It hasn’t cratered yet.
Job growth held steady in May, with the economy adding 139,000 jobs. The unemployment rate has stayed in a tight range, between 4% and 4.2%, over the past year. But there are cracks beneath the surface. Businesses are warning that constantly shifting trade policies are interfering with their ability to plan for the future, leading to hiring and investment freezes.
Policy uncertainty has unfolded against the backdrop of an economy with slower job growth and a cooling housing market. Compared with last year, the Federal Reserve is more reluctant to cut interest rates because officials are worried about new inflation risks.
John Starr, the owner of UltraSource, an importer and manufacturer of meat-processing technology in Kansas City, Mo., said he is hunkering down—no hiring, no more capital spending—until he has clarity on tariffs.
‘We’re going to be very careful about any cash expenditure’ amid uncertainty on tariffs, says John Starr, owner of UltraSource.
The company is waiting for suppliers in Europe to finish work on $20 million in orders it placed before 10% tariffs took effect on April 9. That means he faces a $2 million levy if tariffs stay at that level.
“How am I supposed to pay this?” said Starr, a third-generation owner of the company. “That could wipe out profits for a year.”
Here’s the issue. Are Americans actually going to react by pulling back on spending? I’m not so sure.
Whether the economy again bends, rather than breaks, turns on how the U.S. consumer handles the latest curveball—this time from President Trump’s desire to reorder America’s trading relationships and reduce reliance on imported goods. For months, the president has announced one large tariff increase after another, at times wavering from escalation to temporary resolution.
“Where this goes all depends on what Trump decides to do next, and candidly, even Trump doesn’t know what Trump will do next,” said Christopher Thornberg, founding partner at Beacon Economics in Los Angeles. “So it’s almost impossible to see where this thing is heading.”
Economists largely agree that for the U.S. economy to slide into recession, the American consumer needs to falter.
If you look at those poll results I posted earlier, people think the tariffs are bad and that it’s going to make things worse but they haven’t acted on that. Maybe the price hikes haven’t hit yet and they’ll feel it more acutely this summer. But when we had that hike in inflation in 22 and 23, people screamed bloody murder but it didn’t translate to recession because people kept spending even as they whined about prices.
I’m really beginning to wonder if Trump’s luck is going to hold out once again. According to the polling he’s as popular as he’s ever been. If the economy carries on and we don’t see massive unemployment or a painful spike in unemployment he probably doesn’t miss a beat.