Economic Uncertainty in the US

Gold bars in storage. Photo by Jingming Pan on UnSplash.

Introduction to the Problem

Although the tariffs on imports have not really kicked in yet, Americans are already getting worried about rising prices and are starting to save for a rainy day.

They are skipping a new car, a big vacation, and even putting off having a second child and just hoarding cash.

The Impact of Tariffs on the Economy

Many Americans have these concerns. Trump’s tariffs are affecting the stock market, businesses, and inflation. This makes the Federal Reserve’s job harder as it decides whether to raise or lower interest rates.

While most experts think interest rates will stay stable for now, future decisions are uncertain because tariffs could both raise prices and slow economic growth. And if consumers stop spending, that will just be throwing more water on the fires of the economy.

“Their job has become a lot harder,” said Jay Bryson, an economist at Wells Fargo. Federal Reserve Chair Jerome Powell said that even though people feel uncertain, the economy has still performed well in many ways.

Adjusting to the New Reality

Ordinary Americans are already adjusting their spending. After losing money in the stock market, Dave Gold, a 37-year-old finance worker in Wyoming, cut his expenses in half.

He canceled Netflix, stopped shopping on Amazon, and traveled less. “It’s just really hard to plan for the future,” he said.

Economic Indicators

Retail sales dropped last month, and big companies like Walmart and Delta Air Lines reported lower demand. Job growth has slowed, and the stock market is at its lowest level since September. A University of Michigan survey found that job market worries are at their highest since the Great Recession, and inflation expectations rose sharply.

Consumer spending makes up about two-thirds of the U.S. economy. “It’s not like the consumer is collapsing, but we’re seeing some cracks,” Bryson told the BBC. He now thinks there is a one-in-three chance of a recession, up from one-in-five earlier in the year.

Inflation and its Effects

Prices for everyday items have risen. The best known are eggs which have been affected by bird flu on unhygienic US egg farms, which have risen sharply hitting prices as high as $1 per egg.

Even the White House occasionally admits there may be short-term austerity, but promises long-term benefits when and if manufacturing returns to the US.

Voters’ Concerns

However voters can see that this is not working very well with home-laid eggs and polls show many Americans—Democrats, independents, and even some Republicans—are worried about Trump’s handling of the economy.

Jim Frazer, a software engineer in Nebraska, did not vote for Trump. He bought a new phone and TV last year, thinking tariffs would make them more expensive later. But now, he and his wife are saving instead of spending. They postponed buying a loveseat and scaled back plans to renovate their bathroom.

“I just feel like right now, we need that money squirrelled away in a safe spot,” he said. Many Americans are turning to buying gold, which further exacerbates the foreign exchange problems of the US.