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U.S. Import Dependency Sits At High Levels - Will Tariffs Fix It or Fracture the Economy?

• U.S. goods imports now make up 11.2% of GDP - nearly five times higher than in the 1950s - highlighting America's growing reliance on foreign production.
  
  
• Trump’s proposed tariffs could raise up to $700B annually - but only if imports remain high, creating a paradox that could strain a consumption-driven economy.
  

What you need to know: The U.S. is more import-dependent than ever, with goods imports now making up 11.2% of GDP - up from roughly 2.5% in the 1950s. Trump’s proposed tariffs aim to reverse that trend by boosting domestic manufacturing and raising up to $700B in annual revenue, but doing so risks jolting a 70% consumption-driven economy. 

Why it matters: Trump’s reciprocal tariffs officially went live on Wednesday, April 2nd, marking a major shift in U.S. trade policy. While the goal is to boost manufacturing and shrink the deficit, hitting the $700B revenue target depends on imports staying high - which tariffs are designed to reduce. That contradiction could pose a challenge. 

Now the Deep Dive: I came across an interesting Bloomberg piece this week on America’s growing reliance on imports - and the historical data it offered was worth a closer look¹.

It’s no surprise the U.S. is far more import-dependent today than it was pre-1990—goods imports now make up 11.2% of GDP, compared to just 2.5% in the 1950s and well above levels seen through most of U.S. history.

As we explored in “Triffin’s Dilemma: Why the U.S. Dollar’s Global Role Is a Double-Edged Sword,” being the world’s reserve currency weakens domestic manufacturing and increases reliance on foreign goods.

In short, as the dollar became the world’s currency of choice, U.S. industry paid the price.

It’s this imbalance Trump is now targeting with his proposed tariffs—aimed at reviving American manufacturing while generating revenue to shrink the ballooning budget deficit.

For instance, according to White House advisors, the tariffs could bring in $600B–$700B a year, or about ~20% of current goods imports. That’s actually pretty in line with late-1800s levels, like under President William McKinley (who slapped on huge tariffs of his own to try and protect U.S. industry).

Put simply, more imports = more goods to tax = more tariff revenue.

Thus, in that historical context, the proposal doesn’t look so far-fetched.

But that’s just the theory.

If tariffs work as intended and imports fall, reaching $700B in revenue becomes much harder.

Or, said another way, fewer imports = fewer goods to tax = less revenue.

And let’s not forget - today’s U.S. economy is 70% driven by consumption. Suddenly hitting it with 19th-century-style tariffs could trigger a major shock - with unpredictable consequences.

Yes, America rose from an “emerging market” to a superpower during a high-tariff era. But it’s unclear if tariffs caused that growth - or just happened to be there.

Meanwhile, as I wrote to you last week in “The Coming Global Monetary Reset: What History Tells Us and What Might Be Next” – a big problem with the chronic U.S. trade deficit is due to how the global monetary system is set up. And tariffs alone can’t fix that.

So, time will tell what happens. But it could be a bumpy ride in the meantime. 

Figure 1: Bloomberg, March 2025

Auto Repos Skyrocket: Are We Watching a Subprime Crisis in Real Time?

• In 2024, 1.73 million vehicles were repossessed - he highest since the 2008 crisis - signaling deep consumer strain beneath the surface of a "strong" economy.
  
  
• Subprime auto delinquencies hit all-time highs, while Wall Street piles into riskier loan bundles eerily similar to the pre-2008 mortgage mess.

What you need to know: Car repossessions soared last year – hitting their highest levels since the 2008 crash – and highlighting more and more Americans are stretched financially thin².

Why it matters: In 2024, lenders seized 1.73 million vehicles - up 16% from 2023 and 43% from 2022. Repos haven’t run this high since the financial crash. It’s another sign Americans are falling behind on their bills, squeezed by high interest rates and still-steep car prices. This could trigger further issues

Now the Deep Dive: Last year was brutal for consumers dealing with debt in general – but the auto market really highlighted it.

Car repossessions surged, hitting levels not seen since 2009. That’s alarming on its own. But it’s even more concerning when you consider this happened in 2024—a year when the economy was supposedly "strong.”

But this isn’t just about repos. Two deeper cracks are forming.

Let me explain.

1. Subprime Delinquencies are Breaking Records

I flagged this last year in “Carmageddon: Is the Auto Market Looking Fragile? I Believe So.” That piece called out rising stress among subprime borrowers (FICO scores between 580–619).

Now the pressure’s boiling over.

In January, 6.56% of subprime auto borrowers were 60+ days past due - the highest on record since Fitch began tracking in 1994. February dipped slightly to 6.43%, but that’s still near historic highs. And monthly losses for lenders? The worst since 2009.

Subprime tends to crack first - like the bottom blocks in a game of Jenga. Pull too many, and the whole stack starts to sway. (We’re not toppling yet—but the base is shaking.)

2. Risky Auto Loans are Flooding Wall Street

Long story short, when someone gets a car loan, it usually doesn’t stay on the lender’s books. It gets bundled into a Wall Street product called an asset-backed security (ABS). If that sounds familiar, like mortgage-backed securities from 2008 – that’s because it’s the same concept.

• For example, picture a smoothie. Lenders blend prime (good) and subprime (risky) loans and serve it up to investors – hoping that the bad fruit won’t take away from the taste.

The problem? Lately, the mix is going heavy on the bad fruit. . .

In 2024, “below-prime” ABS issuance jumped 12% to $43 billion – now making up over a third of all auto loan ABS (up from 32.7% in 2023), according to S&P Global³.

The recent report found that:

• Subprime auto-backed securities losses are spiking.
• Subprime delinquencies are at recessionary levels.
• And yet, Wall Street is gobbling up even more subprime debt?

Heck, even prime auto loans are starting to sour – with 60+ day delinquencies hitting their highest level since 2010.

Something’s happening here. I’ll keep you posted.

Figure 2: Bloomberg, March 2025

Wall of Worry: Is Bearish Sentiment a Warning - or a Buy Signal?

• Investor sentiment across the board - from consumers to pros - is at multi-year bearish extremes as fear overwhelms – creating potential contrarian opportunity.
  
  
• History shows these moments of extreme pessimism can set up sharp market reversals.

What you need to know: Investor sentiment just hit extreme bearish levels across the board. Retail investors, consumers, and professional fund managers are all signaling deep pessimism about the stock market.

Why it matters: When bearish sentiment gets this extreme, it usually means one of two things: either the crowd is right - and a correction is brewing or it’s wrong - and markets are setting up for a contrarian upside move. With fear at multi-year highs and fund managers slashing equity exposure at a record pace, this disconnect between sentiment and performance could trigger a major bout of volatility - or opportunity.

Now the Deep Dive: Something interesting is happening in the markets right now – U.S. investors are growing extremely bearish.

And while there’s good reason for this, one has to wonder, “Is this creating an opportunity?”

Just take a look at the multiple surveys - from retail investors to seasoned fund managers - where bearish sentiment is breaking records.

Here’s what’s been flashing red over the past month:

1. Retail pessimism hit rare extremes. - Back in early March, the American Association of Individual Investors (AAII) survey showed over 60% of investors were bearish on the market⁴. That kind of lopsided fear is rare. In fact, it’s only happened five other times since the survey began in 1987. Think about that - over three decades of data, and we’re suddenly back in rare territory.
   
   
2. Consumer confidence in stocks just cratered. - The Conference Board’s March survey found that 45% of consumers expect stock prices to decline over the next 12 months. That’s the highest level of pessimism since July 2022, and before that, you’d have to go back to October 2011 - right after the U.S. lost its AAA credit rating.
   
   
3. Fear of a crash is growing - According to the Q1 Allianz Life Study, published just last week, 51% of Americans now believe “another big market crash is on the horizon.” That’s not just bearish sentiment - that’s near anxiety⁵.

This isn’t just about volatility or inflation anymore. It’s an underlying belief that the entire market is skating on thin ice.

4. The smart money is pulling back at record levels - It’s not just retail investors hitting the brakes here. The March BofA Fund Manager Survey reported the largest drop in U.S. equity allocation on record. That’s institutional capital running for the exits⁶.

Historically, these moments of extreme pessimism can go one of two ways:

• It’s a contrarian signal - and the wall of worry becomes fuel for more potential upside for those brave enough to “buy the fear”.
  
• It’s a warning sign - and sentiment is catching up to a reality that hasn’t hit yet.

Either way, the crowd is spooked - and when that happens, volatility usually isn’t far behind.

Stay tuned - the next move might be big.

 Figure 3: Bank of America, March 2025 

Anyway, who knows what will happen?

This is just some food for thought as we watch how these trends develop.

As always, we’ll be keeping a close eye on things. Enjoy the rest of your weekend.

Sources:

1. Could Tariffs Raise $700 Billion a Year? Not Without Pain - Bloomberg
2. Car Repossessions Hit Levels Unseen Since 2008 Financial Crisis
3. S. Auto Loan ABS Tracker: Full-Year And December 2024 Performance | S&P Global Ratings
4. Bearish Sentiment Surges As If The Market Just Crashed – AdvisorAnalyst.com
5. Breaking: Survey Shows 51% of Americans Expect Major Stock Market Meltdown
6. FT | Investors Slash US Equity Holdings By Most Ever, BofA Survey Shows

Disclosures:

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