The impact on the U.S. economy of the Trump Administration’s new tariffs and other government policies remains unclear halfway through the year, according to analysis from the National Retail Federation (NRF).
“This year began with high expectations for the strength of the U.S. economy,” NRF Chief Economist Jack Kleinhenz said in a release. “Since then, anxiety and confusion have taken center stage in the economy and financial markets as uncertainty over public policy has intensified. It was difficult to judge how policy changes would impact the economy in early 2025 and it remains so now.”
“Economic fundamentals appear solid at this juncture, but uncertainty is pervasive,” Kleinhenz said. “There are many crosscurrents surrounding tariffs, immigration and deregulation, and everyone is sorting through what the tariff rates are going to be, how they will impact inflation for retail products and, importantly, how long they will be in place.”
Kleinhenz’s comments came in the July edition of NRF’s Monthly Economic Review, which said “economic growth is holding up relatively well” so far this year despite uncertainty about the future. GDP fell at an annual rate of 0.5% in the first quarter, but that was mostly because of a surge in imports driven by tariff announcements. In contrast, private final sales to domestic purchasers — a measure of consumer and business spending — were up 1.9% year over year. That was down from 2.9% in the previous quarter but showed continued strength in private sector demand.
The NRF report assessed business conditions by comparing several measures:
- year-over-year inflation as measured by the Personal Consumption Expenditures Price Index ticked up to 2.3% in May from 2.1% in April.
- the labor market is performing better than expected, with employers adding 147,000 jobs in June, just above the monthly average of 146,000 over the past year, and the unemployment rate was largely steady at 4.1%.
- the Federal Reserve is “quite unlikely” to cut interest rates this month but could be on track to do so this fall, as Fed officials are closely watching the “inflation psychology” of consumers
- the signing of the One Big Beautiful Bill Act “could greatly alter the economic outlook,” depending on how businesses and consumers react
- the impact of new tariffs has yet to be clearly seen in prices.
“However, if the large increases in tariffs announced earlier this year take effect and are sustained, they will infiltrate consumer prices, causing a downshift in spending that is likely to spill over into the labor market later in the year with higher unemployment,” Kleinhenz said.
