Offshore
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EndGame Macro
A Big Economy With 2009 Level Freight? Something Doesn’t Add Up.
What’s happening in freight right now is the continuation of a slowdown that really started in mid 2022 and never fully reversed. Shipments are running at levels we last saw in the aftermath of the financial crisis, which makes no sense when you consider the size of today’s economy and population. A freight economy this weak in an economy this large tells you something deeper is going on.
A big part of it is demand. The pandemic pulled years of spending forward…people bought the appliances, furniture, home goods, and gear they were going to buy anyway. Once that wave washed through, consumers shifted back toward services, and goods flow hasn’t really recovered. At the same time, the freight industry is still working off the excess capacity that built up during the boom. Too many carriers chasing too few loads means rates stay soft, margins stay thin, and smaller operators get pushed out.
You also have an industry dealing with higher operating costs and a tougher regulatory backdrop at the exact moment demand is weakest. Fuel, insurance, maintenance…all up. New CDL rules and compliance requirements add friction. And when you stack all of that on top of weak freight rates, you end up with an environment where even steady freight volumes feel painful. Put simply the sector is in a long, grinding recession of its own, one that hasn’t gotten enough attention because it doesn’t show up in the headline economic numbers until much later.
tweet
A Big Economy With 2009 Level Freight? Something Doesn’t Add Up.
What’s happening in freight right now is the continuation of a slowdown that really started in mid 2022 and never fully reversed. Shipments are running at levels we last saw in the aftermath of the financial crisis, which makes no sense when you consider the size of today’s economy and population. A freight economy this weak in an economy this large tells you something deeper is going on.
A big part of it is demand. The pandemic pulled years of spending forward…people bought the appliances, furniture, home goods, and gear they were going to buy anyway. Once that wave washed through, consumers shifted back toward services, and goods flow hasn’t really recovered. At the same time, the freight industry is still working off the excess capacity that built up during the boom. Too many carriers chasing too few loads means rates stay soft, margins stay thin, and smaller operators get pushed out.
You also have an industry dealing with higher operating costs and a tougher regulatory backdrop at the exact moment demand is weakest. Fuel, insurance, maintenance…all up. New CDL rules and compliance requirements add friction. And when you stack all of that on top of weak freight rates, you end up with an environment where even steady freight volumes feel painful. Put simply the sector is in a long, grinding recession of its own, one that hasn’t gotten enough attention because it doesn’t show up in the headline economic numbers until much later.
The Cass Shipment Index, the goto benchmark for freight volumes since 1992, has dropped to 2009 levels.
Freight volumes currently match the Great Financial Crisis levels.
Main Street is experiencing a massive recession. https://t.co/ex4R9jHeet tweet
AkhenOsiris
He's living to 120! 🙏🏼
tweet
He's living to 120! 🙏🏼
His final investing decision was to buy Google. I think that’s beautiful tweet
Offshore
Video
EndGame Macro
Liquidity’s Quiet Peak: Why the Tide Turns After January
Two posts for the full picture scroll down for part two
If you zoom out, the liquidity path into Q1–Q2 is still pretty simple: we’re stepping into a short easy window into year end, and then the system quietly tightens again. Rate cuts, QE chatter, Basel headlines, even the labor data, all of that sits on top of that basic plumbing story, it doesn’t replace it.
Year End Is As Easy as This Cycle Gets
From now into late December and probably into January, the setup is about as friendly as it’s been all cycle.
The Fed has already cut twice and QT stops on December 1. After that, the balance sheet basically goes sideways: maturing Treasuries are rolled, MBS runoff is redirected into T‑bills instead of just disappearing. ON RRP is almost emptied out, so the giant tightening reservoir from 2022–23 is no longer soaking up every dollar.
Year end helps too. You normally get more government outlays, heavier bill issuance, and some cash bleeding out of the Fed and back into banks and money markets. Layer in the possibility of one more insurance cut and you get softer SOFR, calmer repo, and a funding market that feels less jumpy. The long end can still stay sticky under deficits and term premium, but the front end actually breathes.
All of that means that into year end and maybe into early February if Treasury doesn’t rush another big TGA rebuild and reserves stop bleeding, funding steadies, and risk assets get the benefit of the doubt. It’s not 2021, but it’s the least hostile backdrop we’ve had in this tightening phase.
Unemployment rising slowly in the background only reinforces this short window: as the jobless rate drifts up, the Fed has political and macro cover to lean dovish without looking reckless. Markets will want to believe that story.
Q1–Q2: Liquidity Rolls Over Just as Jobs Weaken
The turn comes when Treasury goes back to actively managing the TGA.
That account is already huge, and in Q1–Q2 it gets pulled around by things we can see on the calendar: April tax receipts, heavy coupon issuance to fund big deficits and roll old 2–3% debt, seasonal spending patterns, and whatever political drama D.C. decides to stage.
Every time the TGA rebuilds, cash moves into the Fed and out of bank reserves. With ON RRP nearly tapped out, those drains hit reserves directly. Liquidity tightens even if the Fed doesn’t touch rates or the size of its balance sheet.
You don’t necessarily get a dramatic cliff. You get firmer funding, less cushion under equities, credit spreads that stop tightening, and a tape that suddenly reacts more to bad news than good. If unemployment is still grinding higher at the same time from low and rising toward uncomfortable the pressure shows up in earnings, downgrades, and default rates. That’s when the higher for longer funding costs and the refi wall start to bite.
Even if the Fed cuts again, that only changes the price of money at the front end. The TGA path and issuance mix determine how much of that money is actually sloshing around in the system.
Basel And SLR Relief: Important, But On A Lag
The regulatory story matters, just not on a Q1–Q2 clock.
Regulators are talking about easing capital rules by tweaking the Supplementary Leverage Ratio and watering down parts of Basel III Endgame so reserves and Treasuries aren’t treated like toxic balance sheet hogs. In the long run, that could give the big banks more room to hold duration and reserves, and to step in as a real buffer when Treasury supply is heavy.
But these are still proposals and reproposals. You’ve got public comment, inter agency negotiations, then a multi year phase in once anything is finalized. Real balance sheet behavior doesn’t shift in a big way until 2026.
So in Q1–Q2, banks are still playing under today’s constraints, at the exact moment liquidity is turning down and unemployment is inching up. That encourages caution, not heroics.
Continued below… tweet
Liquidity’s Quiet Peak: Why the Tide Turns After January
Two posts for the full picture scroll down for part two
If you zoom out, the liquidity path into Q1–Q2 is still pretty simple: we’re stepping into a short easy window into year end, and then the system quietly tightens again. Rate cuts, QE chatter, Basel headlines, even the labor data, all of that sits on top of that basic plumbing story, it doesn’t replace it.
Year End Is As Easy as This Cycle Gets
From now into late December and probably into January, the setup is about as friendly as it’s been all cycle.
The Fed has already cut twice and QT stops on December 1. After that, the balance sheet basically goes sideways: maturing Treasuries are rolled, MBS runoff is redirected into T‑bills instead of just disappearing. ON RRP is almost emptied out, so the giant tightening reservoir from 2022–23 is no longer soaking up every dollar.
Year end helps too. You normally get more government outlays, heavier bill issuance, and some cash bleeding out of the Fed and back into banks and money markets. Layer in the possibility of one more insurance cut and you get softer SOFR, calmer repo, and a funding market that feels less jumpy. The long end can still stay sticky under deficits and term premium, but the front end actually breathes.
All of that means that into year end and maybe into early February if Treasury doesn’t rush another big TGA rebuild and reserves stop bleeding, funding steadies, and risk assets get the benefit of the doubt. It’s not 2021, but it’s the least hostile backdrop we’ve had in this tightening phase.
Unemployment rising slowly in the background only reinforces this short window: as the jobless rate drifts up, the Fed has political and macro cover to lean dovish without looking reckless. Markets will want to believe that story.
Q1–Q2: Liquidity Rolls Over Just as Jobs Weaken
The turn comes when Treasury goes back to actively managing the TGA.
That account is already huge, and in Q1–Q2 it gets pulled around by things we can see on the calendar: April tax receipts, heavy coupon issuance to fund big deficits and roll old 2–3% debt, seasonal spending patterns, and whatever political drama D.C. decides to stage.
Every time the TGA rebuilds, cash moves into the Fed and out of bank reserves. With ON RRP nearly tapped out, those drains hit reserves directly. Liquidity tightens even if the Fed doesn’t touch rates or the size of its balance sheet.
You don’t necessarily get a dramatic cliff. You get firmer funding, less cushion under equities, credit spreads that stop tightening, and a tape that suddenly reacts more to bad news than good. If unemployment is still grinding higher at the same time from low and rising toward uncomfortable the pressure shows up in earnings, downgrades, and default rates. That’s when the higher for longer funding costs and the refi wall start to bite.
Even if the Fed cuts again, that only changes the price of money at the front end. The TGA path and issuance mix determine how much of that money is actually sloshing around in the system.
Basel And SLR Relief: Important, But On A Lag
The regulatory story matters, just not on a Q1–Q2 clock.
Regulators are talking about easing capital rules by tweaking the Supplementary Leverage Ratio and watering down parts of Basel III Endgame so reserves and Treasuries aren’t treated like toxic balance sheet hogs. In the long run, that could give the big banks more room to hold duration and reserves, and to step in as a real buffer when Treasury supply is heavy.
But these are still proposals and reproposals. You’ve got public comment, inter agency negotiations, then a multi year phase in once anything is finalized. Real balance sheet behavior doesn’t shift in a big way until 2026.
So in Q1–Q2, banks are still playing under today’s constraints, at the exact moment liquidity is turning down and unemployment is inching up. That encourages caution, not heroics.
Continued below… tweet
Offshore
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EndGame Macro
The Fed Just Checked the Brakes
If this story is right, it’s the clearest tell yet that the Fed knows the plumbing is getting tight and is trying to fix the umbrella before it rains.
The standing repo facility (SRF) is supposed to be the fire extinguisher on the wall so if funding gets tight, dealers hand the Fed Treasuries, get cash overnight at a known rate, and repo markets calm down. The fact that New York Fed felt the need to call the big banks in and ask, “Why aren’t you using this thing, even when market rates trade above it?” tells you two things at once:
They’re Seeing Real Strain Under The Surface
You don’t convene that meeting if everything is perfectly “ample.” Between QT about to end, a big TGA, heavy Treasury issuance, and RRP nearly empty, reserves are a lot thinner than the headline balance sheet makes it look. The recent pops in SOFR and episodes where private repo traded above the SRF rate are exactly the kind of signals that would make them nervous about a 2019 style funding spike.
They’re Worried The Safety Valve Won’t Actually Be Used In An Accident
Banks still treat Fed backstops with stigma: because tapping a facility can look like weakness to risk committees, boards, shareholders, or regulators. Add operational friction (legal docs, intraday limits, internal charges) and you get a tool that exists on paper, but isn’t the first call when funding gets sticky. The Fed does not want to discover in real time that its main shock absorber is psychologically or operationally off limits.
So My Read Is This
This meeting is less about announcing a new problem and more about the Fed admitting to itself that we’re at the edge of the ample reserves zone. They’re trying to destigmatize the SRF, understand what would make dealers actually use it, and buy insurance against the combination of a high TGA, low RRP, and continued issuance colliding with some random shock.
For markets, that cuts both ways. On one hand, it’s reassuring: the Fed is paying attention and doesn’t want a plumbing accident. If they tweak terms, widen access, or just convince dealers the SRF is safe to use, short term funding should be more stable. On the other hand, it’s a quiet confirmation of what the SOFR spikes and H.4.1 have been hinting at: the buffers are thin. When the central bank is calling around about its emergency hose, it’s because they see dry brush building up around the house.
This is a sign we’re close enough to the edge that the Fed is double checking the brakes. Liquidity can still look fine day to day, but in a late cycle setup like this, even small shocks hit harder than they did a year ago.
tweet
The Fed Just Checked the Brakes
If this story is right, it’s the clearest tell yet that the Fed knows the plumbing is getting tight and is trying to fix the umbrella before it rains.
The standing repo facility (SRF) is supposed to be the fire extinguisher on the wall so if funding gets tight, dealers hand the Fed Treasuries, get cash overnight at a known rate, and repo markets calm down. The fact that New York Fed felt the need to call the big banks in and ask, “Why aren’t you using this thing, even when market rates trade above it?” tells you two things at once:
They’re Seeing Real Strain Under The Surface
You don’t convene that meeting if everything is perfectly “ample.” Between QT about to end, a big TGA, heavy Treasury issuance, and RRP nearly empty, reserves are a lot thinner than the headline balance sheet makes it look. The recent pops in SOFR and episodes where private repo traded above the SRF rate are exactly the kind of signals that would make them nervous about a 2019 style funding spike.
They’re Worried The Safety Valve Won’t Actually Be Used In An Accident
Banks still treat Fed backstops with stigma: because tapping a facility can look like weakness to risk committees, boards, shareholders, or regulators. Add operational friction (legal docs, intraday limits, internal charges) and you get a tool that exists on paper, but isn’t the first call when funding gets sticky. The Fed does not want to discover in real time that its main shock absorber is psychologically or operationally off limits.
So My Read Is This
This meeting is less about announcing a new problem and more about the Fed admitting to itself that we’re at the edge of the ample reserves zone. They’re trying to destigmatize the SRF, understand what would make dealers actually use it, and buy insurance against the combination of a high TGA, low RRP, and continued issuance colliding with some random shock.
For markets, that cuts both ways. On one hand, it’s reassuring: the Fed is paying attention and doesn’t want a plumbing accident. If they tweak terms, widen access, or just convince dealers the SRF is safe to use, short term funding should be more stable. On the other hand, it’s a quiet confirmation of what the SOFR spikes and H.4.1 have been hinting at: the buffers are thin. When the central bank is calling around about its emergency hose, it’s because they see dry brush building up around the house.
This is a sign we’re close enough to the edge that the Fed is double checking the brakes. Liquidity can still look fine day to day, but in a late cycle setup like this, even small shocks hit harder than they did a year ago.
tweet
Offshore
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EndGame Macro
When Tariffs Rise, the Economy Doesn’t History Proves It.
When you strip away the dots and regression lines, this figure is making a surprisingly consistent argument: in U.S. history, tariff hikes have tended to cool the economy, not heat it up.
It’s not the story people expect.
Tariffs Don’t Behave Like Pure Price Hikes
Start with the inflation panels (left side). Both the same year and next year charts show the same slope: when tariffs go up, inflation tends to go down, not up. That may sound counterintuitive, but historically it tracks. Tariff shocks raise costs for a narrow slice of goods, but the broader effect is to slow activity which pulls down overall pricing power.
That’s been true as far back as the Smoot-Hawley era, where initial price spikes quickly gave way to collapsing demand. Even the early 1980s voluntary export restraints, one of the most targeted protectionist moves of the modern era gave you a local bump in auto prices, but the macro effect was still disinflationary because the broader economy was already under pressure from tight policy.
The pattern in this chart is just the data version of that history.
The Labor Market Takes the Hit
Now look at the unemployment panels (right side). Same story, opposite direction: tariff hikes are associated with higher unemployment, both immediately and with a lag. That aligns with nearly every major U.S. tariff wave of the last century:
•the 1930s: mass layoffs tied to collapsing trade
•the 1970s–80s steel and auto tariffs: job losses despite industry protection
•the 2002 steel tariffs: employment fell in downstream industries
•the 2018–19 tariff cycle: manufacturing payrolls flattened and then slipped
Tariffs disrupt supply chains, raise costs, and shrink export demand and the labor market absorbs the shock. Companies usually cut before consumers do.
That’s exactly what the dots are telling you here.
The Broader Read: Tariffs Act More Like a Brake Than a Gas Pedal
The big theme across all four quadrants is simple: tariffs behave less like a catalyst for inflation and more like a negative demand shock. They tighten the economy the same way rising credit spreads or a sudden drop in trade volumes do.
That’s why the regression lines keep pointing the same direction:
•When tariffs go up, inflation tends to go down.
•When tariffs go up, unemployment tends to go up.
It matches nearly every high profile tariff episode in U.S. history. They don’t ignite some long, roaring inflation spiral. They slow things down.
What This Means Right Now
Given the tariff wave that has kicked off since early 2025 we’re not talking about a hypothetical future shock. We’re already living in it. And the broader macro backdrop matters because growth is uneven, unemployment is creeping higher, and liquidity is thinner than it looks on the surface.
In that kind of environment, the historical pattern becomes even more relevant. U.S. tariff cycles have rarely created sustained inflation. They tend to work through demand, not through prices…slowing trade volumes, compressing margins, and tightening conditions in the parts of the economy that rely on global supply chains.
So instead of inflation by decree, what you usually get is weaker demand, softer hiring, and more pressure on already fragile sectors. The bumps in specific prices may make headlines, but the dominant effect is a drag on activity.
When you look at the chart through that lens, it’s just spelling out what history already taught us that protectionism doesn’t give you a clean policy boost. More often, it pulls forward the slowdown policymakers are trying to prevent especially when it lands late in the cycle, the way this 2025 tariff regime has.
SF Fed study examines 150 years of U.S. tariffs and find that they lead to lower inflation and weaker aggregate demand (which raises unemployment) https://t.co/d7d9WmIHHJ https://t.co/hqzoIqIsRZ - Nick Timiraos tweet
When Tariffs Rise, the Economy Doesn’t History Proves It.
When you strip away the dots and regression lines, this figure is making a surprisingly consistent argument: in U.S. history, tariff hikes have tended to cool the economy, not heat it up.
It’s not the story people expect.
Tariffs Don’t Behave Like Pure Price Hikes
Start with the inflation panels (left side). Both the same year and next year charts show the same slope: when tariffs go up, inflation tends to go down, not up. That may sound counterintuitive, but historically it tracks. Tariff shocks raise costs for a narrow slice of goods, but the broader effect is to slow activity which pulls down overall pricing power.
That’s been true as far back as the Smoot-Hawley era, where initial price spikes quickly gave way to collapsing demand. Even the early 1980s voluntary export restraints, one of the most targeted protectionist moves of the modern era gave you a local bump in auto prices, but the macro effect was still disinflationary because the broader economy was already under pressure from tight policy.
The pattern in this chart is just the data version of that history.
The Labor Market Takes the Hit
Now look at the unemployment panels (right side). Same story, opposite direction: tariff hikes are associated with higher unemployment, both immediately and with a lag. That aligns with nearly every major U.S. tariff wave of the last century:
•the 1930s: mass layoffs tied to collapsing trade
•the 1970s–80s steel and auto tariffs: job losses despite industry protection
•the 2002 steel tariffs: employment fell in downstream industries
•the 2018–19 tariff cycle: manufacturing payrolls flattened and then slipped
Tariffs disrupt supply chains, raise costs, and shrink export demand and the labor market absorbs the shock. Companies usually cut before consumers do.
That’s exactly what the dots are telling you here.
The Broader Read: Tariffs Act More Like a Brake Than a Gas Pedal
The big theme across all four quadrants is simple: tariffs behave less like a catalyst for inflation and more like a negative demand shock. They tighten the economy the same way rising credit spreads or a sudden drop in trade volumes do.
That’s why the regression lines keep pointing the same direction:
•When tariffs go up, inflation tends to go down.
•When tariffs go up, unemployment tends to go up.
It matches nearly every high profile tariff episode in U.S. history. They don’t ignite some long, roaring inflation spiral. They slow things down.
What This Means Right Now
Given the tariff wave that has kicked off since early 2025 we’re not talking about a hypothetical future shock. We’re already living in it. And the broader macro backdrop matters because growth is uneven, unemployment is creeping higher, and liquidity is thinner than it looks on the surface.
In that kind of environment, the historical pattern becomes even more relevant. U.S. tariff cycles have rarely created sustained inflation. They tend to work through demand, not through prices…slowing trade volumes, compressing margins, and tightening conditions in the parts of the economy that rely on global supply chains.
So instead of inflation by decree, what you usually get is weaker demand, softer hiring, and more pressure on already fragile sectors. The bumps in specific prices may make headlines, but the dominant effect is a drag on activity.
When you look at the chart through that lens, it’s just spelling out what history already taught us that protectionism doesn’t give you a clean policy boost. More often, it pulls forward the slowdown policymakers are trying to prevent especially when it lands late in the cycle, the way this 2025 tariff regime has.
SF Fed study examines 150 years of U.S. tariffs and find that they lead to lower inflation and weaker aggregate demand (which raises unemployment) https://t.co/d7d9WmIHHJ https://t.co/hqzoIqIsRZ - Nick Timiraos tweet
Offshore
Photo
EndGame Macro
When Tariffs Rise, the Economy Doesn’t History Proves It.
When you strip away the dots and regression lines, this figure is making a surprisingly consistent argument: in U.S. history, tariff hikes have tended to cool the economy, not heat it up.
It’s not the story people expect.
Tariffs Don’t Behave Like Pure Price Hikes
Start with the inflation panels (left side). Both the same year and next year charts show the same slope: when tariffs go up, inflation tends to go down, not up. That may sound counterintuitive, but historically it tracks. Tariff shocks raise costs for a narrow slice of goods, but the broader effect is to slow activity which pulls down overall pricing power.
That’s been true as far back as the Smoot-Hawley era, where initial price spikes quickly gave way to collapsing demand. Even the early 1980s voluntary export restraints, one of the most targeted protectionist moves of the modern era gave you a local bump in auto prices, but the macro effect was still disinflationary because the broader economy was already under pressure from tight policy.
The pattern in this chart is just the data version of that history.
The Labor Market Takes the Hit
Now look at the unemployment panels (right side). Same story, opposite direction: tariff hikes are associated with higher unemployment, both immediately and with a lag. That aligns with nearly every major U.S. tariff wave of the last century:
•the 1930s: mass layoffs tied to collapsing trade
•the 1970s–80s steel and auto tariffs: job losses despite industry protection
•the 2002 steel tariffs: employment fell in downstream industries
•the 2018–19 tariff cycle: manufacturing payrolls flattened and then slipped
Tariffs disrupt supply chains, raise costs, and shrink export demand and the labor market absorbs the shock. Companies usually cut before consumers do.
That’s exactly what the dots are telling you here.
The Broader Read: Tariffs Act More Like a Brake Than a Gas Pedal
The big theme across all four quadrants is simple: tariffs behave less like a catalyst for inflation and more like a negative demand shock. They tighten the economy the same way rising credit spreads or a sudden drop in trade volumes do.
That’s why the regression lines all lean the same way:
• When tariffs rise, inflation usually falls.
• When tariffs rise, unemployment usually increases.
It matches nearly every high profile tariff episode in U.S. history. They don’t ignite some long, roaring inflation spiral. They slow things down.
What This Means Right Now
Given the tariff wave that has kicked off since early 2025 we’re not talking about a hypothetical future shock. We’re already living in it. And the broader macro backdrop matters because growth is uneven, unemployment is creeping higher, and liquidity is thinner than it looks on the surface.
In that kind of environment, the historical pattern becomes even more relevant. U.S. tariff cycles have rarely created sustained inflation. They tend to work through demand, not through prices…slowing trade volumes, compressing margins, and tightening conditions in the parts of the economy that rely on global supply chains.
So instead of inflation by decree, what you usually get is weaker demand, softer hiring, and more pressure on already fragile sectors. The bumps in specific prices may make headlines, but the dominant effect is a drag on activity.
When you look at the chart through that lens, it’s just spelling out what history already taught us that protectionism doesn’t give you a clean policy boost. More often, it pulls forward the slowdown policymakers are trying to prevent especially when it lands late in the cycle, the way this 2025 tariff regime has.
SF Fed study examines 150 years of U.S. tariffs and find that they lead to lower inflation and weaker aggregate demand (which raises unemployment) https://t.co/d7d9WmIHHJ https://t.co/hqzoIqIsRZ - Nick Timiraos tweet
When Tariffs Rise, the Economy Doesn’t History Proves It.
When you strip away the dots and regression lines, this figure is making a surprisingly consistent argument: in U.S. history, tariff hikes have tended to cool the economy, not heat it up.
It’s not the story people expect.
Tariffs Don’t Behave Like Pure Price Hikes
Start with the inflation panels (left side). Both the same year and next year charts show the same slope: when tariffs go up, inflation tends to go down, not up. That may sound counterintuitive, but historically it tracks. Tariff shocks raise costs for a narrow slice of goods, but the broader effect is to slow activity which pulls down overall pricing power.
That’s been true as far back as the Smoot-Hawley era, where initial price spikes quickly gave way to collapsing demand. Even the early 1980s voluntary export restraints, one of the most targeted protectionist moves of the modern era gave you a local bump in auto prices, but the macro effect was still disinflationary because the broader economy was already under pressure from tight policy.
The pattern in this chart is just the data version of that history.
The Labor Market Takes the Hit
Now look at the unemployment panels (right side). Same story, opposite direction: tariff hikes are associated with higher unemployment, both immediately and with a lag. That aligns with nearly every major U.S. tariff wave of the last century:
•the 1930s: mass layoffs tied to collapsing trade
•the 1970s–80s steel and auto tariffs: job losses despite industry protection
•the 2002 steel tariffs: employment fell in downstream industries
•the 2018–19 tariff cycle: manufacturing payrolls flattened and then slipped
Tariffs disrupt supply chains, raise costs, and shrink export demand and the labor market absorbs the shock. Companies usually cut before consumers do.
That’s exactly what the dots are telling you here.
The Broader Read: Tariffs Act More Like a Brake Than a Gas Pedal
The big theme across all four quadrants is simple: tariffs behave less like a catalyst for inflation and more like a negative demand shock. They tighten the economy the same way rising credit spreads or a sudden drop in trade volumes do.
That’s why the regression lines all lean the same way:
• When tariffs rise, inflation usually falls.
• When tariffs rise, unemployment usually increases.
It matches nearly every high profile tariff episode in U.S. history. They don’t ignite some long, roaring inflation spiral. They slow things down.
What This Means Right Now
Given the tariff wave that has kicked off since early 2025 we’re not talking about a hypothetical future shock. We’re already living in it. And the broader macro backdrop matters because growth is uneven, unemployment is creeping higher, and liquidity is thinner than it looks on the surface.
In that kind of environment, the historical pattern becomes even more relevant. U.S. tariff cycles have rarely created sustained inflation. They tend to work through demand, not through prices…slowing trade volumes, compressing margins, and tightening conditions in the parts of the economy that rely on global supply chains.
So instead of inflation by decree, what you usually get is weaker demand, softer hiring, and more pressure on already fragile sectors. The bumps in specific prices may make headlines, but the dominant effect is a drag on activity.
When you look at the chart through that lens, it’s just spelling out what history already taught us that protectionism doesn’t give you a clean policy boost. More often, it pulls forward the slowdown policymakers are trying to prevent especially when it lands late in the cycle, the way this 2025 tariff regime has.
SF Fed study examines 150 years of U.S. tariffs and find that they lead to lower inflation and weaker aggregate demand (which raises unemployment) https://t.co/d7d9WmIHHJ https://t.co/hqzoIqIsRZ - Nick Timiraos tweet
Offshore
Photo
EndGame Macro
The Day Selling Hit a 35 Year High
This chart is showing the amount of selling happening in stocks that finished down absolutely exploded, to a level we’ve never seen going back to 1990. Declining volume blew past the spikes from 2001, 2008, COVID, everything.
When you get a print like that it’s a sign that the bulk of trading activity was concentrated in stocks getting hit, and hit hard.
Why a Move This Extreme Happens
When declining volume goes vertical like this, the market is usually dealing with a mix of deeper stresses:
Forced or systematic selling
These aren’t the kind of moves retail or even most discretionary funds create. This looks like leverage coming off CTAs, vol targeting funds, risk parity models, hedge funds trimming exposure because their signals flipped or their risk limits got breached. In other words, it’s mechanical, not emotional.
Fragile positioning under the surface
A market with strong, broad participation doesn’t produce this kind of washout. This tends to happen when everyone is crowded into the same themes, the same baskets, the same trades and something nudges the whole group in the opposite direction at the same time. It’s less about panic and more about the structure being brittle.
A late cycle feel
These readings almost always show up when liquidity is tight enough that selling pressure has real bite. Think back to the clusters in the chart: the early 2000s, the lead up to and aftermath of 2008, the 2020 shock. Those were moments when the system was stretched, not relaxed.
What It Means Going Forward
A one off spike doesn’t tell you whether we’re at the beginning of a downturn or the end of a selloff. But it does tell you the environment has changed.
This is the kind of signal you get when the market becomes more sensitive to bad news, when liquidity cushions are thinner, and when small shocks turn into bigger reactions than they would have a year or two ago. It doesn’t guarantee a major move but it raises the probability that the next macro wobble hits harder than expected.
So the takeaway is that the market just showed you how tightly wound it’s become and that’s something you don’t ignore, especially this late in the cycle.
tweet
The Day Selling Hit a 35 Year High
This chart is showing the amount of selling happening in stocks that finished down absolutely exploded, to a level we’ve never seen going back to 1990. Declining volume blew past the spikes from 2001, 2008, COVID, everything.
When you get a print like that it’s a sign that the bulk of trading activity was concentrated in stocks getting hit, and hit hard.
Why a Move This Extreme Happens
When declining volume goes vertical like this, the market is usually dealing with a mix of deeper stresses:
Forced or systematic selling
These aren’t the kind of moves retail or even most discretionary funds create. This looks like leverage coming off CTAs, vol targeting funds, risk parity models, hedge funds trimming exposure because their signals flipped or their risk limits got breached. In other words, it’s mechanical, not emotional.
Fragile positioning under the surface
A market with strong, broad participation doesn’t produce this kind of washout. This tends to happen when everyone is crowded into the same themes, the same baskets, the same trades and something nudges the whole group in the opposite direction at the same time. It’s less about panic and more about the structure being brittle.
A late cycle feel
These readings almost always show up when liquidity is tight enough that selling pressure has real bite. Think back to the clusters in the chart: the early 2000s, the lead up to and aftermath of 2008, the 2020 shock. Those were moments when the system was stretched, not relaxed.
What It Means Going Forward
A one off spike doesn’t tell you whether we’re at the beginning of a downturn or the end of a selloff. But it does tell you the environment has changed.
This is the kind of signal you get when the market becomes more sensitive to bad news, when liquidity cushions are thinner, and when small shocks turn into bigger reactions than they would have a year or two ago. It doesn’t guarantee a major move but it raises the probability that the next macro wobble hits harder than expected.
So the takeaway is that the market just showed you how tightly wound it’s become and that’s something you don’t ignore, especially this late in the cycle.
@cvpayne @SteveMiran The market seems to be getting anxious about it. Yesterday the market saw its biggest single day declining volume. ($NYDNV) https://t.co/foXpT9GTQh tweet
EndGame Macro
Rate cuts are a blunt demand tool, and the cracks in today’s labor market don’t look like a classic not enough demand problem. We’ve got sector mismatches (tech and goods shedding workers while services still hires), firms over levered from the zero rate era, and productivity and automation shocks hitting certain categories of jobs. Cutting another 25–50 bps won’t suddenly make a busted business model viable or retrain a laid off warehouse worker into a nurse. It just makes money cheaper at the margin.
At the same time, inflation is still hovering close enough to target that the Fed is haunted by the 1970s precedent…ease too early into a still warm economy and you don’t get a huge employment gain, you just loosen financial conditions again, pump asset prices, and risk a second leg of inflation. With a pretty flat Phillips curve, the Fed’s worry is that rate cuts don’t buy you much in terms of jobs, but do buy you more pressure on rents, services, and risk assets.
So when he says “cuts won’t patch job market cracks, could do damage to inflation,” the mental model is that the problems in this labor market are slow moving and structural, not a sudden collapse in aggregate demand. Monetary policy can’t micro target those, it can only spray gasoline on overall demand. And from that vantage point, more easing now looks like a bad trade off…limited help for employment, real risk of undoing the hard won progress on inflation and credibility.
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Rate cuts are a blunt demand tool, and the cracks in today’s labor market don’t look like a classic not enough demand problem. We’ve got sector mismatches (tech and goods shedding workers while services still hires), firms over levered from the zero rate era, and productivity and automation shocks hitting certain categories of jobs. Cutting another 25–50 bps won’t suddenly make a busted business model viable or retrain a laid off warehouse worker into a nurse. It just makes money cheaper at the margin.
At the same time, inflation is still hovering close enough to target that the Fed is haunted by the 1970s precedent…ease too early into a still warm economy and you don’t get a huge employment gain, you just loosen financial conditions again, pump asset prices, and risk a second leg of inflation. With a pretty flat Phillips curve, the Fed’s worry is that rate cuts don’t buy you much in terms of jobs, but do buy you more pressure on rents, services, and risk assets.
So when he says “cuts won’t patch job market cracks, could do damage to inflation,” the mental model is that the problems in this labor market are slow moving and structural, not a sudden collapse in aggregate demand. Monetary policy can’t micro target those, it can only spray gasoline on overall demand. And from that vantage point, more easing now looks like a bad trade off…limited help for employment, real risk of undoing the hard won progress on inflation and credibility.
FED'S SCHMID: FURTHER RATE CUTS WON'T PATCH JOB MARKET CRACKS, COULD DO DAMAGE TO INFLATION tweet
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EndGame Macro (@onechancefreedm) on X
Rate cuts are a blunt demand tool, and the cracks in today’s labor market don’t look like a classic not enough demand problem. We’ve got sector mismatches (tech and goods shedding workers while services still hires), firms over levered from the zero rate…
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$MNDY is down 40% in the last year over fears of AI disruption.
Is this what being disrupted by AI looks like? https://t.co/1uukYCArSJ
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$MNDY is down 40% in the last year over fears of AI disruption.
Is this what being disrupted by AI looks like? https://t.co/1uukYCArSJ
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