Despite months of warnings from economists that tariffs imposed by the Trump administration would unleash a wave of inflation, the anticipated surge has yet to materialize. The absence of clear inflationary pressure has left experts divided: some now question whether the initial predictions were off the mark, while others caution that the true effects may simply not have surfaced yet.
According to The Wall Street Journal’s latest quarterly survey, economists are now forecasting stronger economic growth, a healthier labor market, a reduced risk of recession and milder inflation compared to three months ago. However, as the Journal notes, not all experts are convinced by this optimism. Some argue that the available data is imperfect and often lags behind real-world developments, making it difficult to draw firm conclusions about the impact of tariffs.
The Journal’s first-quarter survey was conducted at a time when anxiety over swiftly changing tariffs was at its peak. The mood has since calmed, largely because many of the threatened tariffs were postponed. Even so, the economists surveyed remain “relatively downbeat,” describing the outlook as only “slightly” improved since the first quarter.
Their projections suggest that inflation-adjusted economic growth will reach an annualized rate of 1% by the fourth quarter of 2025—a figure that is half of what the panel expected in January, but a modest improvement from the 0.8% forecast in April. The panel also anticipates growth rebounding to 1.9% in 2026. As for the likelihood of a recession in the next 12 months, the economists put the odds at 33%, an improvement over April’s 45% estimate but still worse than January’s 22%.
Tariffs have already left their mark. The U.S. is experiencing its lowest industrial construction rate in a decade, and there is evidence suggesting a causal link between higher tariffs and increased retail prices. The issue remains front and center, as new tariffs are announced: 50% on copper, 35% on Canadian imports, 30% on goods from the European Union, with threats of steep tariffs on Russia and its trading partners if the war in Ukraine does not end within 50 days.
Just as the situation appeared to stabilize, new uncertainties have emerged. This has fueled concern among some economists about the difficulty of tracking disruptions in the economy in real time.
Fortune, after speaking with several economists, reported that it is challenging to pin down exactly how the costs of tariffs—essentially a form of consumption tax collected from importers—are distributed among importers, exporters, and U.S. buyers, including both consumers and businesses. Economist and former Federal Reserve staffer Claudia Sahm told Fortune: “Nobody wants to pay the tax, so who is the weakest link?” Walmart can go in and tell their Chinese producers, ‘You have to cut the price.’ Maybe in the pandemic, the consumers said, ‘Okay, I’ll pay for it. I’m not really happy about it, but I have the money.’” She added that, for now, importers or their customers might be absorbing the cost through slimmer margins.
What businesses and consumers were willing to accept in April or May, in hopes of weathering a temporary storm, may not hold if postponed tariffs are reinstated or new ones are introduced. Many companies also stockpiled inventory before tariffs took effect, further muddying the waters.
Complicating matters, key economic data lags behind current events. The Consumer Price Index (CPI) inflation data released in mid-June only covered May. The next report, due Wednesday, July 16, will finally include some data from June. Whether those numbers will offer real insight remains to be seen; it could take another month or two before it becomes clear if inflation is staying flat or poised to take off. Right now we are in wait and see mode — but confidence is improving for the time being.
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