The bottom line is that the US economy is trapped by three troubles: poor employment, tariffs driving prices high, and people being hesitant to spend money. This is fundamentally a chain reaction caused by shortsighted policies.
The job market has slowly dragged down consumer spending. In July, the unemployment rate rose to 4.2%, with only 73,000 new jobs created, and previous data was significantly revised downwards. Worse still, there are fewer people willing to work, and the actual unemployment pressure is much greater than the official figures. Many industries are laying off workers, and ordinary families' income expectations are becoming increasingly bleak.
Tariff policies have exacerbated inflation. Trump raised steel and aluminum tariffs to 50%, and the number of taxed items increased by over 400, with the actual tax rate soaring to 17%. Yale University calculated that each household would lose $2,800, with low-income families faring even worse. Prices for everything from shoes to trucks have increased, and Goldman Sachs predicts that the tariff costs consumers will bear will rise from 22% to 67%, and inflation is not yet at its peak.
Consumer spending is also about to stall. In April, personal consumption expenditures only increased by 0.2%, and sales of RVs, plane tickets, and concert tickets have slowed down. Fitch estimates that this year's consumption growth will drop from 2.2% to 1.9%, and it will likely get worse later. The money people are saving has fallen from $2.1 trillion to $1 trillion and is running out quickly, with the growth rate of credit card debt also declining significantly, indicating that people are clearly hesitant to spend.
Ultimately, it’s still the policy that is digging its own grave: trying to protect industries with tariffs has instead raised corporate costs; trying to reverse the trade deficit has left ordinary people's wallets emptier; trying to reshape the supply chain has caused global supply chains to become chaotic. Now tariffs have turned inflation into a "poor tax," weak employment has led to lower incomes, and weak consumption creates a vicious cycle. The US economy is slipping into stagflation. Fitch has adjusted next year's growth rate to 1.7%. This is not just a number change; it fundamentally reflects a score for the "America First" policy — the prosperity bubble inflated by tariffs is about to be burst by reality.
