U.S. Economy Defies Tariff Predictions Amid AI and Fiscal Support
President Donald Trump's tariff hikes, which saw average rates surge from 2.4% to 28% in April, were expected to cripple the U.S. economy. Instead, growth has accelerated, confounding economists. Ben Harris of the Brookings Institution noted that predictions of stagnation or collapse were widespread a year ago.
Resilience stems from multiple factors: AI advancements have bolstered productivity, while government spending provided a fiscal cushion. Importers and exporters absorbed much of the tariff impact, shielding consumers. The current average tariff rate now stands at 17% after negotiations, according to the Tax Policy Center.
This unexpected durability challenges conventional trade shock models, suggesting policymakers may need to reassess the risks of future restrictions. The economy's adaptability—fueled by technology and strategic buffers—has rewritten the playbook on protectionism's consequences.
