As Trump's tariff policy puts companies in a state of frozen observation, after two false alarms in the U.S. economy in 2023 and 2024, this time it may really face a test.
On June 7, Nick Timiraos, a reporter for The Wall Street Journal, known as the &#34;new Federal Reserve news agency,&#34; published an article stating, &#34;Although the U.S. economy successfully avoided multiple recession alarms in 2023 and 2024, it is now entering another unsettling summer.&#34; Although the U.S. added 139,000 jobs in May and the unemployment rate has remained stable between 4% and 4.2% over the past year, cracks have begun to appear beneath the surface of the economy.
The most concerning issue is that companies are warning that the constantly changing trade policies are disrupting their ability to plan for the future, leading to a freeze in hiring and investment. This policy uncertainty is occurring against the backdrop of slowing job growth and a cooling real estate market. Compared to last year, the Federal Reserve is also more reluctant to cut interest rates due to concerns about new inflation risks.
The article points out that the fragile balance in the labor market, changes in consumer spending, and shocks to the financial market—these three major factors could break apart in an unexpected manner.
As Christopher Thornberg, founding partner of Beacon Economics in Los Angeles, said: &#34;The direction of all this completely depends on what Trump will do next, and frankly, even Trump himself doesn't know what he will do next. So it's almost impossible to predict the direction of the situation.&#34;
Wall Street Journal previously mentioned that Allianz Chief Economic Advisor Mohamed El-Erian published an article earlier this month stating that the Federal Reserve is entering a &#34;difficult summer,&#34; facing four major challenges.
El-Erian pointed out that the four major challenges facing the Federal Reserve include: the erratic U.S. tariff policy, uncertainty in government public finance policy, abnormal discrepancies between economic hard and soft data, and the unpredictable impact of innovative technologies like AI. He suggested that the Federal Reserve adopt a strategy that combines defense and offense, addressing challenges through improved communication mechanisms, refining policy frameworks, and considering adjustments to inflation targets, while promoting systematic reforms in monetary policy to adapt to changes in economic structure.
<h2>Three Major Sudden Risks Approaching a Critical Point</h2>
The article points out that the U.S. economy faces three significant risks that could lead to severe consequences, which may erupt suddenly and unpredictably.
First is the fragile balance in the labor market.
Currently, the U.S. labor market is in an unstable equilibrium: companies are no longer hiring but are also unwilling to lay off the employees they worked hard to recruit three or four years ago. Gregory Daco, chief economist at consulting firm EY, vividly likened it to &#34;a beach ball being pressed underwater suddenly shooting up into the sky; once companies believe demand is too weak to retain these workers, the unemployment rate could rise rapidly.&#34;
&#34;This usually starts with a large company. Then competitors might say, 'Well, listen, we have to do this too,'&#34; Daco explained. This chain reaction could trigger massive unemployment in a short period
The second risk is the potential decline in consumer spending, as consumers may ultimately respond to rising costs, forcing businesses to cut back on expenses.
The consumer debt delinquency rate has been rising for a year, raising concerns that the deteriorating financial situation of low-income borrowers could lead to a more pronounced slowdown in consumer spending. According to real estate brokerage Redfin, there are now nearly 500,000 more sellers than buyers in the U.S. market, the largest gap since the company began tracking in 2013. Redfin economist Chen Zhao predicts that home prices may fall by 1% this year.
&#34;The market has been at a low for the past two and a half years, and people hope for improvement this year. But the reality is worse than expected,&#34; Zhao said.
The third risk is that shocks to financial markets or sudden shifts in sentiment remain an uncertain factor. The Federal Reserve lowered short-term interest rates by 1 percentage point last year, providing some relief to credit card holders or borrowers with variable-rate bank loans.
However, this year, officials have paused rate cuts due to concerns that tariffs could bring new inflation risks. Long-term borrowing rates (not set by the Federal Reserve but affecting many borrowing costs, such as mortgages) have risen as global investors are increasingly focused on how the government will fund its growing deficit in the coming years.
A sudden and sustained rise in borrowing costs could ripple through the stock market, harming corporate profits and diminishing the attractiveness of stocks. Currently high asset prices have been supporting corporate investment and high-income consumer spending.
<h2>Future Economic Direction: A Balance on a Tightrope</h2>
Faced with so many unknowns, companies are adopting various strategies to cope with challenges. Some companies choose to wait and see, while others actively adjust their supply chains.
Jason Thomas, chief economist at private equity management firm Carlyle Group, stated that some companies are temporarily holding off on price increases until tariff policies stabilize. &#34;They say, 'We can't risk damaging relationships with customers and suppliers over a policy that may not exist in two months.'&#34;
However, Thomas expects that companies will ultimately need to pass on some of the cost increases as they deplete inventories acquired at pre-tariff prices.
Ric Campo, CEO of Houston real estate developer Camden Property Trust, believes, &#34;As long as consumers are doing well, our world won't change.&#34; This reflects the view of most economists: the key to whether the U.S. economy falls into recession hinges on whether American consumers will weaken.
Most economists believe the likelihood of a recession is higher than at the beginning of the year, but lower than in April and early May. Currently, most other countries still face a 10% tariff increase, while higher tariffs on dozens of countries have been postponed until early July. A potential positive factor is the recent decline in energy prices, which could offset some of the inflationary pressures from tariffs.
Christopher Thornberg, an economist at Beacon Economics, stated, &#34;The economy has a lot of momentum, so if Trump really backs off tariffs and stays calm, you might see this expansion continue for another two or three years. However, if he continues to rock the boat, it could collapse by early next year.&#34;
In an environment where even decision-makers cannot predict the next course of action, the U.S. economy is heading towards a summer full of uncertainties

Wall Street Journal reporter Nick Timiraos published an article stating that although the U.S. economy successfully avoided a recession in 2023 and 2024, it is now entering another unsettling summer. The fragile balance of the labor market, changes in consumer spending, and shocks to the financial markets—these three factors could break in unexpected ways, depending on what Trump will do next

- The article discusses the current state of the U.S. economy, highlighting concerns over Trump's fluctuating tariff policies that have led to corporate uncertainty and hiring freezes.  
- It identifies three major risks: a fragile labor market, potential declines in consumer spending, and unpredictable financial market shocks, which could lead to significant economic consequences.  
- Experts suggest that the future of the economy hinges on consumer behavior and the stability of trade policies, with a potential recession looming if conditions do not improve.

Will the 'wolf' really come? 'New Federal Reserve News Agency': Is the U.S. economy really heading towards a 'difficult summer'?