Six months after “Liberation Day” tariffs shook markets, the U.S. economy is growing near a 4 percent annual rate, unemployment is low and inflation is under 3 percent. Tariffs have generated more than $400 billion a year in revenue and eased deficit concerns. Yet legal threats, rising grocery prices and stress in farming and supply chains keep risks elevated for investors and businesses.
Where the trade war stands
When the administration unveiled sweeping tariffs six months ago, many expected an immediate downturn. Instead the headline data have surprised on the upside. Economic growth is running near 4 percent, the job market remains tight and headline inflation has come down to below 3 percent. Those readings have helped calm some of the most dire recession forecasts.
At the same time, the tariffs are visible in day to day costs. Collections are projected to top $400 billion a year. That revenue has become a central argument for the policy. It has also shown how costs are being redistributed. Importers faced additional charges and many companies passed those costs to consumers. Grocery prices are rising at the fastest rate in three years. Nearly half of respondents to a recent Axios Vibes survey by The Harris Poll said it is harder to afford groceries than a year ago.
The evidence so far supports the political claim that tariffs can raise large sums of revenue without causing an immediate recession. Whether that dynamic can persist depends on how the costs and benefits of the policy flow through the economy over the next year.
Corporate behavior and sector pain
Corporate responses to tariffs are uneven and evolving. A new KPMG survey of 300 C-suite executives shows firms are adjusting to higher trade costs. Forty four percent have already raised prices for customers and 71 percent intend to raise prices in the next six months. Companies are also adjusting payroll plans. Thirty eight percent have paused hiring and 44 percent have carried out layoffs. Those moves show how firms are trying to protect margins while managing demand and the cost impact of tariffs.
Some sectors feel the strain more than others. Agriculture has been one of the clearest trouble spots. China has reduced purchases of commodities like soybeans, translating into billions of dollars in lost sales. The administration is preparing a rescue package for soybean farmers that Treasury officials have described as imminent. The farm sector’s weakness contrasts with strength in other parts of the economy and highlights the uneven distribution of tariff effects.
Promises to shore up domestic manufacturing have not yet produced widespread new capacity. Companies have pledged plants and investments but actual ground breaking has been slow. Even with firm commitments, it will likely be a year or more before new factories add material production capacity and jobs. That lag raises the risk that consumers and businesses continue to carry tariff costs while seeing only limited near-term benefits on employment and domestic output.
Policy uncertainty and legal threats
Legal and policy uncertainty is a major variable for markets. A pending Supreme Court case could determine whether tariffs imposed under the International Emergency Economic Powers Act are lawful. If the court rules against the administration, a large share of what has been levied could be invalidated. Treasury officials have warned that if collections must be refunded the fiscal consequences could be severe.
Officials are attempting to shore up the program by relying more on established authorities such as Section 232 and Section 301 rules. Those alternatives may be more durable legally but they are not as broad or as fast acting as the original approach. The administration also continues to announce additional tariff possibilities. Semiconductors and robotics are among the sectors that have been mentioned as potential targets for new levies. That continues a pattern of policy moves that can affect supply chains and investment decisions across multiple industries.
Market preview for the coming trading session
Markets will open the session with a mix of confidence and caution. Strong growth readings and a tight labor market support risk appetite because they point to continued corporate revenue and earnings resilience. That backdrop favors cyclical sectors that benefit from robust domestic activity and rising investment. At the same time, the prospect that strong demand could push the Federal Reserve toward higher rates creates friction for risk assets and for interest rate sensitive sectors.
Investors will be parsing several specific developments. First, any fresh data or commentary that suggests the Fed will tighten policy to manage overheating could lift yields and weigh on long duration assets. The current debate on whether rising activity requires a rate response has already led some prominent economists to call for higher rates. Markets are likely to react to renewed comments on that topic.
Second, tariff news remains a direct market mover. Updates on collections compared with imposed tariffs, signals about additional levies and the Supreme Court case will all be watched closely. A ruling that limits tariff authority or news that collections must be refunded could produce abrupt repricing of fiscal forecasts and pressure sectors most exposed to trade costs. Conversely, continued collections that stay in place could support deficit improvement narratives and alter expectations for fiscal policy.
Third, corporate guidance will be scrutinized for signs of margin compression or pass through of costs. The KPMG survey shows a growing willingness among executives to raise prices and to slow hiring. Retailers and consumer staples firms, including grocery producers and sellers, will be in focus because of visible consumer price pressures. Agricultural firms and suppliers will remain sensitive to developments around China and any federal support for growers.
For traders and portfolio managers the session is likely to reward situational flexibility. Assets that benefit from a stronger growth and higher rate environment may perform well while names with concentrated exposure to tariffs and fragile end markets could lag. Volatility is possible if legal developments force a sudden reassessment of tariff collections or if fresh announcements expand the set of targeted industries.
Finally, watch for headlines about new tariff targets and official remarks on any planned manufacturer incentives. Those items influence expectations about when promised domestic capacity will materialize and about how persistent tariff costs will be for businesses and consumers.
In sum, the next trading session will reflect the fundamental tension between strong cyclical data and the policy and legal uncertainties wrapped up in a large and ongoing tariff program. Markets will react not only to economic signals but also to concrete steps that change the calculus for companies that import, produce or sell goods in the United States.
