Peter Boockvar on US Credit Rating Downgrade, Tariffs, and Consumer Inflation Fears

US Credit Rating Downgrade

• 📉 Moody's has downgraded the US credit rating to AA1 from AAA, following S&P and Fitch.
• ⚠️ While not immediately impactful on treasury yields, it's a symbolic call-out of the US's strained debts and deficits.
• 📈 A more significant impact would be a spike in the 10-year yield, similar to what was seen in the UK.

Consumer Sentiment and Tariffs

• 😟 Consumer sentiment data is unexpectedly weak, with consumers expressing significant worry about tariff-driven inflation.
• 🛍️ Walmart is acknowledging the need to absorb price increases from vendors, indicating that tariffs cannot be fully absorbed by them.
• 💸 This absorption by retailers means the cost will be eaten somewhere along the supply chain, potentially hurting specific vendors or impacting consumers indirectly.

Impact of Tariffs on Corporate Taxes

• 📊 A 10% tariff on $3.3 trillion of US imports amounts to a $330 billion tax on US companies.
• ⚖️ This is equivalent to wiping out the 2017 Trump corporate tax cut, effectively raising the US corporate income tax rate from 21% to 34%.
• 📉 Even at a best-case scenario of a 10% tariff, the US would face the highest tariff rate since the early 1940s.