There has been a lot of discussion about tariffs, inflation and interest rates lately. But while inflation has definitely cooled and the Federal Reserve has been concentrating its worries on tariffs causing inflation, we all know interest rates are the Fed’s favorite tool for fighting inflation by tamping down demand. There is no real data indicating tariffs cause anything but one-time price adjustments.
While the economy has been holding steady, the Fed has been afraid first of cutting interest rates rekindling inflation and then when inflation has been down for months, they’re afraid of tariffs causing inflation. Chairman Jerome Powell may be relying on flawed research from the Boston Fed on tariffs and inflation.
How can we collect $100 billion so far in tariffs with no jump in inflation, and yet the Fed is terrified of tariffs? President Donald Trump imposed tariffs his first term and the inflation rate was 1.4%.
Or maybe Powell doesn’t like Trump. If the economy is strong enough to grow if interest rates go down, supply-side economists believe that would not rekindle inflation. But the Fed’s theory is that growth causes inflation.
If you believe government spending—which has been trending a little down—is the primary cause of inflation, then cutting rates some won’t trigger inflation.
The Federal Open Market Committee meets the end of July for its next interest rate meeting and then doesn’t meet again until mid-September. A July cut is possible but not likely, the experts say.
Now that the One Big Beautiful Bill Act has passed, the main obstacles to an economic boom are the Fed’s fear of tariffs and the finalizing of trade negotiations with key countries. The second half should provide consumers with more optimism, better stock market returns and probably some interest rate relief beginning at least by fall. If the Fed starts cutting rates, a stronger housing market would really help many phases of the economy. A strong economy and optimism for the near future should help keep beef demand strong. Reshoring some manufacturing, more building and equipment spending from incentives in the new Big Beautiful law, more jobs and higher wages should support a stronger economy, therefore, beef demand.
Our biggest question will be Mother Nature’s moisture in the West. Regardless of the economy, the size of the cow herd is determined by forage available. Not enough moisture, no herd rebuilding, high prices for beef and a stronger dependence of the beef industry on the strength of the economy. Likely next in importance is keeping packing plants open with the numbers we have and processors finding enough labor to keep plants running.
The northward travel of the screwworm is worrisome, as it has moved farther faster than expected. Feedyards who count on that supply of Mexican feeder cattle have had a difficult time with the border mostly closed for the last several months. USDA has been pushing Mexico to step up its efforts and is working on boosting its capabilities short-term and long-term. It’s lucky we now have a USDA concentrating on things like this instead of DEI (Diversity, Equity and Inclusion) and ESG (Environmental, Social and Governance).
Border control is getting to be a sticky wicket. With the border finally under control, Trump even mentioning doing something to make sure agriculture and construction firms could be given some authority to keep long-term employees and be responsible for them, made some people and officials really nervous. The term carve-outs popped up quickly. We have heard rumors that USDA was working on a guest worker program. We’ve only been asking for such a program with meaningful numbers for years. The present programs are too cumbersome, too slow, without sufficient numbers. We need AI whizzes to invent the technology to spot fake documentation for the E-Verify program for ag and packing employers pronto. If everyone needs a “Real ID” to fly, we should be able to provide Real ID to workers with legal work papers or citizenship papers. This is 2025, tech wizards.
Permanent tax cuts, expensing and accelerated depreciation back to Jan. 20 will help agriculture right away. I’m not sure permanent death tax levels at new rates ($15 million/$30 million) and indexing has sunk in on everyone. We’ve only been trying for permanence for decades. The increases for risk protection insurance are very important. City folks don’t realize how risky and how uncontrollable a factor that weather is. Getting risk protection for livestock is something we could only imagine years ago.
Trade Promotion Assistance renewal that boosts our industry investment in the U.S. Meat Export Federation was critical, too. — Steve Dittmer, WLJ columnist
(Steve Dittmer is the author of the Agribusiness Freedom Foundation newsletter. Views in the column do not necessarily represent the views or opinions of WLJ or its editorial staff.)
