The Summer of Standoffs
The Summer of Love the months ahead of us most certainly will not be. More like the Summer of Our Discontent. As we look around the world, conflicts like those in Ukraine and the Middle East still loom large with only the faintest, periodic glimmers of hope for peaceful resolutions. Everywhere you look across the U.S. political landscape, there is simmering conflict from local school board meetings and town councils to the halls of Congress and the vaunted chambers of the Supreme Court.
The Summer of 2025 is shaping up to be a summer of standoffs. Conflict is pervasive in so much of how we live our lives and what we observe in the halls of power and in the financial centers from New York to Silicon Valley. Some of the confrontations are around principles and others seem so to be more around personalities. Many might actually be entertaining if they were set on the silver screen and not unfolding daily before our eyes with the economy (not to mention principles of good governance) hanging in the balance, but here we are.
So how is the Summer of Standoffs shaping up? Let’s take a look at some of the key face-offs:
Standoff #1: Corporate America vs. Trump
A quirky thing happened between Amazon and Donald Trump a few weeks ago — quirky but with far-reaching and deep-seated implications. On April 29th, Punchbowl News reported that Amazon planned to display the cost of the tariff as a component of the total price of various items on their website. This would have been meant to highlight to consumers how the tariff costs were directly impacting them. You can imagine how this went over in the Trump White House; Press Secretary Karoline Leavitt called it a “hostile and political act,” and suggested Amazon had “partnered with a Chinese propaganda arm.”
Trump and Amazon Founder Jeff Bezos purportedly talked later the same day, and Amazon backtracked from any meaningful discussion of this idea, saying in a short statement, “The team that runs our ultra low cost Amazon Haul store considered the idea of listing import charges on certain products. This was never approved and is not going to happen.” Clearly pleased with the quick about-face, President Trump said later in the day, “[Bezos] solved a problem very quickly and he did the right thing. He’s a good guy.”
Although some Amazon shareholders, customers, and employees were frustrated at how quickly the company backtracked (it’s unclear if the idea really was up for meaningful consideration or not), Bezos navigated the Trump storm well, all things considered. Amazon stock (AMZN) is up about 8% since the Punchbowl News initial report, in line with a broader market really but outpacing it, for sure.
The question of how to make it clear to stakeholders including both shareholders and customers that tariffs will impact prices which then, in turn, impacts profitability, while also being mindful of the need to appease President Trump is top of mind for many CEOs and others in leadership roles in companies large and small throughout the United States and, indeed, the world. After Mattel CEO Ynon Kreiz said recently that they do not anticipate moving manufacturing back to the United States in response to the Trump Tariffs, the President responded by saying, “That’s ok. Let him go, and we’ll put a 100 percent tariff on his toys, and he won’t sell one toy in the United States, and that’s their biggest market.” Mattel makes Barbies, Hot Wheels, American Girls dolls, among many other classic toys.
Apple, Harley-Davidson, Bank of America, Merck, and many other companies have felt the heat from Trump in recent months. Not even Walmart, whose CEO Doug McMillan has historically enjoyed a friendly relationship with Trump, is immune. After McMillan, who leads the largest private sector employer in the country in Walmart, said that the proposed tariffs would lead to higher prices on the Walmart shelves, Trump posted on Truth Social, “Between Walmart and China they should, as is said, ‘EAT THE TARIFFS,’ and not charge valued customers ANYTHING. I’ll be watching, and so will your customers!” On a recent earnings call, McMillan tried to remain even-keeled, saying, “We will do our best to keep our prices as low as possible. But given the magnitude of the tariffs, even at the reduced levels announced this week, we aren’t able to absorb all the pressure given the reality of narrow retail margins.”
For the most part, America’s CEOs are not taking a combative stance against the president, but their consternation is clear. Absent collective action by the group of them, however, they all risk swinging on their own in the wind against a president known to be vindictive and vengeful. The way these various battles play out between specific companies and Trump and between corporate America as a whole and the president will be very interesting to observe in the months ahead.
Standoff #2 - Trump vs. Jerome Powell (featuring the Supreme Court)
I’ve written a lot in these digital pages about the tension between President Trump and Fed Chair Jerome Powell, so I won’t dwell much more on it today. Their relationship is contentious, to say the least. As Trump continues to call on the Fed to lower rates while threatening Powell’s job, and as Powell holds the line on rates and brusquely resists the urge to fully engage with Trump, the battle lines become further entrenched.
Just this past week, the Supreme Court gave Trump a victory while also offering some protection to Powell. On Thursday, the Court upheld Trump’s firing of two federal board members of independent, quasi-judicial organizations including the National Labor Relations Board. However, the Court’s ruling carved out protection for the Federal Reserve board, essentially saying that the Fed has enjoyed historical independence from the White House, which is now a well-established precedent that should be upheld.
The Fed appears to have no specific plans to lower interest despite the pressure and threats from Trump. On Thursday, Chicago Fed Reserve President Austan Goolsbee said, “Everything is always on the table, but I feel like the bar for me is a little higher for action in any direction while we’re waiting to get some clarity.” So, we wait.
Standoff #3 - Ratings Agencies vs. The Government
This past week, the Republican-led House of Representatives narrowly passed a tax and spending bill known as the “One Big Beautiful Bill Act” by a 215-214 vote. The bill will now go to the Senate, where it is expected to be amended but ultimately passed. The bill, backed by President Trump, contains several key provisions:
Eliminates the tax on tips
Increases the state and local tax deduction cap from $10,000 to $40,000
Tightens eligibility for Medicaid
Reduces SNAP benefits by $300 billion while tightening eligibility and adding stricter work requirements
Adds $220 Billion for border defense and border security
Debt markets reacted strongly to the bill’s passage in the House of Representatives, with yields jumping. This is a reflection of market expectations of higher interest rates and possibly higher inflation in the years to come as a result of some of the measures in the bill. The Congressional Budget Office (CBO) estimates that the bill could add approximately $2.3 trillion to the national debt over the next decade. The Penn Wharton Budget Model an increase of $2.8 trillion over that same time period.
None of the major ratings agencies currently have the United States in their highest tiers. On May 16, Moody’s lowered the U.S. credit rating from Aaa to Aa1—the first time since 1917 that the country has not held the agency’s top rating. The decision stemmed from concerns over the ballooning federal debt, now at $36 trillion, and the sharp rise in interest payments, which now exceed those of comparable nations. Moody’s cited a persistent lack of meaningful fiscal reforms from both Congress and recent presidential administrations, warning that deficits and entitlement spending are likely to worsen over the next decade. Still, there was a nod of positivity in the Moody’s report, however, as they upgraded the U.S. credit outlook from negative to stable, emphasizing America’s strong economic institutions, the robustness of its economy, and the continued global dominance of the U.S. dollar.
Similarly, Fitch had previously downgraded the U.S. credit rating in August 2023, and S&P has had the U.S. credit rating in a sub-optimal spot since 2011. These lowered ratings underscore growing unease about America’s fiscal direction. If the government continues to borrow heavily without implementing meaningful reform, it could reduced investor confidence, which would in turn lead to higher borrowing costs as interest rates continue to rise.
As you can imagine, the Trump Administration has pushed back on the recent Moody’s downgrade, blaming the country’s fiscal and monetary issues on the Biden Administrations and others, and certainly Congress has more than their own hand in these matters, as well.
The Summer Ahead
It has been wet and dreary in the northeast this spring, and so has this article. So I’ll end on a more positive note. I hope if you are reading this on Sunday morning, you have a peaceful and relaxing Memorial Day Weekend. It is important to remember that along we tend to honor our active duty military and veterans on all of these types of holidays (e.g. Armed Forces Day, Memorial Day, the Fourth of July, and Veterans Day itself), Memorial Day is truly meant to honor those who lost their lives in the defense of our nation, its people, and our way of life. It’s nothing against our veterans and active duty military, but those who have died in service should have their own moment of solemn recognition, admiration, and gratitude.
I have been able to spend this weekend at a soccer tournament in New Hampshire with my family watching our 11-year-old and his team, and then we made a quick jump into Boston for a Red Sox game yesterday and Museum of Science visit. I appreciate the chance to have these moments, and I hope you and yours have many similar ones in your own ways and in your own activities in the summer ahead, even in the midst of this complicated world in which we live.
Ben Sprague lives and works in Bangor, Maine as a Senior V.P./Commercial Lending Officer for Damariscotta-based First National Bank. He previously worked as an investment advisor and graduated from Harvard University in 2006. Ben can be reached at ben.sprague@thefirst.com or bsprague1@gmail.com.
