The US economy is facing growing uncertainty as President Donald Trump’s threat of tariffs on imports from Mexico, Canada, and China continues to weigh on businesses and consumers. The administration has vowed to impose a 25% tariff on Mexican goods and double tariffs on Chinese goods to 20%, sparking concerns about the impact on inflation, consumer confidence, and trade.
Layoffs are rising, consumer spending has unexpectedly dropped in January, and consumer confidence has plunged, leading to a sharp downgrade of economic growth forecasts. The Atlanta Federal Reserve’s GDPNow model now projects a 2.8% decline in GDP for the first quarter, marking a swift downgrade from a previous forecast of 2.3%.
Businesses are feeling the uncertainty, with some warning of potential job losses and higher costs. A US-based transportation equipment supplier noted that customers are pausing on new orders due to tariff uncertainty, while a toy company has estimated it could be left with an additional $5 million gap in its finances if tariffs increase.
Even major companies like Chipotle and Alcoa are concerned about the impact of tariffs on their operations. While some CEOs have expressed willingness to absorb extra costs, others have warned that higher prices could harm consumers.
The situation is further complicated by the potential for a trade war between North America’s largest trading partners. Mexico and Canada have vowed to retaliate with their own tariffs, while China has promised to respond to higher tariffs.
Experts are divided on the impact of these developments. Some, like Ed Yardeni, president of investment advisory Yardeni Research, believe that the growth scare is just a headfake caused by extremely cold weather and uncertainty around policies in Washington, predicting that the underlying resilience of the economy will withstand the uncertainty.
Others, however, are more cautious, warning that the uncertainty could have a lasting impact on economic growth. As the situation continues to unfold, businesses and consumers alike will be watching closely for any further developments that could shape the US economy’s trajectory.
Source: https://edition.cnn.com/2025/03/03/economy/tariff-choas-threatens-risky-economy/index.html