In January, shortly after Donald Trump returned to the White House, he began raising tariffs. Despite warnings from experts about potential economic harm, he pushed ahead with taxes on goods from Mexico, Canada, and China, eventually expanding this to a range of products from various countries. This triggered significant unrest in trade and rattled financial markets. Once concerns grew, Trump paused his most aggressive tariff plans for 90 days to allow for negotiations.
So, how has this impacted the economy?
Initially, the US stock market took a hit. The S&P 500 dropped around 12% as investors reacted to Trump’s high tariffs, which included a 145% tax on items from China. However, after rolling back some of these steep tariffs to a more manageable 10%, the market bounced back, with the S&P 500 rising about 6% for the year.
It’s interesting to note that, despite overall gains, stocks of companies most affected by tariffs, like retailers and automakers, are still struggling. As the 90-day talk deadline approaches, uncertainty looms. Liz Ann Sonders, chief investment strategist at Charles Schwab, remarked that investor confidence may be overly optimistic; a sudden spike in tariffs could shake things up again.
Trump’s tariff actions also led to a rush in importing goods earlier this year, but this momentum took a nosedive in April and May. Surprisingly, imports in the first five months of the year were 17% higher than last year. Industry analyst Ben Hackett noted that the future hinges on whether Trump decides to continue his tariff freeze or ramp up the taxes again. He suggested that a return to strict tariffs could lead the economy toward a brief recession.
When it comes to prices, the worry is still being monitored. Imported goods only account for about 11% of consumer spending in the US. Though tariffs have increased significantly, some data show price hikes have been moderate. Recent reports indicated that consumer prices increased just 0.1% from April to May, easing some fears. Yet, other products, like toys, have seen sharper price increases, and many goods affected by tariffs haven’t yet hit store shelves.
Consumer sentiment, however, has taken a downward turn, coinciding with the announcement of new tariffs. Retail sales fell by 0.9% from April to May, marking two consecutive months of decline. This slowdown suggests that while overall consumer spending may decelerate, many economists believe the economy could avoid recession if the job market remains stable. Currently, unemployment stands at a low 4.2%, and job growth is steady.
Experts agree we’re in a waiting period. Many businesses have put a pause on hiring and investing, uncertain about the future. Sonders warns that while a softening economy seems likely, the next steps will be crucial in determining the outcome. It’s a landscape of volatility, where every decision influences not just traders but everyday consumers. For more detailed market data, you can visit [this source](https://www.bls.gov/).