The US economy is facing a growing risk of recession due to President Donald Trump’s nationalist agenda, which has imposed heavy tariffs on imported goods from other countries. Despite a slow hiring rate and slowing economic growth, the unemployment rate remains low at 4.2 percent.
According to recent data released by the Bureau of Labor Statistics (BLS), US employers added only 73,000 jobs in July, far fewer than expected. This is largely due to Trump’s tariffs, which have increased costs for manufacturers and made it harder for them to expand hiring or gain global market share.
Economic growth has also slowed, with the gross domestic product expanding at a 1.2 percent annualized clip over the first half of this year. The slowdown in growth is largely attributed to an explosion in artificial intelligence infrastructure spending, which has contributed more to American economic growth than all of consumer spending.
The impact of Trump’s tariffs on inflation is also significant. Consumer prices rose by 2.6 percent in June, with core goods prices climbing at a 3.7 percent annualized clip. This suggests that America would have enjoyed a return to the Fed’s 2 percent target inflation rate had Trump not manufactured a surge in the cost of imported goods.
Despite these challenges, many sectors are already responding to rising import costs by shedding payroll. If this trend continues, and unemployment rises, consumer spending will likely dip, leading to a potential recessionary spiral.
The Federal Reserve may try to preempt this dynamic by cutting interest rates in September. However, if Trump’s tariffs continue to lift consumer prices, the central bank could find itself at an impasse: The Fed normally raises interest rates when prices are too high, and cuts them when job growth is too slow.
Source: https://www.vox.com/politics/422053/jobs-report-trump-tariffs-us-economy-gdp-inflation-ai