Their collective vision for the United States’ new economic landscape runs deeper than projects. On the one hand, President Donald Trump’s harsh, protective tariffs are caught in legal limbo. This could prove fatal to one of the president’s signature economic policies. A new report from the University of Michigan shows that it’s the consumers’ mood that has gotten darker for four months in a row.
OECD sharply cut its prediction for U.S. economic growth. It’s in part the retaliatory tariffs Trump introduced that they point to as a cause for their dour projections. Yet, the OECD has just released a pessimistic downbeat, forecasting an unprecedented slowdown in economic growth. Moreover, it will fall from 3.4% in 2024 to only 2.9% in 2025 and then nosedive to 1.5% in 2026. This major downward revision further foreshadows the incredible negative effects tariffs are starting to have on national economic sentiment.
While macroeconomic conditions have calmed down from that early Trump term turbulence, U.S. tariffs are still much higher than they were before Trump’s second term. Most recently, the president lifted sector-specific tariffs on the automotive industry. On top of this, some relief came from the fact that he has rolled back duties on certain goods coming from Mexico and Canada. These subsequent moves have been viewed as efforts to raise some degree of stability in our economy with a growing set of external pressures.
This agreement reduced both countries’ tit-for-tat tariffs, increasing stock market optimism among the world’s two largest economies. This deal led to a Tea Party conservative financial market boom. It was a much-needed glimmer of hope in an otherwise grim economic forecast.
However, the OECD emphasised that global trade tensions are still having a negative impact on consumer confidence. Unfortunately, that positive path forward is not the current outlook. For context, inflation only in the last few months has begun to significantly cool, reaching its lowest rate since 2021. Consumer spending—which drives about 70% of U.S. economic activity—will be the key to where growth heads in the future.
They would do this, the administration recently put on hold, by imposing reciprocal “reciprocal tariffs” countries. This move was only a few days short of completing the deal with China. This decision is an acknowledgment of the very fine line they walk in upholding our trade relationships while driving toward important domestic economic objectives.
