Economic growth is slowing amid tariffs and weakening consumer demand
of ConsumerAffairsJune 9, 2025
- Job market holds steadybut growth slows amid tariff uncertainty and weak consumer demand
- Businesses like UltraSource brace for sudden cost surges and pull back on capital spending
- Fed reluctant to cut interest rates, leaving markets vulnerable to policy shocks
After dodging two recession scares in the past two years, the U.S. economy is now facing a new test: rising trade uncertainty and business hesitation fueled by President Donald Trumps aggressive tariff policies, Wall Street observers say.
While job growth continued in May, adding 139,000 jobs and keeping unemployment near 4.1%, beneath the surface, economic momentum is faltering.
Business leaders and economists say erratic tariff announcements and lingering inflation worries are freezing hiring and investment, while new costs are threatening fragile profit margins. With consumers showing signs of fatigue, housing sales stagnating, and interest rates stuck, the risk of a downturn is again on the table.
Were going to be very careful about any cash expenditure, said John Starr, CEO of Kansas City-based UltraSource, a manufacturer of meat-processing equipment, in a Wall Street Journal report. After Trump raised tariffs on imported machinery by 10% in April, Starr is staring down a $2 million unexpected cost that could wipe out profits for a year.
The uncertainty is paralyzing. A planned 120-day grace period for converting TikTok into a U.S.-owned company collapsed last month after a sharp 34% tariff hike on Chinese goods led Beijing to delay negotiations. That move spooked many businesses with global supply chains, who now worry that Washingtons trade posture could swing again at any moment.
Theres no clarity. And without clarity, we cant plan, Starr said.
Consumers and labor: A balancing act
For now, U.S. consumers are keeping the economy afloat. But signs of stress are mounting: delinquency rates on credit cards and auto loans have climbed, and more Americans are delaying major purchases. The housing market has also turned ice coldRedfin reports nearly 500,000 more sellers than buyers, the widest gap since 2013. Home prices are expected to drop by at least 1% this year.
The labor market, while stable, is also in a delicate equilibrium. Companies that struggled to hire during the pandemic are reluctant to let go of workers nowbut that could change quickly, said EY chief economist Gregory Daco, the Journal reported. It only takes one big layoff to trigger a cascade.
Fed on pause, inflation looms
Adding to the unease, the Federal Reserve has paused interest rate cuts amid concerns that tariffs may re-ignite inflation. Long-term borrowing costs remain high as markets worry about how the U.S. will finance growing deficits. This affects everything from mortgage rates to business loans.
If these borrowing costs stay elevated, stock markets could wobble, and that could feed back into lower investment and hiring, warned Jason Thomas, chief economist at Carlyle Group.
Despite strong job numbers and past resilience, economists say this summer could be make-or-break.
Observers said the recovery could continue if Trump backs off tariffs. But if he persists, “we could see the whole thing fall,” one economist said.
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