Free Trade Week in Review
Inflation, retail spending, & more
Free Trade (or freer trade, anyway) had its best week in years, posting multiple wins on the tariff front.
First, the White House agreed to allow $800 million in Argentinian beef imports in an effort to lower prices.
Then on Tuesday Congress rejected a measure that would have limited Congress’s ability to vote against the White House’s tariffs (yes, you read that right).
As a result, Congress voted to overturn the tariffs on Canada on Wednesday, a move that succeeded due to six Republican defectors. Of course, the president will almost certainly veto that once it gets through the Senate.
And as of this morning, the Financial Times reports that the White House is planning to roll back some of its steel and aluminum tariffs, a tacit acknowledgement that these import taxes are in fact causing economic harm.
On the data front, this week brought us updates on inflation, retail spending, a jobs report (read our longer post on that here), and a whole lot more.
Monday
Oil Stuff
Gas prices increased for the fourth straight week and are back above $3.00/gallon for the first time since mid-December. Diesel prices were essentially flat for the week.
Domestic oil production bounced back to near-record highs last week, confirming that the prior week’s slowdown was weather-related.
TSA Checkpoint Travel Numbers
Air travel has bounced back big time after plunging during the big winter storms, according to TSA data. During the week ending February 9th, travel volumes were 4.1% higher than during the same week one year ago.
Tuesday
Retail Sales
Retail spending was unchanged in December and just 2.4% higher than in December 2024. That’s not great, but I actually think this data is…I don’t want to say “better,” but maybe slightly less bad than it looks at a glance
A lot of this recent weakness is due weak spending in interest rate-sensitive dealerships and furniture stores. Most other categories have posted healthy increases over the past year.
And 2025 was actually a decent year for retail spending, with total sales 3.7% higher than in 2024. That jumps to 4.2% if you exclude sales at gas stations (gas prices were lower in 2025).
There’s plenty of reasons to worry about consumers (see right below this!), but at least as of December, nothing in the retail sales data is panic-worthy. Of course, given recent winter storms, retail sales will likely be weak again for January, so we won’t get another credible read on this until February’s data is released.
Household Debt and Credit
This data on delinquency rates is worrying and will get its own post at some point in the not so distant future.
For now, let’s start with the share of credit card debt 90+ days overdue, which rose to 12.7% in Q4 2025, the highest level since 2011.
Auto loans are also a large and growing cause for concern, with 5.21% of the total balance 90+ days past due. That’s the second highest quarterly rate ever, trailing only Q4 2010.
The youngest borrowers (18-29) are transitioning into serious delinquency at the fastest rate. That’s always the case. What’s interesting is that the transitioning rate for those 18-29 has slowed over the past year for most debt types with one glaring exception: student loans.
We’ve also seen rising delinquency in states that had red-hot housing markets and have since cooled (like AZ, FL, and TX). This makes sense, especially with some portion of recent homebuyers likely underwater.
Despite those massive red flags, the total share of household debt that’s 90+ days late stands at just 3.12%, which is lower than in Q4 2019. That’s entirely due to low (albeit rising) delinquency rates on mortgages and home equity line of credits.
Big picture, this data has me a little worried about consumers, especially those at the lower end of the income distribution.
Tariffs Cost Average Household $1,000 in 2025
This Tax Foundation analysis estimates that tariffs implemented in 2025 amounted to an average tax increase of $1,000 per U.S. household in 2025. This represents the “largest US tax increase as a percent of GDP (0.54 percent for 2026) since 1993.” That’s obviously not helping the household debt problems mentioned above.
U.S. Import and Export Price Indexes
U.S. import prices are flat over the past year, while U.S. export prices are up 3.1% over the past year. While it’s possible (likely, even) that import prices would have risen absent tariffs, the fact that import prices haven’t fallen is a sign that foreign companies are not eating the cost of tariffs.
NFIB Small Business Optimism Index
Small business owner optimism fell slightly in January and remains quite a bit below the December 2024 cyclical peak. That said, small business owners are always happier with a Republican in the White House, and overall optimism levels remain relatively elevated.
