As of April 2025, concerns about the U.S. economy are intensifying.
Beyond the challenges of rising unemployment and stock market declines, policy decisions—particularly recent tariff increases—are playing a pivotal role in shaping economic prospects.
This article examines how the U.S.’s protectionist measures may be adversely affecting the economy, analyzing key indicators to provide a comprehensive overview.
Stagnant Unemployment Rates and Signs of Economic Slowdown
In March 2025, the U.S. unemployment rate remained at 4.2%, with 7.1 million individuals unemployed.
This figure has shown little change since May 2024, fluctuating between 4.0% and 4.2%. Notably, sectors reliant on international trade, such as manufacturing and agriculture, are experiencing heightened layoffs, suggesting that recent tariff escalations are contributing to employment challenges.
Stock Market Declines and Diminished Investor Confidence
In March 2025, the S&P 500 index fell by 5.75%, bringing its year-to-date return to -4.59%.
This decline reflects growing investor apprehension, particularly concerning the potential repercussions of escalating trade tensions. The imposition of broad tariffs has introduced uncertainty, prompting investors to adopt a more cautious stance.
The Counterproductive Impact of Tariff Increases
The U.S. administration recently implemented sweeping tariffs, including a universal 10% levy on all imported goods and higher rates on specific countries—20% on EU imports and 34% on Chinese goods. While intended to bolster domestic industries, these measures have led to several unintended consequences.
- Increased Production Costs: Tariffs on imported raw materials have raised expenses for U.S. manufacturers, potentially leading to higher consumer prices.
- Retaliatory Measures: Affected countries have imposed counter-tariffs on U.S. exports, diminishing the competitiveness of American products abroad.
- Supply Chain Disruptions: Companies dependent on global supply chains face challenges in sourcing components, leading to production delays and increased operational costs.
These factors collectively contribute to economic deceleration rather than the intended stimulation of domestic growth.
Recession Indicator ①: The Sahm Rule Activation Risk
The Sahm Rule posits that a recession is likely when the three-month moving average of the unemployment rate rises by 0.5 percentage points or more relative to its low in the previous 12 months.
FREDAlthough the current unemployment rate has not yet triggered this indicator, the upward trend warrants close monitoring.
Recession Indicator ②: Yield Curve Dynamics
The spread between 10-year and 2-year Treasury yields has recently narrowed to 0.33%.
While this represents a slight widening from previous inversions, the persistently narrow spread continues to signal potential economic challenges ahead.
Policy Implications and Future Outlook
The administration’s protectionist trade policies, aimed at revitalizing domestic industries, appear to be yielding counterproductive results.
The escalation of tariffs has strained international relations and introduced volatility into global markets.
Policymakers face the challenge of balancing protective measures with the need to maintain robust international trade relationships.
Conclusion: Navigating the Economic Landscape
The current trajectory of U.S. economic indicators suggests a precarious path forward.
While the intent behind tariff implementations is to protect domestic interests, the resultant economic data points to unintended negative consequences.
It is imperative for stakeholders to remain vigilant, continuously assessing economic indicators and policy impacts to navigate the evolving economic landscape effectively.
