U.S. Economy Faces Three Risks Due to Tariff Uncertainties

New York, NY, June 9, 2025-"The U.S. economy, which weathered false recession alarms in 2023 and 2024, is entering another uncomfortable summer,” reports the Wall Street Journal.

“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.

Three risks loom large.

• First, the U.S. labor market has been in an uneasy equilibrium where companies aren’t hiring but are reluctant to fire workers that they hustled to find three or four years ago. Like a beach ball that shoots skyward after being held underwater, joblessness can quickly jump once companies decide demand is too soft to keep those workers.

• Second, consumers could finally push back against rising costs, forcing companies to tighten their belts.

Delinquency rates on consumer debt have been on the rise for a year, raising fears that deteriorating finances for low-income borrowers could lead to a more pronounced slowdown in consumer spending.

For the housing market, the spring sales season has been a bust. The U.S. market now has nearly 500,000 more sellers than buyers, according to real-estate brokerage Redfin. That is the largest gap since its tally began in 2013. Home prices could fall 1% this year, said Redfin economist Chen Zhao.

• Third, financial-market shocks or abrupt sentiment changes remain a wild card. The Fed reduced short-term interest rates by 1 percentage point last year, providing a measure of relief to borrowers with credit cards or variable-rate bank loans.

Officials hit pause on rate cuts this year amid concerns that tariffs might create new inflation risks. Longer-term borrowing rates, which aren’t set by the Fed and which influence many borrowing costs such as mortgages, have been elevated as investors around the world pay more attention to how governments will finance rising deficits in the years to come.

Any sudden and sustained rise in borrowing costs could spill over to the stock market, hurting companies’ earnings and making stocks less attractive. Lofty asset prices have supported business investment and high-income consumer spending.

For many companies, the uncertainty triggered by Trump’s sudden and seemingly arbitrary announcements of tariffs has upended the outlook for sales this year.