the pandemic. And one of the things the Trump administration has been saying is, "We actually signed a trade deal in 2020, and you did not live up to the commitments." And the commitments were increasing purchases of U.S. goods...

We're talking about agricultural and energy products, like liquefied natural gas and oil and gas, and perhaps the idea of Chinese investment in U.S. companies, too – with a deal on Chinese social media platform TikTok squarely part of the conversation. (That has been back-burnered from now, it seems.)

And Charlene mentioned the subject of Taiwan will come up as well. We don't know for sure, but that may be the "other kind of war" that Chinese officials were alluding to yesterday. This is all to say, the trade-war story isn't over by any means.