U.S. economy expected to slow
Tariffs, immigration crackdown catching up to consumers
By: Paul Davidson
USA Today
..... The cloud of uncertainty that has hovered over the U.S. economy the first haft of 2025 threatens to unleash a thunderstorm that dampens growth in the second half as President Donald Trump's higher tariffs hit consumers and his immigration crackdown rocks the job market.
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While growth was already poised to slow, Trump on July 10 [2025] increased the risks of a more pronounced pullback by announcing plans to raise the tariff rate on many Canadian imports form 25% to 35% and impose a blanket 15% to 20% duty on most other countries, up from 10%. On July 12, [2025] the tariff threats ramped up again with Trump announcing 30% tariffs on all imports from Mexico and the European Union.
..... In the spring, [2025] Trump announced a 90-day pause on high double-digit reciprocal tariffs for China and many other countries, easing recession fears and reversing a stock market sell-off. White House officials extended the reprieve to August 1 [2025] to provide more time for negotiations.
..... But Trump recently has ratcheted up his trade threats, unveiling plans for a 50% tariff on imported copper, 50% on all shipments form Brazil and high fees for 14 countries that don't reach a deal with the United States by August 1. [2025] Already in effect: a 50% levy on metals, 25% on cars and 30% on china, in additions to the blanket 10% charged that appears poised to rise sharply.
..... "Risks are intensifying that we may see much higher rates, with consequences efforts on inflation and growth," said Jonathan Millar, senior U.S. economists at Barclay.
..... Just 42% of CEOs of small and mid-size companies plan to add to their staffs in the next year, [2026] the lowest level on record dating to 2003, according to a June [2025] survey by Vistage, a CEO networking group.
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Gregory Daco, chief economist at EYParthenon, has lowered his odds of a recession this year [2025] to 35% from 50% but said the chances of a downturn would claim about 50% if Trump reverts to the tariffs he rolled out in early April. [2025]
..... Even without the harsher import fees Trump recently announced, economists have been predicting a notable slowdown in growth the rest the year. [2025]
..... "We're carrying much less economic momentum," Daco said.
..... Forecasters have been surprised that tariffs haven't yet had a significant effect on inflation. Daco said that's partly because manufacturers and retailed stocked up on foreign goods in February and March, [2025] before the fees took effect.
..... Also, he said, companies have been routing products through bonded warehouses that delay tariff payments. Higher prices from tariffs don't immediately show up in inflation reports.
..... But all those tactics can delay the inevitable only so long, Daco said.
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"As inventory buffers thin, bonded warehouse timelines expire and cost absorption runs its course, prices pressures will start surfacing more clearly into the second half of 2025," Daco wrote in a note to clients.
..... Before Trump escalated the trade conflicts, many economists said the levies have pushed the average U.S. tariff rate from about 3% to 15%, a rise that would drive the Federal Reserve's preferred annual inflation measure from 2.7% to abut 3.3% by the end of the year. An immigration surge that has bolstered the U.S. labor supply and job growth the past few years "is about to go into reverse," JPMorgan Chase said in a research note.
..... The Trump administration is ending provisions that temporarily protected immigrants who lack permanent legal status from deportations for humanitarian reasons. That will likely cause 1.8 million migrants, including about 1.1 million workers, to lose their legal status in the second half of the year, [2025] JPMorgan Chase said. Especially affected industries such as agriculture, construction and hospitality.
..... Already, annual net immigration to the United States has slowed form about 3 million the past few years to an annual rate that's set to reach 500,000 by year's end, [2025] according to the Congressional Budd get Office and economists.
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That compares to a rate of 900,000 a year before the pandemic.
..... The spike in deportations could quickly slow American's engine within months, JPMorgan Chase said.
..... The economy shrank at an annual rate of 0.5% in the first quarter but forecasters said that was mostly because the flood of imports form companies stocking up had to be subtracted from output (since they're made in foreign countries). Private domestic demand, a more telling measure of the economy's underlying health, increased a solid 1.9%.
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And economists estimate the government later this month [07/2025] will report 2% growth in the second quarter, according to those surveyed by Wolters Kluwer Blue Economic Indicators.
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But those forecasters expect quarterly growth to average just 0.7% the second half of the year, [2025] in line with Millar's estimate, and above the 0.5% gain Daco projects. That's close to stall speed.
..... From the fourth quarter of 2024 to the fourth quarter of 2025, Millar estimates the economy will grow a meager 0.5%, cpmpared to 2.5% the prior year. [2024]
..... Resilient households ahve propped up teh U.S. economy the past few years, but the treat of higher prices from tariffs ahs led Americans to rein in their spedning, Daco and Millar said. Now, the actual pass-through of the fees into price will likely have a more tangible impact on consumption, Daco said.
..... After adjusting for inflation, consumer spending fell 0.3% in May [2025] and is expected to rise just 0.7% the second half of the year, [2025] according to the Wolters Kluwer survey. Consumption makes up 70% of economic activity.
..... Meanwhile, average monthly job growth has slowed to 130,000 so far this year [2025] from 168,000 in 2024.
..... Companies have sharply cut back hiring amid tariff-related uncertainty but remain hesitant to lay off workers following severe pandemic-related labor shortages, Millar said.
..... However, Daco said more companies are shedding workers through attrition and retirement, as well as targeted layoffs.