Reference Message Network reported on June 12 that according to a report by The Wall Street Journal of the United States on June 9, the U.S. economy has withstood several rounds of false recession warnings in 2023 and 2024, and is now entering another unsettling summer.

In May, employment growth remained stable, with the nation adding 139,000 new jobs nationwide. Over the past year, the unemployment rate has remained within a narrow range of 4% to 4.2%.

However, cracks exist beneath the surface. Companies have warned that changing trade policies are disrupting their ability to plan for the future, leading to stagnation in hiring and investment.

The policy uncertainty has intensified against the backdrop of slowing employment growth and a cooling real estate market. Compared to last year, the Federal Reserve is less willing to cut interest rates, as officials are concerned about emerging new inflation risks.

John Starr, owner of UltraSource, said he will adopt a conservative strategy—neither hiring nor increasing capital expenditures—until he figures out the tariff issue. UltraSource is a meat processing technology importer and manufacturer based in Kansas City, Missouri.

The company is waiting for its European supplier to complete a $20 million order placed before the 10% tariff took effect on April 9. This means if the tariff remains at this level, he will face a tax bill of $2 million.

"How am I supposed to pay for this?" said Starr, the third-generation operator of the business. "This could wipe out an entire year's profit."

Whether the U.S. economy can bend without breaking again depends on how consumers respond to the latest variables—this time coming from President Donald Trump's intention to restructure America's trade relations and reduce reliance on imported goods. In recent months, Trump has announced substantial tariff increases, swinging between escalation and temporary easing.

"The ultimate direction completely depends on what Trump decides next, frankly speaking, even Trump himself doesn't know what his next move will be," said Christopher Turnberry, founding partner of Beacon Economics Consulting in Los Angeles. "So it's almost impossible to predict how things will develop."

—Firstly, the U.S. labor market has been in an uneasy state of balance. Companies neither add new hires nor want to lay off employees recruited with great difficulty three or four years ago. It's like a beach ball pressed underwater; once companies believe demand is weak enough that they can no longer retain employees, the unemployment rate may rise rapidly.

—Secondly, consumers may ultimately resist rising costs, forcing businesses to tighten their belts.

—Thirdly, financial market shocks or sudden shifts in market sentiment remain an uncertain factor. The Federal Reserve lowered short-term interest rates by one percentage point last year, which alleviated pressure somewhat on credit card or floating-rate bank loan borrowers.

Due to concerns about tariffs potentially bringing new inflation risks, officials suspended interest rate cuts this year. Medium- and long-term borrowing rates are not set by the Federal Reserve but affect many borrowing costs such as home mortgages. As global investors increasingly focus on how governments around the world will finance growing deficits in the coming years, medium- and long-term interest rates have risen.

A sudden and sustained increase in borrowing costs could ripple through the stock market, harming corporate profits and reducing stock attractiveness.

The Federal Reserve significantly raised interest rates in 2022 and 2023 to curb inflation. However, the impact on the U.S. economy was limited because many households and businesses had refinanced at ultra-low interest rates during the pandemic. Subsequently, the U.S. economy benefited from an unexpected surge in artificial intelligence-related capital spending.

Any pullback could come suddenly. Jason Thomas, chief economist at private equity management firm Carlyle Group, said: "Technological innovation almost always leads to overbuilding."

Some companies are currently delaying price hikes, waiting to see how the tariff issue will resolve. Thomas said: "They all say, 'We can't take the risk of damaging our relationships with customers and suppliers due to a policy that may no longer exist in two months.'"

However, he expects businesses will eventually have to pass on some of the cost increases because their inventory purchased before the tariff implementation will eventually run out.

While people often improperly attribute the good or bad performance of the U.S. economy to the president, this time might be an exception.

"The U.S. economic momentum is strong, so if Trump really backs down on tariffs and calms down, honestly, you'll see this expansion continue for another two or three years," Turnberry of Beacon Economics Consulting said. "But if he continues to stir up trouble, then by early next year, this expansion might be derailed."

Original article: https://www.toutiao.com/article/7514972318754521651/

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