President Trump has suggested that as part of his tariff policy, he would consider sending out rebate checks or tariff refund checks to Americans, funded by the revenue collected from the tariffs imposed on imported goods. “We have so much money coming in, we’re thinking about a little rebate for people of a certain income level,” Trump told reporters Friday outside the White House. “A little rebate for people of a certain income level might be very nice.”

The rebate would be drawn from the significant amount of tariff revenue collected by the U.S. government—over $100 billion in the first half of 2025 alone, according to Treasury data.

Trump’s remarks about these rebate checks perhaps being targeted to Americans “of a certain income level” suggest they would likely be means-tested, but Trump offered few details about the exact income thresholds or amount of the rebate.

The stated purposes of the rebate are to compensate Americans who may have faced higher prices as a result of the tariffs and to potentially provide a small economic stimulus, which gives new meaning to Trump’s remarks about businesses “eating the tariffs,” with much economic debate over who is really footing the bill for them.

Any such rebate policy would likely require congressional approval, and lawmakers like Sen. Josh Hawley have indicated support for legislation that would deliver rebate checks to working Americans, but no bill text or timetable has been specified. If enacted, the administration would need to establish eligibility rules, application or automatic distribution methods, and payment logistics. This could resemble past stimulus check programs, but that is just theoretical at this point.

The rebate concept is distinct from legal or administrative tariff refunds to importers, which have been considered or mandated following court rulings questioning the legality of some tariffs. In such cases, refunds would go to the companies that paid the import duties, not directly to end consumers.

Is this legal?

Trump’s proposed tariff refund checks—rebates funded by tariff revenue and distributed directly to American consumers—would almost certainly require explicit legislation from Congress to be legally valid, given that the U.S. Constitution gives Congress—not the president—the power to levy tariffs and appropriate federal funds. 

The president can impose certain tariffs under delegated statutory authorities, but courts have repeatedly found that the sweeping use of these powers under the International Emergency Economic Powers Act (IEEPA) is not legal. Multiple recent court rulings (including a unanimous U.S. Court of International Trade decision) have blocked Trump’s broad tariffs for lacking legal basis under the IEEPA, yet the tariffs remain in place pending appeal and, theoretically, a Supreme Court ruling.

Trump’s busy July

The suggestion of tariff rebate checks or refund checks is another new policy suggestion from Trump in a July that has been full of them, as Washington, D.C., has been roiled by a metastasizing scandal involving disgraced deceased pedophile Jeffrey Epstein. Trump’s Justice Department is facing bipartisan criticism for its decision not to release the so-called Epstein files, which the Justice Department has said do not exist. The Wall Street Journal has published a series of scoops about Trump’s past closeness to Epstein, including Trump’s name being mentioned in the files.

In July, Trump said he had reached an agreement with Coca-Cola to bring real sugar back into the Coke formula, which the company partially confirmed days later. He also demanded the Washington Commanders football team revert to their former “Redskins” name, threatening political obstruction for their stadium project if they did not comply. He announced the release of 230,000 files related to Martin Luther King Jr. And he escalated his feud with the Federal Reserve and Chair Jerome Powell, visiting the in-process office renovations in a hard hat and engaging in a bizarre, comedic argument with Powell about cost overruns on live television.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

This story was originally featured on Fortune.com

Headline U.S. inflation jumped to 2.7% in June, its steepest rise in five months, according to the latest consumer price data. UBS Global Wealth Management took a look under the hood, writing in its monthly letter that “it’s quiet … a little too quiet.”

Chief investment officer Mark Haefele appealed to the cinephiles in his audience: “Movie fans will know that feeling of tension when the hero steps into supposedly dangerous new territory only to find nothing there.” The TACO traders are waiting for the next shoe to drop, tariffs are at their highest since the 1930s, and the Federal Reserve’s independence is threatened, he writes. Yet global stocks are at record highs, rate volatility is down, and credit spreads are tightening.

Haefele looked under the hood of headline inflation to isolate the reading for “core goods” in June, arguing that this is where the tariff impact is being revealed, as its June increase showed a two-year high. Much of the recent acceleration reflects price hikes in goods most exposed to the new tariffs—household furnishings, appliances, electronics, apparel, and toys. There’s also a lag between when tariffs are announced, when importers stockpile goods, and when stores finally pass those costs on to shoppers, meaning this should increase in coming months.

UBS Global Wealth Management

All about the lag

UBS Global Wealth Management notes that data in the weeks and months ahead will be key to determining whether core goods truly are surging, reflecting the impact of tariffs. Indeed, industries that rely heavily on imports are feeling the pinch first. Retail sales in categories such as electronics and home furnishings have dropped by 2% and 1.1%, respectively, once adjusted for inflation, as households begin to curb spending in response to higher prices. Conversely, overall retail sales volumes are still up 0.4% month over month, and consumer spending remains relatively resilient.

Who bears the burden?

A central question remains on tariffs: Who pays for them—exporters, importers, or consumers? Haefele cautions that it’s unclear how exporters, importers, or consumers will divide the economic costs. The split will likely differ by industry, product, and market position.

Some companies, such as General Motors, have already reported a direct hit: GM’s second-quarter earnings took a $1.1 billion loss as a result of tariffs, leading to a 32% decline in core profit. The automaker is responding with a mix of price increases, cost-cutting, and supply-chain adjustments, but warns that a continued tariff environment could further squeeze margins or eventually force higher prices onto buyers. Across the wider business community, company executives are now addressing tariffs in earnings calls.

Haefele said UBS will closely watch retail sales, inflation, and consumer spending data, while listening for comments in the ongoing second-quarter earnings season about who will truly be “eating the tariffs,” to paraphrase President Donald Trump.

Policy offsets and Fed dilemmas

Some fiscal offsets may be on the way. The recent “One Big Beautiful Bill,” which contains extended and new tax cuts—partly funded with tariff revenue—could help stimulate the economy. But the amount of that revenue is unclear.

Risks tilt in both directions. If tariffs fuel a larger-than-expected inflation surge, consumer spending may slow and the Federal Reserve could be forced into a tough policy corner, balancing price stability against economic growth. Alternatively, if companies absorb more costs to maintain market share, profits could slump, further weighing on investment and labor markets.

For now, the lagged nature of tariffs means their full effect is only beginning to show up beneath the surface of headline inflation. Economists and policymakers will be closely monitoring core inflation, retail sales, and corporate margins in the months ahead. The only certainty, it seems, is that tariffs are no longer an abstract policy debate: They are beginning to hit home—one price tag at a time.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

This story was originally featured on Fortune.com

• U.S. median rent has risen from about $824 in 2008 to more than $1,300 in 2025. As rent has increased faster than wages, Americans are spending much more of their income on housing. On average, it now takes an entire week’s worth of pay to afford monthly rent.

It’s hard to imagine today, but about 17 years ago, rent for Americans was less than $1,000 per month. In 2008, the median rent was just $824 per month; today it’s more than $1,300—and many major metropolitan areas like New York City and Los Angeles dwarf that figure. Between 2022 and 2025 alone, rents jumped nearly 6%.

That also means Americans are spending much more of their monthly income on housing. Although it’s generally recommended not to spend more than a third of one’s income on housing, many Americans are shelling out much more than that. That’s largely due to rent prices rising faster than wage growth in the U.S.

A recent Self Financial analysis of housing data from the U.S. Census, Apartment List, Bureau of Labor Statistics, and the Federal Reserve illustrates how many hours worth of work Americans are spending on housing each month. 

On average, Americans need to work 38.3 hours to cover their monthly rent, which works out to the average work week. But there’s a decent spread on the number of work hours needed to pay for rent across the U.S. 

Vermont residents need to work 60.2 hours per month to meet the average monthly rental costs, the highest of any state, according to the Self Financial analysis. People living in South Dakota need just 27.6 hours to cover rent, placing them in the lowest spot. Unsurprisingly, New York City residents need to work the most hours to pay rent at 90.2 hours. 

These are the five U.S. states with the highest number of hours required to cover the average monthly rent: 

• Vermont: 60.2 hours
• Hawaii: 59.9 hours
• California: 52.4 hours
• New Jersey: 50.4 hours
• Maryland: 50.3 hours

And these are the five U.S. states with the fewest number of hours required to cover the average monthly rent: 

• Maine: 32.3 hours
• North Dakota: 32.2 hours
• Alabama: 31.4 hours
• Arkansas: 31.1 hours
• South Dakota: 27.6 hours

See the heat map below, which shows the number of hours required to cover the monthly rent in each state. To see the number of hours, hover over each state. Deeper red indicates a higher number of hours.

While this may appear to be a grim outlook for rental housing in the U.S., there is a small glimmer of hope. As of May, median U.S. asking rent had actually dropped about 1% year-over-year, according to Redfin. That’s because apartment construction is hovering near a 50-year high, Redfin economists said.

“Even though renter demand is strong, it’s not keeping pace with supply,” said Sheharyar Bokhari, Redfin senior economist. “Many units are sitting vacant for months, which means renters have power to negotiate concessions and landlords have less leeway to keep rents high.”

Meanwhile, it’s still much cheaper to rent than to buy a home in the U.S. thanks to sky-high mortgage rates nearing 7% and home prices that are 55% higher than at the beginning of 2020, according to the Case-Shiller U.S. National Home Price Index.

Take Austin, Texas, for example. “Many people in Austin are finding that it’s a lot cheaper to rent than buy,” Austin real-estate agent Andrew Vallejo recently told Fortune. “You could buy a home and have a monthly mortgage payment of $3,200, but the same home will rent for $1,900. Unless the buyer has a good amount of money for a down payment, renting is way less expensive.”

This story was originally featured on Fortune.com

• The American new home market is cooling, with softer sales, higher inventory, and falling prices reflecting the current slowdown.

The latest New Residential Sales report (June 2025) from the U.S. Census Bureau shows that the U.S. housing market is experiencing a slowdown in new single-family home sales, while inventory and supply have increased, and prices are declining.

As buyers balk at high home prices and mortgage rates that continue to approach 7%, a recent Oxford Economics report predicts more pain ahead. Concerns about the economy and job security mean many would-be new purchasers are opting to make do with modest home improvements instead.

Increased new home sales often indicate strong consumer confidence, greater employment, and accessible financing. Conversely, declines suggest waning buyer interest, affordability issues, or economic stress.

“There’s no question that in many of pockets of the Sun Belt—the epicenter of U.S. single-family homebuilding—buyers have gained a considerable amount of leverage this year and the market has softened,” ResiClub editor-in-chief Lance Lambert told Fortune Intelligence.

“In order to keep sales volumes steady, big homebuilders have compressed margins further and done bigger incentives or outright price cuts. Lennar is spending the equivalent of 13.3% of final sales price on incentive, like mortgage rate buydowns,” Lambert noted, up from 1.5% at the height of the Pandemic Housing Boom in the second quarter of 2022. In normal times, Lambert pointed out, Lennar spends 5% to 6% on buyer sales incentives. (Lennar is ranked no. 129 on the Fortune 500.)

Key points from the report:

• New home sales: Sales were at a seasonally adjusted annual rate of 627,000 in June 2025. This is only 0.6% higher than May 2025, but 6.6% lower than June 2024, indicating a notable year-over-year decline in buying activity.
• Inventory: At the end of June, there were 511,000 new houses for sale, a 1.2% increase from May 2025 and an 8.5% increase from June 2024. This rise in inventory suggests that homes are staying on the market longer.
• Months’ supply: The supply of homes relative to the sales rate is now at 9.8 months, up from 9.7 months in May 2025 and 8.4 months in June 2024. A higher months’ supply figure generally indicates a slower market with more supply than demand.
• Prices: The median sales price for new homes in June 2025 was $401,800, which is 4.9% lower than May 2025 and 2.9% lower than June 2024. The average sales price was $501,000, down from the previous month but slightly higher than a year ago. This points to downward pressure on prices, likely due to rising inventory and decreased demand.

What it means:

• The combination of dropping sales, rising inventory, and declining prices indicates a market with weaker demand and increased supply.
• These conditions are often seen when buyers are constrained (e.g., by high mortgage rates or economic uncertainty), or homebuilders have ramped up production in anticipation of higher demand that didn’t fully materialize.
• The elevated months’ supply metric—at almost 10 months—suggests a buyer’s market, where purchasers have more negotiating power and sellers may need to lower prices to attract buyers.

A new home is defined by the U.S. Census Bureau as a single-family house that is being sold for the first time. Since new home sales are recorded early in the sales process, trends in new home sales can signal coming shifts in the broader housing market, forecasting changes before they appear in existing home sales data.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

This story was originally featured on Fortune.com

President Donald Trump’s trade deals are illegal, Piper Sandler flatly declares in a new research note. The investment bank analyzed ongoing court battles and legislative authority, and concluded that Trump’s reliance on the International Emergency Economic Powers Act (IEEPA) to impose wide-ranging tariffs and cut bilateral deals far exceeds the powers granted by Congress.

It’s not a new opinion from Piper, necessarily—the bank laid out its reasoning in April, shortly after Trump’s “Liberation Day” announcement of universal tariffs under the IEEPA. Then, as now, it sees a 9–0 ruling in the Supreme Court against Trump as more likely than a Trump win.

The reason that the Piper Sandler team of Andy Laperriere, Don Schneider, and Melissa Turner is revisiting the subject is that oral arguments in these and similar cases are scheduled through September. The U.S. Court of Appeals for the Federal Circuit will hear oral arguments on whether Trump truly has unlimited authority under the IEEPA to impose tariffs on Thursday, July 31. Piper Sandler forecasts that appellate courts will issue rulings over the next several months.

“Trump will probably continue to lose in the lower courts, and we believe the Supreme Court is highly unlikely to rule in his favor,” the bank said. Here’s why.

Stiff resistance

Trump’s trade policy has encountered stiff resistance as lower courts push back against the administration’s sweeping claims of executive authority. On May 28, the U.S. Court of International Trade (CIT) ruled unanimously against Trump’s use of the IEEPA for tariffs, calling the administration’s arguments unconvincing. The decision is now under appeal.

In a separate May 29 ruling, D.C. District Judge Rudolph Contreras found that the IEEPA does not enable the president to impose tariffs at all and ordered an immediate reversal of certain duties—though that order is currently stayed pending appeal.

According to Piper Sandler, the heart of the matter is congressional intent. As it did in April, the firm argues that the IEEPA, enacted in 1977, was designed to give the president certain emergency economic powers, but not blanket authority to set tariffs. Courts have consistently rejected the idea that the statute includes such sweeping power.

Even recent bilateral deals, such as Trump’s agreement with Japan, do not cure the underlying legal flaw. Congress, not the president, holds the ultimate authority to impose tariffs and approve international trade agreements. Piper Sandler stresses, “Making a deal with another country has no bearing on the legality of Trump’s tariffs,” highlighting that executive-led deals absent congressional approval lack legal standing. “If Trump does not have the authority to impose tariffs he is claiming, it doesn’t matter whether he makes a deal with Japan or anyone else.”

Billions and bilateral deals at stake

If the Supreme Court rules against Trump, all trade deals and announced tariff changes made under the IEEPA—including minimum 10% import rates and threatened reciprocal tariffs—would be declared instantly illegal. Refunds could flow to companies and individuals who have paid unlawfully imposed tariffs, if they file claims with the CIT.

The massive, headline-grabbing $550 billion Japanese investment pledge is cited by Piper Sandler as an example of economic promises lacking clarity, specifics, or legal durability.

“Our trading partners and major multinationals know Trump’s tariffs are on shaky ground,” the Piper team writes. “It’s notable the promise of $550 billion in Japanese investments in the U.S. is accompanied by no details. It’s not clear where the money will be coming from, who will decide how it is allocated, and over what period the $550 billion will be spent.”

Despite all these reasons the tariffs are clearly illegal, Piper insists that the tariffs are likely to go up from this point and “remain at record levels for the next many months.” Here’s why.

Will tariffs go away soon?

Piper Sandler’s analysts caution that tariffs are likely to remain in place in the near term, supported by administrative stays and the slow judicial process. Even if reciprocal tariffs are struck down, Trump could pivot to other statutes, such as Section 232 (covering steel, aluminum, and cars), though these have even stricter legal guardrails and could invite further litigation. Trump is on “strong legal ground” in using Section 232 to impose tariffs on steel, aluminum, and cars, the bank says, but he may try to stretch that authority as he has done with other trade statutes. “The base case is there will be years of legal battles over tariffs.”

The research note details at least eight ongoing lawsuits from a diverse range of plaintiffs—including states, tribes, and small businesses—all challenging Trump’s use of the IEEPA. Court dockets now stretch across several federal circuits, signaling that “years of legal battles” may follow, even if Trump loses at the Supreme Court.

Piper Sandler emphasizes that major multinational corporations and foreign governments see U.S. trade policy as unstable. The result, the bank argues, is reluctance to invest heavily in the U.S. until the legal landscape becomes clearer—a situation that may persist for months, if not years, irrespective of any immediate court ruling.

Piper Sandler’s analysts express confidence that recent judicial skepticism of the executive branch’s unchecked statutory interpretations will carry over to the Supreme Court. The bank finds the conservatives on the court likely to vote just as they did in a series of recent cases, in which they “lined uniformly against the Executive Branch pulling out an old statute and asserting far-reaching, never-before-used authority nowhere found in the text of the statute.” The liberals are also not likely to grant unlimited authority to Trump.

Still, with Trump’s well-known litigious nature, and the legal calendar ahead, Piper concludes: “Instability surrounding trade is likely to last a lot longer.”

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

This story was originally featured on Fortune.com

• U.S. stocks have soared, with the Wilshire 5000 market cap hitting a new all-time high of 212% of GDP, one of Warren Buffett’s key warning levels. Despite global indexes near record highs, we’re seeing mild sell-offs this morning. In addition, Goldman Sachs reported a high level of speculative trading activity.

The U.S. stock market has just blown through Warren Buffett’s favorite economic indicator, stock market cap to GDP, setting a new all-time high. The valuation of the Wilshire 5000—which hit a record high on July 23—is now somewhere north of 212% of U.S. GDP, the “Buffett Indicator” shows.

Chart via LongTermTrends.Net

Perhaps that’s one reason stocks are selling off globally this morning. While most indexes in Asia and Europe remain near their all-time highs, there is broad-based but mild selling in all of them.

Goldman’s froth indicator is high

There’s another sign the markets may be near their top: Goldman Sachs launched a new “Speculative Trading Indicator” that measures froth by gauging trade volumes in “unprofitable stocks, penny stocks, and stocks with elevated EV/sales multiples”—the kind of trades that only look good when the market is rising irrationally. Sadly, “The most actively traded stocks include most of the Magnificent 7 along with companies involved in digital assets and quantum computing, among others,” Ben Snider and his team told clients.

“The indicator now sits at its highest level on record outside of 1998-2001 and 2020-2021, although it remains well below the highs reached in those episodes,” they said.

S&P futures, by contrast, were flat this morning premarket—so who knows where the Americans are going today.

The Fed may delay

No one expects the Fed to lower interest rates next Friday, despite President Trump’s continued pressure on Chairman Jerome Powell. (The video of the face-off between the two yesterday, in which Trump humiliates Powell and Powell corrects a false assertion by Trump, is a cringey must-watch.)

So investors are focused on September, October, and December. Sixty percent of speculators in the Fed Funds futures market currently think Powell will cut interest rates by 0.25% to the 4% level in September—a move that would deliver new cheap money into equities.

The problem for Trump is that in order to deliver that cut, inflation needs to stay low and the jobs market needs to not get stronger. Currently, inflation is moving up and the jobs market is robust but not perfect. That combo might push a rate cut to October or December—which would explain why investors are taking profits today rather than staying in the market.

“The jobs market continues to hold up despite concerns about a cooling economy, while officials remain nervous about the effect of tariff-induced price hikes on inflation. We see no interest rate cut this month, but the Fed is expected to start laying the groundwork for a move, most likely in December,” ING’s James Knightley and Chris Turner said in a note this morning. “As long as the jobs picture holds up, firmer inflation may well delay the restart of the Fed easing cycle.”

Trump’s tariffs are starting to contribute to inflation, UBS’s Paul Donovan told clients. “Consumers in Europe, the UK, Mexico, and Canada are paying between 0.3% and 1.9% less for the consumer appliances they buy than was the case in March of this year. The US consumer, meanwhile, is paying (on average) 3.6% more for their appliances than they were before Trump’s trade taxes,” he said in an email.

The capex boost is coming

And then, according to Piper Sandler’s Nancy Lazar and her colleagues, there’s a secret weapon hidden inside Trump’s One Big Beautiful Bill which could supercharge GDP growth (and thus, by implication, deter the Fed from cutting): Capex. 

A provision within the OBBB halves the effective rate of corporate tax and incentivises capital expenditure by companies. “Capex’s GDP punch is triple that of housing. Upside capex shocks add 1%+ to GDP. And every related goods producing job creates 6 more – the multiplier. Our preliminary (very preliminary) forecast for 2026 real GDP is about 3%,” they told clients.

With robust growth and tariff inflation still very much in the picture, perhaps stock investors are sensing that Powell will dig his heels in and delay rate cuts even longer than the futures market is currently assuming.

Here’s a snapshot of the action prior to the opening bell in New York:

• S&P 500 futures were flat (+0.13%) this morning, premarket, after the index closed marginally up at a new all-time high of 6,363.35 yesterday. 
• Tesla declined 8.2% yesterday after a lousy earnings call. 
• STOXX Europe 600 was down 0.34% in early trading. 
• The U.K.’s FTSE 100 was down 0.39% in early trading. 
• Japan’s Nikkei 225 was down 0.88%. 
• China’s CSI 300 Index was down 0.53%. 
• The South Korea KOSPI was up 0.18%. 
• India’s Nifty 50 was down 0.86%. 
• Bitcoin fell 2.76% to $115K.

This story was originally featured on Fortune.com

Hedge fund billionaire Ray Dalio is known for his dire warnings about the economy and the national debt, but he just issued one of his starkest warnings to date, likening the United States’ mounting debt crisis to an impending “economic heart attack” and urging policymakers to revisit the fiscal discipline that characterized the 1990s boom years. Dalio’s alarm, sounded in a series of social media posts and interviews, including with Fortune’s Diane Brady, comes as the national debt nears $37 trillion and the federal deficit continues to swell, fueling bipartisan anxieties about the country’s financial health.

Dalio, founder of the world’s largest hedge fund, Bridgewater Associates, described America’s deficit spiral in dramatic—and visceral—terms. “We’re spending 40% more than we’re taking in, and this is a chronic problem,” he said in a recent appearance on Fox Business. “What you’re seeing is the debt service payments … well into squeezing away, so it’s like plaque in the arteries squeezing away buying power.”

The analogy underscores a grim reality: Debt service payments have ballooned as a share of government spending, increasingly crowding out funds for other priorities. Dalio warns the U.S. is near a tipping point where it must issue new debt merely to pay interest on existing obligations—a cycle that he says could trigger not just a financial shock but a systemic breakdown reminiscent of cardiac arrest. We’ve got to go back, he argues—back to the ’90s.

A blueprint for recovery

Dalio contends that there is still a way out—as long as the country acts with unity and resolve. He points to the ’90s as a model for bipartisan problem-solving, fiscal restraint, and balanced economic growth. “If we change spending and income (tax returns) by 4% while the economy is still good,” he wrote on Twitter, “the interest rate will go down as a result, and we’ll be in a much better situation.” He added that we know this kind of balance can happen because it happened before, from 1991 to 1998, referencing how both spending controls and targeted tax measures restored equilibrium in the 1990s.

Dalio suggests that by trimming the federal deficit to 3% of GDP—levels last sustained during the Clinton era—the U.S. could stabilize markets, tame interest payments, and avoid a crisis. In a CNBC appearance in early July, Dalio put the odds at over 50% that a financial “trauma” will result from the debt not being dealt with properly.

Past warnings

This is far from the first dire warning to come from Dalio on the state of the U.S. economy. In the past five years, he has voiced concerns about the debt created to fight the financial effects of the pandemic, both inflation and stagflation, and even a looming recession. Although a recession has not set in since the COVID-related crash of 2020, Dalio warned that rising asset prices weren’t creating real wealth, as inflation was eroding purchasing power.

A consistent theme of Dalio’s warnings is that the disease may be worse than the cure, criticizing policymakers likely to act only when inflation became critical and the dollar’s value had materially eroded. He has voiced variations of his “heart attack” and “plaque” critique since 2024.

Despite offering a clear prescription, Dalio expresses skepticism that current political dynamics will allow for compromise or the hard choices required. “My fear is that we will probably not make these needed cuts due to political reasons,” he wrote on Twitter, warning that absolutism in Washington could doom efforts to put the country’s fiscal house in order.

The consequences, Dalio argues, would be severe and far-reaching: sustained government overspending, rising debt service burdens, and a loss of confidence among buyers of U.S. Treasuries. This scenario, he says, could escalate into what he calls a “serious supply-demand problem,” where the market refuses to fund America’s borrowing habits at sustainable rates, catalyzing a financial crisis with global shock waves. The April fall in the 10-year Treasury bond market was a tremor of just such a refusal from foreign investors, who seemed to balk at President Donald Trump’s planned tariffs being much more aggressive than expected.

Dalio’s repeated invocations of the 1990s are more than nostalgia—they are a call to bipartisan pragmatism and shared sacrifice. He warns that failure to act now, with the economy still on stable footing, will only raise the costs (and pain) of inevitable reforms. Although Dalio did not comment on it, the debt situation has actually worsened throughout 2025, with legislation passing through Congress that is set to expand the debt for years to come. Trump’s One Big Beautiful Bill Act will add $3.4 trillion to deficits over the next decade, according to the Congressional Budget Office.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

This story was originally featured on Fortune.com

• The housing market continues to struggle with nearly high mortgage rates and home prices, driven by years of undersupply and slow home construction. Builders face higher costs and labor shortages, and home price growth is expected to slow this year as sellers pull homes off the market.

If you thought the housing market was bad enough: Buckle up. 

Mortgage rates are still nearly 7% and home prices are 55% higher than they were at the beginning of 2020, according to the Case-Shiller U.S. National Home Price Index. 

Housing inventory is slightly rising overall, but it’s not doing so by nearly enough, a May report by the National Association of Realtors and Realtor.com shows. And an analyst note published this week by Oxford Economics said the housing market will continue to deteriorate this year. 

“The supply of existing homes for sale is approaching pre-pandemic levels as a combination of high prices, elevated mortgage rates, and concerns over the labor market keep buyers sidelined,” Oxford Economics analyst Matthew Martin wrote in a note titled Recession Monitor – Real test for economy is just beginning. “The new-home market is also being challenged, with builders continuing to offer incentives including price cuts in an effort to move unsold inventory.”

Oxford Economics researchers also noted sellers will have less ability to pass along price increases. In other words, sellers will keep pulling their homes off the market if they can’t get a sale price they think they deserve. 

Meanwhile, homebuilders will continue to face higher costs due to tariffs and a reduced labor force because of fewer immigrants and more deportations, according to Oxford Economics. This, in turn, will slow housing starts—a.k.a. new construction—which won’t help inventory levels. 

“A longstanding lack of inventory has supported both high prices and sluggish sales in the market for existing homes,” Daiwa Capital Markets analysts Lawrence Werther and Brendan Stuart wrote in a note published Wednesday. “Substantial improvement is unlikely to materialize in the near term until mortgage rates (and/or prices) ease, thereby mitigating the current affordability challenges faced by potential buyers.”

Affordability is also hurting builders, who have had to continue offering incentives and price cuts. 

“Multiple years of undersupply are driving the record high home price. Home construction continues to lag population growth,” Lawrence Yun, chief economist for the National Association of Realtors, said in a statement. “This is holding back first-time home buyers from entering the market.”

“We still don’t have an abundance of homes that are affordable to low- and moderate-income households, and the progress that we’ve seen is not happening everywhere,” Realtor.com Chief Economist Danielle Hale said in a statement. “It’s been concentrated in the Midwest and the South.”

However, that leads to one small silver lining predicted by Oxford Economics. Due to labor-market concerns and weak demand (thanks to currently high home prices and mortgage rates), they predict home price growth will slow and builders will limit new-home construction.  

“Slower home price growth may provide a floor beneath sales,” Martin wrote, but “household appetites for spending will largely hinge on the health of the labor market.”

Despite a struggling housing market, Oxford Economics predicts the U.S. will avoid a recession this year and the Federal Reserve will start to “cut rates aggressively” at the beginning of 2026. 

This story was originally featured on Fortune.com

• Analysis: Donald Trump is set to make a rare presidential visit to the Federal Reserve—only the fourth in U.S. history—amid escalating criticism of Jerome Powell’s leadership and spending on the central bank’s D.C. headquarters. While previous visits symbolized respect for Fed independence, Trump’s stop comes after repeated attacks on interest rate policy and a public clash over renovation costs, raising fresh concerns about political pressure on the central bank.

Donald Trump is taking his battle with Jerome Powell to the doorstep of the Federal Reserve. Literally.

The president will be visiting the central bank at 4 p.m. ET on Thursday, returning to the White House a little over an hour later, per his public schedule.

The move is unusual for a number of reasons. Primarily, because this is the first visit by a president to the central bank in nearly two decades—and only the fourth visit from the Oval Office in history.

The context of this visit also raises eyebrows, as President Trump and his cabinet have been continually lobbying and criticizing the Fed since winning the Oval Office in January.

In the past, visits from the president to the Fed have been viewed as endorsements—both of the chairman at the time and of the Fed’s independence as a whole.

For example, the last visit came from George W. Bush on Feb. 6, 2006, when he attended the swearing-in ceremony for his nominee, Ben S. Bernanke, as the 14th chairman of the Fed.

Bush’s attendance was seen as a backing not only of Bernanke but also of the independent nature of the Fed. When announcing his nomination, Bush told reporters in the Oval Office: “In our economy, the Fed is the independent body responsible for setting monetary policy, for overseeing the integrity of our banking system, for containing the risk that can arise in financial markets, and for ensuring a functioning payment system.

“Across the world, the Fed is the symbol of the integrity and the reliability of our financial system, and the decisions of the Fed affect the lives and livelihoods of all Americans.”

Prior to Bush’s visit, the most recent example of a president visiting the Fed had been President Gerald Ford in July of 1975—again for a swearing-in ceremony at which the independence of the central bank was lauded.

Speaking at the swearing-in of Philip C. Jackson as a member of the Board of Governors, President Ford said: “The essence of the Federal Reserve System is independence. Independence of both the Congress and the president, as well as the individual independence of thought of each of its governors. I firmly and completely respect that independence.”

The final example—but the first visit of its kind—came in 1937 when President Franklin D. Roosevelt attended the opening of the board’s new headquarters—the Eccles building, which President Trump will likely be visiting today.

Trump vs. the Fed so far

Even before Trump won the election, there were signs he might cause trouble for Chair Jerome Powell. Despite being the president to nominate Powell for the role, he made veiled threats about the security of the chairman’s role. He told Bloomberg: “I would let him serve [his term] out, especially if I thought he was doing the right thing.”

Back then, the “right thing” in Trump’s mind was not to cut interest rates as it would give the economy, and the Biden administration at the time, a boost.

Since taking the Oval Office in January that request has flipped to the other extreme. Trump has dubbed Powell “dumb” and “hardheaded” for not cutting the base rate, adding he knows more than the Fed boss about interest rates.

While some market followers may agree with Trump’s take that Powell and the Federal Open Market Committee are reacting too slowly to economic data, no analyst or investor wants to see the independence of the central bank threatened.

As such, markets reacted shakily when Trump threatened to fire Powell, and then stabilized when the president rescinded the suggestion. After all, the federally mandated independence of the Fed was written into law to protect it from the whims of politicians and instead mandate it to ensure the long-term health of the economy.

While lambasting the policy of the Fed remains a common theme of the Trump administration (even yesterday, the president wrote on Truth Social that “families are being hurt because interest rates are too high, and even our country is having to pay a higher rate than it should be because of ‘Too Late [Powell].’”), criticism is also being lobbied at wider decision-making.

This has included Powell’s management of the central bank’s offices—which Trump will reportedly be touring today—with Russell Vought, director of the White House’s Office of Management and Budget, making public a letter he sent to the Fed chair, saying the president is “extremely troubled by your management of the Federal Reserve System” particularly relating to the “ostentatious overhaul of [the Fed’s] Washington, D.C., headquarters.”

Powell has since responded to, and clarified, some of the points raised in Vought’s letter, noting: “The project is large … because it involves the renovation of two historic buildings on the National Mall that were first constructed in the 1930s. While periodic work has been done to keep these buildings occupiable, neither building has seen a comprehensive renovation since they were first constructed.”

Though the Fed has independence in its business management and expenditures, Powell reaffirmed the bank’s commitment to “transparency for our decisions and to be accountable to the public”—announcing a new section of the Fed’s website had been created to keep voters up-to-date on the latest developments.

This story was originally featured on Fortune.com

• Markets rallied as the U.S. moved closer to trade deals with Japan and the EU, bringing much-certainty after months of President Trump’s volatile tariff threats. The S&P 500 hit a new record and futures are up prior to the opening bell. Stocks rose across Europe and Asia this morning. With uncertainty easing, investor risk appetite has increased, according to Deutsche Bank and Goldman Sachs.

The S&P 500 delivered yet another new record high yesterday, closing up 0.8% at 6,358.91. S&P futures are calling for more gains this morning. Markets in Europe, Japan, and China are all up this morning.

Why the joy? Because the uncertainty caused by Trump’s tariff negotiations / threats / demands / letters is finally clearing away. Yesterday markets digested the proposed trade deal with Japan (15% tariffs plus some other stuff) and this morning there are reports that the EU is closing on a deal (again, 15% tariffs plus some other stuff). Those rates are half what Trump initially proposed.

The TACO trade (Trump Always Chickens Out) appears to be in full effect, for anyone who was long on stocks.

Japan and Europe are two of the U.S.’s largest trading partners and now that the markets have some certainty around trade, it’s back to “risk-on” for investors, according to Jim Reid’s team at Deutsche Bank.

“The risk-on tone has continued over the last 24 hours, with the S&P 500 (+0.78%) at a fresh record thanks to growing optimism that more trade deals would be reached before August 1. The initial catalyst was the US-Japan deal we woke up to this time yesterday, with both European and US risk assets rallying as they caught up to the news. But around the time that European markets were going home, an FT headline said that the EU and the US were closing in on a similar deal that would also put 15% tariffs in place,” he wrote. 

“If a 15% total rate inclusive of existing tariffs is agreed as suggested, this would mark only a marginal increase compared to the 10% additional tariffs that EU exports to the US have faced since Liberation Day but with certainty about the future.”

The key word there is “certainty”. It’s what the markets want. The other uncertain issue that’s now in the rearview mirror is Trump’s fiscal spending/debt bill. “The passage of the ‘One Big Beautiful Bill’ removes one major source of policy uncertainty by extending key expiring provisions of the Tax Cuts and Jobs Act (TCJA), thereby averting a fiscal cliff worth 1% of GDP in 2026–27,” Gregory Daco at Parthenon-EY told clients.

With certainty back on the table, “risk appetite is up,” according to Christian Mueller-Glissmann and Andrea Ferrario at Goldman Sachs. The bank’s proprietary “Risk Appetite Indicator” had been floundering below -1 on the scale for much of the year but has now poked its head back into positive territory.

Here’s a snapshot of the action prior to the opening bell in New York:

• S&P 500 futures were flat this morning, premarket, after the index closed up 0.78% yesterday.
• STOXX Europe 600 was up 0.58% in early trading.
• The UK’s FTSE 100 was up 0.85% in early trading.
• Japan’s Nikkei 225 was up 1.59%.
• China’s CSI 300 Index was up 0.7%.
• India’s Nifty 50 was down 0.51%.

This story was originally featured on Fortune.com

Australia announced it will reduce restrictions on U.S. beef imports in a move U.S. President Donald Trump’s administration claimed as a major victory over “non-scientific trade barriers.”

Agriculture Minister Julie Collins said Thursday that relaxing the restrictions designed to keep Australia free of mad cow disease, also known as bovine spongiform encephalopathy or BSE, would not compromise biosecurity.

“Australia stands for open and free trade — our cattle industry has significantly benefited from this,” Collins said in a statement.

U.S. Secretary of Agriculture Brooke L. Rollins responded to Australia’s annoucement by congratulating Trump on a “major trade breakthrough that gives greater access to U.S. beef producers selling to Australia.”

She issued a statemeant under the leadline: Make Agriculture Great Again Trade Wins.

“American farmers and ranchers produce the safest, healthiest beef in the world. It’s absurd that non-scientific trade barriers prevented our beef from being sold to consumers in Australia for the last 20 years,” Rollins said.

“Gone are the days of putting American farmers on the sidelines. This is yet another example of the kind of market access the President negotiates to bring America into a new golden age of prosperity, with American agriculture leading the way,” she added.

Australia has allowed imports of beef grown in the United States since 2019. But Australia has not allowed imports from the U.S. of beef sourced from Canada or Mexico because of the disease risk.

But the U.S. has recently introduced additional movement controls that identify and trace all cattle from Mexico and Canada to their farms of origin.

US cattle import controls satisfy Australian authorities

Australian authorities were “satisfied the strengthened control measures put in place by the U.S. effectively manage biosecurity risks,” Collins said.

The timing of the new, reduced restrictions has not been finalized.

Trump attacked Australian import restrictions on U.S. beef when he announced in April that tariffs of at least 10% would be placed on Australian imports, with steel and aluminum facing a 50% tariff.

“Australia bans — and they’re wonderful people, and wonderful everything — but they ban American beef,” Trump told reporters then.

“Yet we imported $3 billion of Australian beef from them just last year alone. They won’t take any of our beef. They don’t want it because they don’t want it to affect their farmers and, you know, I don’t blame them, but we’re doing the same thing right now,” Trump added.

Lawmaker fears appeasing Trump endangers Australian cattle industry

Opposition lawmaker David Littleproud suspected the government was endangering Australia’s cattle industry to appease Trump.

“I want to see the science and it should be predicated on science. I’m suspicious of the speed at which this has been done,” Littleproud told reporters.

“We need to give confidence to the industry, but also to you (the public): this is not just about animal welfare, this is about human welfare, this is about BSE potentially coming into this country and having a human impact, so I think it’s important the government’s very transparent about the science and I don’t think it’s even beyond the question to have an independent panel review that science to give confidence to everybody,” he added.

Around 70% of Australian beef is exported. Producers fear that export market would vanish overnight if diseases including mad cow or foot-and-mouth disease infected Australian cattle.

Will Evans, chief executive of Cattle Australia who represents more than 52,000 grass-fed beef producers across the nation, said he was confident the agriculture department had taken a cautious approach toward U.S. imports.

“The department’s undertaken a technical scientific assessment and we have to put faith in them. They’ve made this assessment themselves. They’ve said: ‘We’ve looked at this, we’ve looked at the best science, this is a decision that we feel comfortable with,’” Evans said.

“When you have a $75 billion (Australian $50 billion) industry relying on them not making this mistake, I’m sure they’ve been very cautious in their decision-making,” he added.

US beef prices rise because of drought and a domestic cattle shortage

Beef prices have been rising in the U.S. due to factors that include drought and shrinking domestic herd numbers.

The average price of a pound of ground beef in the U.S. rose to $6.12 in June, up nearly 12% from a year ago, according to U.S. government data. The average price of all uncooked beef steaks rose 8% to $11.49 per pound.

Australian demand for U.S. beef is likely to remain low for reasons including a relatively weak Australian dollar.

Australia’s opposition to any U.S. tariffs will be high on the agenda when Prime Minister Anthony Albanese secures his first face-to-face meeting with Trump.

Albanese and Trump were to hold a one-on-one meeting on the sidelines of a Group of Seven summit in Canada last month, but the U.S. president left early.

Albanese expects the pair will meet this year, although no date has been announced.

The two countries have had a bilateral free trade deal for 20 years and the U.S. has maintained a trade surplus with Australia for decades.

This story was originally featured on Fortune.com

• High home prices and mortgage rates have made the housing market especially tough for millennials, leaving many priced out of buying larger or new homes. As a result, a growing number of homeowners are opting to renovate by tapping home equity to stay put. This shift reflects the new reality where renovating for function and value, rather than moving, is becoming the norm among younger generations.

No matter which way you slice it, the housing market is challenging for just about everyone right now. Mortgage rates nearing 7% and elevated home prices have kept buyers out of the market. Sellers have gotten fed up with not getting the offers they think they deserve. 

That’s been especially tough for millennials who are growing out of their first homes. In many markets across the U.S., some smaller or starter homes are selling at or near $1 million—which prices the vast majority of younger buyers out.

But instead of dwelling on the fact they can’t afford their dream home, many current home owners are turning to renovations instead to add that idealistic kitchen or extra bathroom they would’ve wanted in a newer, larger home. Results from a June survey by This Old House, a home improvement brand, shows 60% of millennial homeowners and 56% of Gen Z homeowners have remodeling or renovation plans this year. 

In the real estate industry, it’s generally agreed upon that renovating a current home can typically be cheaper than building a new home from scratch or buying a larger existing home—although there are always individual factors at play that can impact a homeowner’s decision. But according to renovations marketplace Realm, it’s $49,000 cheaper on average to renovate an existing home and $79,000 cheaper to expand it than to buy a new one. Realm, which was founded in 2019, is responsible for about $200 million worth of projects each year, mostly in California and Seattle.

Why homeowners are staying in place

This staying-in-place phenomenon is caused by four main factors, Liz Young, founder and CEO of Realm, told Fortune. The first is current homeowners don’t want to sell their properties and re-enter a housing market that has mortgage rates much higher than the sub-3% rates of the pandemic era. Second, there is very high home equity in the U.S. Many homeowners tap into this home equity through a home equity line of credit (HELOC) for home renovations. This is also an appealing option because even if the home renovations are expensive, they’re being financed through a HELOC at more manageable monthly payments. 

Next is that we have an aging U.S. population who are staying in their homes for longer, and finally, new zoning rules have made it easier for homeowners to add on to their current homes or even build accessory dwelling units (ADUs) for family members or for use as a rental property.

“If you live in an area where the price per square foot to purchase a home is high, you could almost always add space and significantly increase your home value in doing so,” Young said. “There’s just no incentive right now for a consumer to leave their home and disrupt that low [mortgage] rate.”

Courtesy of Realm

Courtesy of Realm

Home renovation trends

Young said they’re seeing homeowners approach adding space to a home in three ways: adding to their primary residence, building ADUs, and converting unused space to make it functional. This would include additions such as an extra bathroom or bedroom or converting a garage, a shed, or basement for livable space for a family member or a tenant.

Because renovations can be disruptive, Young said homeowners are also prioritizing getting multiple renovation projects done at once. 

“If you’ve ever gone through a renovation, the reality is they are disruptive,” Young said. “Because people could tap into home equity to fund these projects, we’re really seeing them do multiple things at the same time.”

Kitchen renovations are one of the most popular choices among homeowners, Young said, as well as larger-scale outdoor projects. 

“With the pandemic, people got used to entertaining and hanging out outside. This is just an extension of our living area,” she said. “We’re seeing people look to have a fluid indoor-outdoor living setup where you’re able to transition seamlessly from entertaining or hanging out inside as well as outside.” This could include projects like hardscaping, outdoor kitchens, pools, and poolhouses. Outdoor living rooms are also popular.

The trends in home renovations also ultimately show how the American dream has changed. 

“The big thing that we’ve seen change is this idea of buying your dream home out of the gate,” Young said. “If I rewind the clock 15 years ago, people had these big ambitions or dreams of like, ‘Oh, I’m going to buy this amazing house and it’s going to be perfect.’ And for millennials—myself included—that’s just not the reality. There’s not enough housing inventory.”

This story was originally featured on Fortune.com

• My grandmother had 10 children, but they were always well-fed and had a happy home.
• She loved to go thrift shopping and never wasted any food.
• She taught me how to make a great life for my son as a single mom.

I often think of one sentence from my late grandmother's obituary: "She kept her 10 children fed and clothed."

Yes, she had 10 children, but what's mesmerizing about this statement is that she always made sure her children had what they needed. As a former single mom of just one boy, I know firsthand that keeping your children fed, clothed, and taken care of is no small feat.

Once I had my own son, I was blessed to spend a lot of time with my grandmother, as we both lived in the same area for the first time. I saw her several times a week, often for lunch or dinner visits. On Sundays and holidays, she typically had our family over for dinner.

I observed all of the ways in which she made these daily meals, visits, and holidays special without having a lot of money.

She showed me that buying secondhand could help stretch a small budget

My grandmother loved frequenting thrift stores and yard sales so that most of her clothes and furniture were found items. In retirement, she volunteered at the local thrift store and always bought things for her children and grandchildren, frequently asking us if there was anything we needed.

The toys she found for my son often became his favorite, while the gently used clothing she picked up for him helped me always keep my son in well-fitting clothes. When I moved into my own home, we scoured yard sales together and found my dining room table and even a lawn mower for my new yard.

I had a handful of Christmases as a mom that were tough money-wise. I found myself using my experience thrifting with my grandmother to find unique gifts, such as a vintage Coca-Cola snow globe and a collector's Batman and Joker set. My son didn't know they weren't brand new. To him, they were just treasures that he still has.

She fed us all well with so little in her kitchen

When it came to putting a meal together, I still marvel at the way my grandmother could create something cozy and plentiful with very little on hand. Dinners were adorned with plates of pickles and olives, saltines and butter, and linen napkins.

These small things helped meals feel more like an event and also gave the impression of an abundance of food.

She earned a reputation for never letting anything go to waste, a habit she developed growing up on a farm during the Great Depression. Leftovers were reworked into meals the next day, and there was never anything too small to save, whether half of an apple or just one clove of garlic.

I saw that it didn't take much money to make a house feel like a home. Even the ordinary day felt special if you were visiting with her. Sure, her decorations were small acts of love, but she was also attentive. She really made the point to see how you were doing and was hospitable, always offering a cookie or another cup of coffee.

I found myself resorting to her secrets when money got tight

As a single mom on a small budget, I caught myself using the same tricks I had picked up from my grandmother. My son's birthday parties, for instance, were often decorated with found items around the home — tablecloths, flowers, and decorative dishware.

For holidays, I focused on the traditions we could build that cost next to nothing but emphasized togetherness, such as making festive cutout cookies or taking Christmas light drives around the neighborhood.

I ensured holidays were never about the quantity of gifts, but the thought put into them. My grandmother always got me one present for my birthday or Christmas, but it would be something special, often useful, and timeless.

Because of her, I knew how to provide my son

I struggled with wanting to provide for my son without having a lot of money. I never wanted him to feel like he was lacking in anything.

In many ways, my grandmother showed me how to create an illusion of plenty. It didn't matter that I relied on used goods or had to find ways to spread the groceries out because my son never noticed. He was always fed and clothed well.

Most of all, he felt safe. His home was warm, welcoming, and decorated to cheer up our day-to-day lives. I was always there for him, offering to be a Lego buddy or seeing if he needed a snack. My grandmother's ways showed me that I didn't need a lot of money to take care of my son. I just needed to be there for him, with the right attitude and creative ingenuity.

• Many Americans' health insurance costs could go up next year.
• Expanded Affordable Care Act subsidies reduced premiums by 44% for many Americans, but are now expiring.
• Without subsidies, premiums could rise by 75% for middle-class Americans.

Middle-class Americans have a new cost to worry about next year: pricier health insurance premiums.

A Biden-era policy expanding eligibility for Affordable Care Act subsidies is set to expire at the end of this year, and there doesn't seem to be much legislative appetite to extend it.

Without those subsidies, out-of-pocket premium costs are set to go up by an average of 75% — imposing another financial burden on Americans and potentially leading to some opting out of coverage altogether.

For some Americans, that could mean a $1,000 or more a year increase in health insurance.

An analysis from the Center on Budget and Policy Priorities found that the enhanced ACA subsidies reduced net premium costs by 44% in 2024, with 93% of those enrolled in the marketplace receiving some form of premium tax credits. In 2024, around 19.3 million Americans enrolled in the marketplace received premium tax credits — the subsidy beefed up by both the American Rescue Plan and the Inflation Reduction Act. How much enrollees received depended on their income and the initial costs of their local plans.

Miranda Yaver, an assistant professor of health policy and management at the University of Pittsburgh and a healthcare fellow at the left-leaning Roosevelt Institute, said that the enhanced subsidies were a "game changer" for Americans who earn too much to qualify for Medicaid, but still may struggle to make ends meet. Business Insider has reported on these workers, known as ALICE or asset-limited, income-constrained, employed. They make too much to qualify for robust assistance, but still struggle to pay their bills.

"If you're piecing together some better-than-minimum-wage jobs, but still hourly jobs, this means that health insurance becomes much more accessible, and that means that you can get the care you need and not have to fear as much about getting sick," Yaver said.

Subsidies expanded who was eligible for ACA health insurance

Some GOP legislators have argued that the policy expanded ACA eligibility too much and offered relief to higher earners while remaining costly to the country. A CBO projection found that making the policy permanent would increase the deficit by $335 billion over the next decade and reduce revenues by $60 billion.

"It is particularly concerning that, by removing the income eligibility limit, some of our nation's highest earners are now eligible for government assistance," Reps. Jason Smith and Jodey Arrington, who respectively chair the House Ways and Means Committee and House Budget Committee, wrote in a 2024 letter. "In certain areas of the country, a family making as much as $599,000 in 2023 could qualify for taxpayer-funded subsidies."

Before the subsidies, only Americans earning between 100% and 400% of the federal poverty line qualified, or between $15,650 and $62,600 based on the current cutoff for a single American.

That 400% limit was expanded under the new structure, meaning that some Americans with ACA coverage were newly eligible to have some premium relief, especially older beneficiaries. Those who made above the 400% line, but were spending over 8.5% of their household income on premiums, became eligible for subsidies.

Christen Young, a visiting fellow at the Brookings Institution's Center on Health Policy, said that those newly eligible Americans saw savings of around $10,000 to $15,000 a year on their premiums.

"Those are the people who are facing particularly large increases in premiums when these enhancements expire," Young said.

A 2024 KFF analysis found, for instance, that Americans making $40,000, or 266% of the federal poverty line, could see their annual premiums increase by $1,247 annually.

"If you take a single parent of one child earning $50,000 a year, that family is saving about $1,700 because of the enhanced premiums. They're going to see their premium increase by about 80% next year when the subsidy enhancements go away," Young said. "A family of four with a household income of $130,000, they're saving $8,000 a year with these enhancements, and they'll see their yearly premium increase by about 60 to 70% next year."

When health insurance costs go up, healthy young people tend to drop coverage

With the expiration looming at the end of the year and premiums expected to rise, many younger and healthier Americans may decide to opt out of coverage. This could, in turn, raise costs even more for those who remain on ACA plans.

Without that younger and healthier group, it becomes more expensive to insure the remaining Americans, and costs go up across the board.

"It's insurance companies correcting for the fact that the people who are going to be enrolled in their plans will probably not be as healthy," Yaver said.

A projection from the nonpartisan Congressional Budget Office found that should the measures lapse, 4.2 million more Americans would be uninsured by 2034.

"One of the things that is really critical to health insurance is being able to essentially spread the risk of insuring people so that we can essentially bring younger and healthier people into the insured population," Yaver said.

There is a possibility that Congress could step in and extend the subsidies, although that looks unlikely, as it would have to have bipartisan approval. The potential end of the subsidies also comes as Americans face a mixed economy: The labor market is seeing shifts, but still chugging along. Inflation is creeping higher, and consumer sentiment is looking dreary — albeit not as low as it has been.

"The average American would have a very difficult time accommodating an unexpected $1,000 expense. That could be a medical, dental expense, home repair, car repair, you name it," Yaver said. "It's very easy to end up spending a thousand dollars in the American healthcare system."

Do you have a story to share about health insurance premiums? Contact this reporter at [email protected].

Treasury Secretary Scott Bessent sharply escalated his criticisms of the Federal Reserve on Monday, publicly urging a comprehensive investigation into the central bank’s operations and effectiveness. In a news-making interview with CNBC, Bessent questioned whether the Federal Reserve has fulfilled its mandate, issuing a rare public critique from the nation’s top economic official on its own central bank at a pivotal moment for U.S. economic policy. His remarks came amid a summer storm of criticism from the Trump administration against the Fed.

Speaking from Washington, Bessent likened the proposed investigation to safety reviews in other major agencies, such as the Federal Aviation Administration. “What we need to do is examine the entire Federal Reserve institution and whether they have been successful,” Bessent told CNBC’s “Squawk Box.” “Has the organization succeeded in its mission? If this were the [Federal Aviation Administration] and we were having this many mistakes, we would go back and look at why has this happened.”

Bessent also accused the Federal Reserve of “fear-mongering” over President Trump’s sharp tariffs on imported goods, noting: “There was fearmongering over tariffs, and thus far, we have seen very little, if any, inflation. We’ve had great inflation numbers,” he said, referencing the latest data showing annual inflation measured at 2.7% in June, although inflation did creep slightly higher than expected in June, to its highest level since February. Still, inflation has widely not materialized as much as economists and the Fed have warned, and economists have been working to solve the $100 billion mystery. Morgan Stanley has described the tariffs as a developing “mosaic” with “idiosyncratic” effects on the economy, poised to generate $2.7 trillion over the next decade.

He lamented what he sees as an intellectual rigidity at the central bank, criticizing how they are unable to “break out of a certain mindset,” adding, “all these PhDs over there—I don’t know what they do,” Bessent remarked, expressing frustration at the economists steering the institution’s decisions.

The pressure campaign

Bessent’s demand for an inquiry comes amid growing discord between the Trump administration and Fed Chair Jerome Powell, with many Trump officials openly criticizing Powell after Trump began posting on social media at his frustration over Powell’s refusal to cut interest rates as he has consistently cited the risk of inflation running out of control if he does so. The President has pressed the central bank to lower interest rates, arguing that hesitancy has cost the economy “hundreds of billions of dollars.” Jeffrey Roach, chief economist at LPL Financial, told Fortune that cutting rates down to 1%, as Trump says he wants, would be a “ludicrous” outcome.

While Trump recently tamped down speculation about removing Powell, Bessent declined to comment on whether he had directly advised against the move, emphasizing instead the need to investigate the broader institution, not just its leadership. Earlier in July, Bessent was the first Trump official to confirm that a formal process was under way by the Trump White House to select Powell’s successor.

In recent weeks, officials including National Economic Director Kevin Hassett and Federal Housing Finance Authority chair Bill Pulte have criticized Powell over the Fed’s $2.5 billion renovation of its headquarters in Washington DC. Powell pushed back against these criticisms just days before Bessent’s Monday comments. Over the weeked, the Associated Press reported that the White House and Fed clashed over whether the renovation should incorporate more glass or the more expensive marble, with marble being the Trump administration’s choice, per meeting minutes. Adding to the turmoil, Republican lawmakers in Congress made a criminal referral against Powell earlier on Monday, alleging false statements to Congress about the renovation work. For his part, Powell has asked the central bank’s inspector general to review aspects of the project for transparency.

Markets and Independence

The central bank’s independence is a cornerstone of U.S. economic credibility with global markets. Some White House officials, as well as market participants, fear that escalating attacks could undermine institutional trust. Senate Majority Leader John Thune notably affirmed the market’s seeming desire and support for an independent Federal Reserve and JPMorgan Chase CEO Jamie Dimon rebutted Bessent’s remarks about a formal process to replace Powell, saying central bank independence is “absolutely critical.” The risk of losing Fed independence is widely understood to be synonymous with the U.S. economy’s wider loss of credibility, but Deutsche Bank has spelled out a scenario where, if Trump were to remove Powell before the end of his term, both the dollar and bond market could collapse.

Despite political friction, Bessent reiterated that President Trump alone will ultimately decide the future of Fed leadership. The market is responding in much the way Thune described, with stocks hitting record highs in July amid a better-than-expected jobs report and increases in both retail sales and consumer sentiment. Those combine to lead to the very thing Trump wants to end: unchanged interest rates.

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 

This story was originally featured on Fortune.com

• President Donald Trump’s tariffs are expected to heat up prices later this year, but the housing market is looking weak enough that it may cool overall inflation. That would clear the way for the Federal Reserve to lower interest rates, which Trump has been pressuring Chairman Jerome Powell to do for months.

The Federal Reserve is keeping a close eye on President Donald Trump’s tariffs and how they will affect inflation, but the housing market may clear the way for lower rates—rescuing central bankers from the White House’s relentless pressure for more easing.

The housing market has largely been frozen since the Fed launched an aggressive rate-hiking campaign in 2022, as mortgage rates jumped along with Treasury yields.

Last year saw a few rate cuts, but prospective homebuyers still face high borrowing costs, and the strains are starting to show. Now, there are growing alarms that home prices, sales and homebuilding are all headed for a slump.

Housing accounts for about a third of the goods and services measured in the consumer price index, meaning weakness in shelter costs can slow inflation readings substantially.

That could offset the inflationary effects of Trump’s expansive tariffs. While they have yet to trigger a big spike in prices, there are signs that import-sensitive categories, such as autos and appliances, are already feeling the impact of higher duties.

In a note last week, Comerica Bank chief economist Bill Adams said the cooling housing market is helping bring down core service price inflation, in a trend disconnected from tariffs.

“Toward the end of the year, the housing market may become a bigger deal for inflation than tariffs,” he predicted. “Housing weakened in the second quarter, with sluggish construction and sales and falling price indexes. If house prices and rents continue to run cool they will further slow core inflation.”

Cooler inflation is more likely than labor market data to spur Fed rate cuts. Adams noted that even if hiring becomes sluggish, the unemployment rate will probably hold steady.

That’s because Trump’s immigration crackdown is squeezing the labor supply, so demand for workers would have to tumble for the jobless rate to jump, he explained. And with Trump’s tax cuts going into effect later, businesses are unlikely to slash hiring.

“A more likely outcome for the economy is that the weakening housing market cools core inflation enough that the Fed feels comfortable incrementally reducing rates late this year,” Adams wrote, adding that Comerica expects a quarter-point cut from the Fed at the December meeting.

December won’t be soon enough for Trump, but others on Wall Street don’t see any cuts this year. At the same time, Trump is mindful of the Fed’s impact on housing. In a Truth Social post on Friday, he said Fed officials are “choking out the housing market with their high rate, making it difficult for people, especially the young, to buy a house.”

Chairman Jerome Powell and other policymakers have held off on lowering rates, pointing to the potential for tariffs to stoke inflation further later this year.

Meanwhile, Trump has been haranguing and insulting Powell for months to cut, even suggesting that he could oust the man he appointed in his first term to lead the Fed.

Trump said last week it’s “highly unlikely” that he would fire Powell, but others in the administration are pressuring the Fed in other ways. The White House has used cost overruns on the Fed’s headquarters renovation to accuse Powell of mismanagement. And on Monday, Treasury Secretary Scott Bessent told CNBC that “the entire Federal Reserve institution” should be examined.

The connection between lower rates and housing was not lost on Jim Reid, global head of macro research and thematic strategy at Deutsche Bank.

“This may explain the persistent pressure from Mr. Trump on the Fed to cut rates—perhaps he sees this as the most effective way to support the housing market,” he wrote in a note on Monday.

This story was originally featured on Fortune.com

• President Trump’s GENIUS Act legalizes stablecoins and requires them to be backed by U.S. dollars or Treasuries. That’s going to increase demand for dollar-backed assets and, maybe, cement the dollar’s reserve currency status. Bitcoin and Ether have both risen as a result, alongside a modest recovery in the U.S. dollar.

Bitcoin is up. Ether is up. And the dollar is up—a little. These things might be related if you believe, as many in the cryptocurrency world do, that the Trump Administration’s regulatory support for crypto will revolutionize digital payments.

Bitcoin was up 1.27% this morning at just under $119K per coin. ETH rose sharply by nearly 12% over the last five days. These gains came as President Trump signed the GENIUS Act, which legalizes stablecoins. Stablecoins are cryptocurrencies that maintain their value at 1:1 with fiat currency, usually the U.S. dollar.

The GENIUS Act specifically requires that stablecoins in the U.S. be backed by dollars or U.S. Treasuries. That will lock in demand for dollars and short-term U.S. bonds from stablecoin issuers, and that in turn will support both the dollar and the price of bonds.

Lo and behold, the U.S. dollar, which had been down by 10.8% year-to-date at the beginning of the month, has picked itself up and is now down only 9.39%. 

The act “formalizes stablecoin issuers’ role as quasi money market funds, supporting US short-term debt markets and channeling non-USD liquidity into dollars,” Deutsche Bank analysts Marion Laboure and Camilla Siazon told clients in a note seen by Fortune. “At a time when US dollar hegemony is under question, this has been seen as a win by the Trump administration. On Friday, Trump affirmed that the GENIUS Act would ‘secure the dollar’s status as the world reserve currency,’ and followed that if the US were to lose its reserve status, it would be akin to the US ‘losing a world war.’”

It’s not yet clear whether the crypto market is big enough to push up the price of the dollar. But it might be, Laboure and Siazon say. “Tether alone holds over ~$120bn in treasury bills as of Q1 2025 and ranks amongst the top holders of US treasuries.”

“The US treasury predicts that T-bills held by stablecoin issuers (excluding interest-bearing stablecoins) will grow to ~$1trn by 2028,” they said.

The act also bans stablecoin issuers from offering “yield” to holders. (In cryptoworld, yield is a stream of payments that looks a lot like interest given to anyone who offers their crypto holdings as a loan to borrowers on a crypto exchange.) Because stablecoins will not be able to offer payments to holders, it looks as if crypto investors are piling into ETH, which has long offered yield payments to anyone willing to “stake” their coins as a security on the Etherium blockchain. (Staking involves punishing anyone who approves a false transaction on the blockchain but rewarding anyone with new ETH if they approve a true transaction.)

“This perhaps explains why we are also seeing a rise in Ether (+25%) last week, as expectations for diminished stablecoin yields are driving interest towards Ethereum as the primary alternative for yield generation in decentralized finance,” the pair said.

Here’s a snapshot of the action prior to the opening bell in New York:

• S&P 500 futures were up 0.24% this morning. The index closed flat at 6,296.79 on Friday. 
• China’s SSE Composite was up 0.72%. 
• The STOXX Europe 600 was down 0.17% in early trading. 
• The UK FTSE 100 was down 0.18% in early trading.
• The Nikkei 225 was down 0.21%. 
• Bitcoin was up 1.27%, at just under $119K.

This story was originally featured on Fortune.com

European Union and US negotiators are heading into another week of intensive talks, as they seek to clinch a trade deal by Aug. 1, when US President Donald Trump has threatened to hit most EU exports with 30% tariffs.

Officials in Brussels are prepared to stomach an unbalanced agreement that favors the US if that’s what is required to break the impasse before the deadline. But the two sides have yet to yield a decisive breakthrough despite an earlier round of negotiations in Washington last week, according to people familiar with the matter. 

Because of that the EU is also stepping up preparations to retaliate in a scenario where there is no agreement. EU envoys are set to meet as early as this week to formulate a plan for measures to respond to a possible no-deal with Trump, whose tariff negotiating position is seen to have stiffened ahead of the deadline.

The US is now seen pushing for a near-universal tariff on EU goods higher than 10%, with increasingly fewer exemptions limited to aviation, some medical devices and generic medicines, several spirits, and a specific set of manufacturing equipment that the US needs, said the people, who spoke on condition of anonymity to discuss private deliberations.

A spokesperson for the European Commission, which handles trade matters for the bloc, said they had no comment to make on the ongoing negotiations.

The two sides have also discussed a potential ceiling for some sectors, as well as quotas for steel and aluminum and a way to ring-fence supply chains from sources that oversupply the metals, the people said. The people cautioned that even if an agreement were reached it would need Trump’s sign off – and his position isn’t clear.

“I am confident we’ll get a deal done,” US Commerce Secretary Howard Lutnick said on CBS’s Face the Nation on Sunday. “I think all these key countries will figure out it is better to open their markets to the United States of America than to pay a significant tariff.”

Lutnick added that he had spoken to European trade negotiators early Sunday.

Trump’s Letter 

The US president wrote to the EU earlier in the month, warning that the bloc would face a 30% tariff on most of its exports from Aug. 1. Alongside a universal levy, Trump has hit cars and auto parts with a 25% levy, and steel and aluminum with double that. He’s also threatened to target pharmaceuticals and semiconductors with new duties as early as next month, and recently announced a 50% levy on copper. In all, the EU estimates that US duties already cover €380 billion ($442 billion), or about 70%, of its exports to the US.

Before Trump’s letter, the EU had been hopeful it was edging toward an initial framework that would allow detailed discussions to continue on the basis of a universal rate of 10% on many of the bloc’s exports.

The EU has been seeking wider exemptions than the US is offering, as well as looking to shield the bloc from future sectoral tariffs. While it’s long accepted that any agreement would be asymmetrical in favor of the US, the EU will assess the overall imbalance of any deal before deciding whether to pull the trigger on any re-balancing measures, Bloomberg previously reported. The level of pain that member states are prepared to accept varies, and some are open to higher tariff rates if enough exemptions are secured, the people said.

Any agreement would also address non-tariff barriers, cooperation on economic security matters, digital trade consultations, and strategic purchases.

Move Quickly

With the prospects of a positive outcome dimming and the deadline looming, the EU is expected to start preparing a plan to move quickly if it can’t reach a deal, said the people. Any decision to retaliate would likely need political sign-off from the bloc’s leaders because the stakes are so high, the people added.

Countermeasures of any substance would likely provoke an even wider transatlantic trade rift, given Trump’s warnings that retaliation against American interests will only invite tougher tactics from his administration. 

The bloc has already approved potential tariffs on €21 billion of US goods that could be quickly implemented in response to Trump’s metals levies. They target politically-sensitive American states and include products such as soybeans from Louisiana, home to House Speaker Mike Johnson, other agricultural products, poultry, and motorcycles.

The EU has also prepared a list of tariffs on an additional €72 billion of American products in response to Trump’s so-called reciprocal levies and automotive duties. They would target industrial goods, including Boeing Co. aircraft, US-made cars, and bourbon whiskey.

It’s also working on potential measures that go beyond tariffs, such as export controls and restrictions on public procurement contracts.

Anti-Coercion Tool 

Bloomberg reported last week that a growing number of EU member states want the bloc to activate its most powerful trade tool, the so-called anti-coercion instrument (ACI), against the US should the two sides fail to reach an acceptable agreement and Trump carries through with his tariff threats.

The ACI would give officials broad powers to take retaliatory action. Those measures could include new taxes on US tech giants, or targeted curbs on US investments in the EU. They could also involve limiting access to certain parts of the EU market or restricting US firms from bidding for public contracts in Europe.

The anti-coercion tool was designed primarily as a deterrent, and if needed, a way to respond to deliberate coercive actions from third countries that use trade measures as a means to pressure the sovereign policy choices of the 27-nation bloc or individual member states.

The commission can propose the use of the ACI, but it’s up to member states to determine whether there’s a coercion case and if it should be deployed. Throughout the process, the EU would seek to consult with the coercing party to find a resolution.

Member states were briefed on the status of trade talks with the US on Friday.

This story was originally featured on Fortune.com

• With mortgage rates remaining high and looking unlikely to drop much anytime soon, the housing market outlook is quickly deteriorating. Moody’s Analytics chief economist Mark Zandi said he thinks a “red flare” is more appropriate for housing, just weeks after he sent off a “yellow flare.” Unless mortgage rates come down substantially, home sales, homebuilding and prices will slump, he warned.

The housing market is getting so weak that it’s poised to become a significant drag on overall economic growth, according to Moody’s Analytics chief economist Mark Zandi.

In a series of posts on X last week, he noted that he sent off a “yellow flare” on the housing market just a few weeks ago but now thinks a “red flare” is more appropriate as the outlook is already deteriorating.

“Home sales, homebuilding, and even house prices are set to slump unless mortgage rates decline materially from their current near 7% soon,” Zandi warned. “That, however, seems unlikely.”

Existing home sales unexpectedly rose in May, but still marked the slowest sales pace for any May since 2009, further evidence that the typically busy spring selling season has been a bust.

Meanwhile, sales of new single-family homes sank 13.7% in May from the prior month, and single-family housing starts dropped 4.6% in June, with permits down as well.

“Home sales are already uber depressed, but homebuilders providing rate buydowns had been propping sales up,” Zandi said. “They are giving up. It’s simply too expensive. A big tell is that many builders are delaying their land purchases from the land banks. New home sales, starts, and completions will soon fall.”

He added that home prices had also held up well, but are now going sideways and set to turn lower as near-7% mortgage rates crush demand.

In fact, the latest Case-Shiller home price report showed a 0.3% monthly fall in the 20-city index in April, steeper than March’s downwardly revised 0.2% dip.

And the latest Housing Market Index survey from the National Association of Home Builders showed 38% of builders cut prices in July, up from 37% in June, 34% in May, and 29% in April.

Putting more downward pressure on prices is increased supply. Home listings have been climbing, as even homeowners with low, pre-pandemic mortgage rates eventually need to put those properties up for sale and buy new homes at higher rates.

“Given their demographic and job situations, locked-in homeowners must move,” Zandi added. “They can only work around these needs for so long.”

Conditions are so tepid that many homeowners who listed their properties are taking them off the market after failing to find a buyer at the price they were offering.

Delistings are up 35% year to date and 47% year over year in May, outpacing active listing growth of 28.4% and 31.5%, respectively, according to a Realtor.com report this month.

For Zandi, that all adds up to bad news for the overall economy, which is already feeling strains from President Donald Trump’s tariffs.

“Housing will thus soon be a full-blown headwind to broader economic growth, adding to the growing list of reasons to be worried about the economy’s prospects later this year and early next,” he said.

Analysts at Citi Research issued a similar warning in May, when they pointed out that the economist Ed Leamer, who passed away in February, famously published a paper in 2007 that said residential investment is the best leading indicator of an oncoming recession.

Citi pointed to fewer permits for single-family-home construction and an increase in the effective supply of homes on the market amid weak demand. Median home prices of existing homes were also falling on a monthly basis.

“Residential fixed investment is the most interest rate sensitive sector in the economy and is now signaling that mortgage rates around 7% are too high to sustain an expansion,” Citi said.

This story was originally featured on Fortune.com

• A closer look at recent economic data reveals a decline in discretionary spending on services, according to a recent note from Wells Fargo, which said the metric historically has fallen during or immediately after recessions. That belies the overall narrative on Wall Street that tariffs have not impacted the economy as much as feared.

Recent economic data have eased fears that President Donald Trump’s tariffs aren’t yet causing a downturn or spike in inflation, but Wells Fargo is more skeptical.

In a note on Tuesday, economists Tim Quinlan and Shannon Grein dismissed the “false narrative” that tariffs were having a benign impact, pointing out that consumer spending data has actually been revised much lower from more upbeat earlier readings.

“It never quite rang true that consumer spending was completely unfazed by the sudden implementation of tariffs,” they wrote. “This mirage was sustained by initial estimates of GDP growth that pegged the pace of inflation-adjusted Q1 consumer spending at 1.8% (annualized); that’s three-times faster than what it turned out to be in the third estimate—just 0.5%.”

In fact, data on services spending was even more skewed to the upside, as revisions put growth at just 0.6%, down from an initial print of 2.4%.

Those trends continued into the second quarter and constitute a clear warning sign largely being overlooked, namely that households are indeed reducing their discretionary spending, according to the note.

While discretionary spending on goods has held up, spending on services is down 0.3% through May on a year-over-year basis.

“That is admittedly a modest decline, but what makes it scary is that in 60+ years, this measure has only declined either during or immediately after recessions,” Quinlan and Grein warned.

They pointed out that spending on food services and recreational services, which includes things like gym memberships and streaming subscriptions, were barely higher.

Meanwhile, transportation spending was down 1.1%, led by declines in auto maintenance, taxis and ride-sharing, and air travel, which had the steepest drop at 4.7%.

“The fact that households are putting off auto repair, not taking an Uber and cutting back or eliminating air travel points to stretched household budgets,” Wells Fargo said.

Even increases in spending on goods seem weaker than they appear, as categories like cars and appliances saw big surges that haven’t been sustained. That’s because consumers rushed to buy items before Trump’s tariffs hiked prices, pulling forward purchases to earlier in the year.

In addition, the muted inflation data appears misleading too, the economists wrote. Many businesses stockpiled extra inventory ahead of tariffs and have been able to draw on those supplies, allowing them to avoid passing on tariffs costs to consumers for now.

Trump’s on-again, off-again approach to tariffs may also be delaying those pass-throughs and even encouraging some businesses to eat the costs, especially if tariffs are seen as a temporary negotiation tactic, they added.

“Another too-good-to-be-true development with respect to tariffs is how broad measures of inflation have yet to register a worrying inflationary shock,” Quinlan and Grein said.

Others on Wall Street are less downbeat but still see tariffs weighing on the economy. Capital Economics sees tariffs causing a slowdown but not a recession, forecasting GDP growth of 1.6% this year and 1.5% next year.

JPMorgan expects growth of 1% in the third quarter, about steady with gains in the first half of the year, which saw a contraction in Q1 and a rebound in Q2.

Wells Fargo’s more contrarian view comes amid a sharp debate over the economic outlook and whether the Federal Reserve should resume rate cuts sooner rather than later.

Fed Governor Christopher Waller has pointed to weak job readings in arguing for a rate cut this month. But other policymakers prefer to wait, saying the economy has been resilient while tariffs have yet to full show up in the inflation data.

The retail sales report released on Friday showed a bigger-than-expected jump last month with broad gains. But that dataset mostly covers spending on goods.

Meanwhile, the latest consumer price index came in below expectations again, but still showed signs that tariffs were putting upward pressure on inflation as well as indications that weak demand may be limiting the ability of businesses to hike prices even higher.

“Consumer spending is simply not as sturdy as we previously thought it was or even as it was first reported to be,” Wells Fargo said. “We’ve long held the view that a stable labor market can offset tariff-induced inflation, and that may still be true and would prevent more of a recessionary impulse from ensuing. But consumers have shifted their behavior in the wake of tariffs.”

This story was originally featured on Fortune.com