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The health of the US economy is looking less and less stable by the day.

Layoffs are rising. Consumer spending u the backbone of the economy u unexpectedly dropped in January. Consumer confidence has plunged. A key GDP forecast suddenly turned negative. And extreme fear is back on Wall Street
as stocks slide.

Despite the murky picture, President Donald Trump continues to inject chaos into the economy with almost-constant tariff threats.

Now heAs just hours away from lobbing tariffs on not just one or two but
all three of AmericaAs biggest trading partners.

Starting on Tuesday, Trump has vowed to impose a 25% tariff on imported
goods from Mexico and Canada, and to double tariffs on those from China to 20%.

Those tariffs u if they get imposed u could increase costs for Americans at
a time when inflation remains stubbornly high. That, in turn, could prevent the Federal Reserve from lowering borrowing costs, another source of pain
in the cost-of-living problem confronting consumers.

Mexico and Canada have all vowed to retaliate by slapping their own tariffs
on US goods, setting the stage for a potential trade war inside of North America. China has promised to respond to higher tariffs, too.
All the uncertainty is weighing on businesses

Even just the threat of tariffs has a cost, causing confusion and
uncertainty that makes it hard for investors, CEOs and consumers to plan.

One measure of this confusion, the trade policy uncertainty index, spiked
in January to the highest level in data going back to 1960. And that
doesnAt even factor in the latest tariff threats from the White House in recent days.

Jay Foreman, the CEO of Basic Fun!, a toy company that makes Care Bears and Tonka trucks, among other goods, said his business was just starting to contend with the 10% tariffs Trump imposed across all Chinese imports that went into effect last month.
Customers shop for produce at an H-E-B grocery store on February 12 in
Austin, Texas.

Related article Americans are getting fed up with the economy. Does that
mean weAre heading into a recession?

Now the threat of an additional 10% tariff is potentially leaving his
company with oanother $5 million gapo in its finances.

ThatAs because around 90% of all the toys Basic Fun! sells are manufactured
in China. Until around 2026, the company is being forced to fully absorb
the added cost of tariffs because of contracts that have already been
signed with customers, Foreman told CNN.

oEvery plan we have to mitigate a 10% tariff is not workable based on a 20% tariff,o he said.

In TrumpAs ideal world, the threat of higher tariffs would cause Foreman to move production to the US. But thatAs simply not a financially viable
option.

oThere are things you arenAt able to physically produce here, and toys is
one of those.o China, he said, has been an unmatched location for toy production due to the manufacturing labor force, cost advantages and production capacity.

But even if it were possible to move production to the US, he said itAs all but guaranteed heAd have to charge higher prices. oA $10 baby doll will go
to $30. Is that what the consumer wants?o

And itAs hardly just companies that rely on Chinese goods that are
concerned. Even the CEO of one of the largest US aluminum makers, Alcoa, warned the 25% tariffs Trump threatened across all aluminum imports could
cost the United States 100,000 jobs.
Consumers are increasingly becoming more cautious spenders.
Consumers are increasingly becoming more cautious spenders.
Adam Gray/Bloomberg/Getty Images
Taking a bite out of US economic growth

Underscoring the growth scare gripping investors, a closely watched
projection of economic growth was sharply downgraded on Friday.

The Atlanta Federal ReserveAs GDPNow model now projects a 1.5% decline in
GDP for the first quarter. While itAs far too early to say whether GDP will indeed turn negative, it marks a swift downgrade from a growth forecast of 2.3% previously.

The decline took into account the dive in consumer spending that was
reported in JanuaryAs Personal Consumption Expenditures report released Friday. Consumer spending makes up about two-thirds of the US economy,
meaning that pullbacks in spending can have an outsized impact on GDP.

In addition, uncertainty around tariffs could be weighing on the mood of American consumers, with recent consumer confidence metrics deteriorating
at a historic pace.
Economists were expecting the Personal Consumption Expenditures index to
slow to 2.5%.

Related article Inflation is easing, but another alarm bell is ringing
about the US economy

Pantheon Macroeconomics noted that the 11-point drop in the Conference
BoardAs consumer confidence index between December and February is the
biggest to start a year since 2009 u during the height of the Great
Recession.

Worse, the University of MichiganAs consumer sentiment indexAs 9-point drop over that span is the most since records began in 1978.

Of course, itAs far too early to know whether the softening outlook for the economy economic picture is just a blip or something more concerning.

Time and again the US economy has shaken off recession fears, including in 2022 after the Fed spiked interest rates to fight inflation, and in the
summer of 2024 when the unemployment rate started to rise.

Ed Yardeni, president of investment advisory Yardeni Research, is confident the growth scare is just a headfake caused by extremely cold weather in January and uncertainty around policies in Washington.

oItAs a soft patch. I donAt think itAs going to last very long,o Yardeni
said. oIAm betting on the underlying resilience of the economy and that it
can withstand the uncertainty of Trump 2.0.o

Instead of launching a trade war, Yardeni advised Trump to ostrike a deal
and claim victoryo with Canada and Mexico.

oTariffs are a toxic area. You donAt want to stay there too long,o he said. --- Synchronet 3.21b-Linux NewsLink 1.2