London Daily

Focus on the big picture.
Thursday, Jul 31, 2025

America's economy is slowing. Ending the trade war could fix that

America's economy is slowing. Ending the trade war could fix that

Happy Sunday. A version of this story first appeared in CNN Business' Before the Bell newsletter. Not a subscriber? You can sign up right here.

The Federal Reserve doesn't have a magic wand to revive the slowing American economy. But President Donald Trump might.
New evidence emerged last week showing how tariffs and the vast uncertainty surrounding the US-China trade war are hurting the economy.

The manufacturing sector suffered its worst month since June 2009. Services, the larger portion of the modern economy, grew at its weakest pace in three years.

And although the unemployment rate tumbled to a 50-year low, a remarkable feat, private payroll growth continues to slow.
Taken together, the latest figures paint the picture of a slowing economy, but not one that's close to collapsing. Either way, growth could use a jump-start. While stocks rallied sharply late last week on hopes for a Federal Reserve rate cut, easy money alone won't solve the underlying problem: trade uncertainty.

"The economy needs a resolution to the trade war. The longer this persists, the greater damage it does to the US economy," said Kristina Hooper, chief global market strategist at Invesco.

The outlook for the economy is dimming. The New York Federal Reserve's GDP growth forecasting model was downgraded on Friday to 1.3% for the fourth quarter, compared with an earlier forecast of 1.8%.

The good news is that US and Chinese officials are scheduled to meet this week in Washington to try to make progress towards trade peace. Expectations are low for a breakthrough, although if one emerged it would immediately boost sagging business spending.

"We really need to have a rollback of the tariffs for there to be an improvement in CEO confidence," said Hooper.

Instead of getting rolled back, however, tariffs are currently scheduled to go up.

US tariffs on $250 billion of Chinese goods are set to rise on October 15, to 30% from 25%. And the Trump administration plans to impose 15% tariffs on December 15 on consumer-facing imports from China, including laptops, smartphones and certain footwear and apparel.

The on-again, off-again nature of the trade war has created confusion among business executives.

"It's not the tariffs themselves. It's the uncertainty about tariffs that is causing businesses to hesitate to make decisions," said David Kelly, chief global strategist at JPMorgan Funds. "Your entire business plan can be overturned by a tweet."


Factories cut jobs

Some economists argued that the very mixed September jobs report hints at damage from the US-China trade war. For just the second time since mid-2017, the manufacturing industry shed jobs last month. That makes sense because manufacturing is at the front lines of the trade war.

"The woes of the manufacturing sector are beginning to weigh on the broader economy," said Scott Clemons, chief investment strategist at Brown Brothers Harriman.

Bigger picture, total nonfarm payroll gains have slowed to 161,000 per month this year, compared with 223,000 in 2018. And wage growth decelerated in September.

"This is as good as it's likely to get until the trade war is resolved," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Shepherdson said the same leading indicators that predicted the hiring slowdown are now signaling that nonfarm payroll growth will decelerate to just 50,000 by the end of the year, from 304,000 in January. That means the unemployment rate would then begin to rise.

The hope is that trend will be reversed by progress on the trade front.

Expectations for a near-term resolution are low, however, especially after President Donald Trump vowed during last month's UN speech to address the "grave economic injustice" of unfair trading practices by China.

The last thing the already-slowing economy needs is a breakdown of the trade negotiations that leads to a rise in tensions and fresh rounds of tariffs.

"If there is an escalation, we could be headed for Brexit-level uncertainty," Invesco's Hooper said. "That would greatly increase the likelihood that the US goes into a recession."
Newsletter

Related Articles

0:00
0:00
Close
Former Judge Charged After Drunk Driving Crash Kills Comedian in Brazil
Jeff Bezos hasn’t paid a dollar in taxes for decades. He makes billions and pays $0 in taxes, LEGALLY
China Increases Use of Exit Bans Amid Rising U.S. Tensions
IMF Upgrades Global Growth Forecast as Weaker Dollar Supports Outlook
Procter & Gamble to Raise U.S. Prices to Offset One‑Billion‑Dollar Tariff Cost
House Republicans Move to Defund OECD Over Global Tax Dispute
Botswana Seeks Controlling Stake in De Beers as Anglo American Prepares Exit
Trump Administration Proposes Repeal of Obama‑Era Endangerment Finding, Dismantling Regulatory Basis for CO₂ Emissions Limits
France Opens Criminal Investigation into X Over Algorithm Manipulation Allegations
A family has been arrested in the UK for displaying the British flag
Mel Gibson refuses to work with Robert De Niro, saying, "Keep that woke clown away from me."
Trump Steamrolls EU in Landmark Trade Win: US–EU Trade Deal Imposes 15% Tariff on European Imports
ChatGPT CEO Sam Altman says people share personal info with ChatGPT but don’t know chats can be used as court evidence in legal cases.
The British propaganda channel BBC News lies again.
Deputy attorney general's second day of meeting with Ghislaine Maxwell has concluded
Controversial March in Switzerland Features Men Dressed in Nazi Uniforms
Politics is a good business: Barack Obama’s Reported Net Worth Growth, 1990–2025
Thai Civilian Death Toll Rises to 12 in Cambodian Cross-Border Attacks
TSUNAMI: Trump Just Crossed the Rubicon—And There’s No Turning Back
Over 120 Criminal Cases Dismissed in Boston Amid Public Defender Shortage
UN's Top Court Declares Environmental Protection a Legal Obligation Under International Law
"Crazy Thing": OpenAI's Sam Altman Warns Of AI Voice Fraud Crisis In Banking
The Podcaster Who Accidentally Revealed He Earns Over $10 Million a Year
Trump Announces $550 Billion Japanese Investment and New Trade Agreements with Indonesia and the Philippines
US Treasury Secretary Calls for Institutional Review of Federal Reserve Amid AI‑Driven Growth Expectations
UK Government Considers Dropping Demand for Apple Encryption Backdoor
Severe Flooding in South Korea Claims Lives Amid Ongoing Rescue Operations
Japanese Man Discovers Family Connection Through DNA Testing After Decades of Separation
Russia Signals Openness to Ukraine Peace Talks Amid Escalating Drone Warfare
Switzerland Implements Ban on Mammography Screening
Japanese Prime Minister Vows to Stay After Coalition Loses Upper House Majority
Pogacar Extends Dominance with Stage Fifteen Triumph at Tour de France
CEO Resigns Amid Controversy Over Relationship with HR Executive
Man Dies After Being Pulled Into MRI Machine Due to Metal Chain in New York Clinic
NVIDIA Achieves $4 Trillion Valuation Amid AI Demand
US Revokes Visas of Brazilian Corrupted Judges Amid Fake Bolsonaro Investigation
U.S. Congress Approves Rescissions Act Cutting Federal Funding for NPR and PBS
North Korea Restricts Foreign Tourist Access to New Seaside Resort
Brazil's Supreme Court Imposes Radical Restrictions on Former President Bolsonaro
Centrist Criticism of von der Leyen Resurfaces as she Survives EU Confidence Vote
Judge Criticizes DOJ Over Secrecy in Dropping Charges Against Gang Leader
Apple Closes $16.5 Billion Tax Dispute With Ireland
Von der Leyen Faces Setback Over €2 Trillion EU Budget Proposal
UK and Germany Collaborate on Global Military Equipment Sales
Trump Plans Over 10% Tariffs on African and Caribbean Nations
Flying Taxi CEO Reclaims Billionaire Status After Stock Surge
Epstein Files Deepen Republican Party Divide
Zuckerberg Faces $8 Billion Privacy Lawsuit From Meta Shareholders
FIFA Pressured to Rethink World Cup Calendar Due to Climate Change
SpaceX Nears $400 Billion Valuation With New Share Sale
×