Jerome Powell said the Fed will hold interest rates steady in July.
Chip Somodevilla/Getty Images
The Federal Reserve will hold interest rates steady, aligning with market expectations.
Strong job growth and rising inflation likely influenced the Fed's decision to maintain rates.
Two Fed governors dissented from the decision, preferring lower rates.
America's central bank is once again holding interest rates steady, although two Fed governors disagreed with the move in a rare departure from the committee's typical unanimity.
The Federal Open Market Committee announced Wednesday that it will not cut its benchmark rate, holding for the fifth time this year. It's a decision in line with forecasts: CME FedWatch, which anticipates interest-rate changes based on market moves, had projected a 96.9% chance of a hold in July.The Fed said in its July 30 statement that strong jobs numbers and a recent uptick in inflation contributed to the call.
Fed Governors Christopher Waller and Michelle W. Bowman dissented from the hold decision, saying they preferred a rate cut.
"What you want from everybody, and also from a dissenter, is a clear explanation of what you're thinking and what your argument is, and we had that today," Chair Jerome Powell said at the press conference. "It was a good meeting, and people really thought about this."
Powell added that "the majority of the committee" believes that current inflation and employment markers call for "moderately restrictive policy for now."
The chair said that the US is in a "solid position" economically, and the labor market is in balance. There's a slowing supply of jobs and demand for workers, contributing to a historically-low unemployment rate, he said. And, while Powell said the full impact of President Donald Trump's tariffs "remain to be seen," he said the price of many consumer goods are rising, which is a contrast from easing inflation on service prices.
"If we cut rates too soon, maybe we didn't finish the job with inflation. History is dotted with examples of that," Powell said. "And if we cut too late, maybe we're doing unnecessary damage to the labor market. We're trying to get that timing right."
Fed policy has gotten pushback from the Trump administration
While there's still time for the Fed's two penciled-in cuts in 2025, some economists and Trump administration leaders hoped for a change sooner rather than later. They've put the central bank — and Powell — in the hot seat.
President Donald Trump has consistently pushed for Powell to cut rates, writing in a July 8 Truth Social post that "'Too Late' Jerome Powell," "has been whining like a baby about non-existent Inflation for months, and refusing to do the right thing. CUT INTEREST RATES JEROME — NOW IS THE TIME!" Trump has also suggested removing and replacing Powell before the end of his tenure next year, though Wall Street leaders and top CEOs have warned that changing the Fed's leadership could have significant market consequences.
Trump's cabinet members have echoed his criticisms. Treasury Secretary Scott Bessent said in an interview last week that the Fed is "fear-mongering over tariffs," and "I think that what we need to do is examine the entire Federal Reserve institution and whether they have been successful." Commerce Secretary Howard Lutnick added that Powell is "doing the worst job" and "I don't know why he's torturing America this way. Our rates should be lower."
Waller, the dissenting Fed governor, also pushed for a rate cut ahead of Wednesday's meeting: "With inflation near target and the upside risks to inflation limited, we should not wait until the labor market deteriorates before we cut the policy rate."
The Fed's play to keep rates steady is a response to key indicators of economic health. The US labor market exceeded expectations by adding 147,000 jobs in June — due mostly to growth in the healthcare and hospitality sectors — and unemployment cooled to 4.1%. Consumer sentiment and retail spending are making a small recovery from early summer dips, and GDP rose more than expected this month. Inflation climbed to 2.7% in June from 2.4% in May, moving further from the Fed's 2% goal. Keeping rates unchanged is a strategy to curb further inflation while the Fed still sees positive momentum in the job market, Powell said.
Powell has also said that he's watching Trump's tariff agenda closely. The White House's next planned tariff deadline is August 1, which could place new levies on top trade partners. The president struck a deal with the European Union earlier this week, which sets a 15% tariff on most imported European goods, a reduction from Trump's planned 30% tariff.
The Fed chair emphasized at Wednesday's press conference that his top priorities are to promote maximum US employment and stable prices, regardless of politics and policy.
"The credibility of the Fed on price stability is very, very important. People believe that we will bring inflation down," he told Congress last month, adding, "That credibility once lost is very expensive to regain."
"The government data really is the gold standard in data," he said. "We need it to be good and to be able to rely on it. We're not going to able to substitute that. We'll have to make due what what we have, but I really hope we have what we need."
Federal Reserve Chair Jerome Powell gave little indication on Wednesday of bowing anytime soon to President Donald Trump’s frequent demands that he cut interest rates, even as signs of dissent emerged on the Fed’s governing board.
The Fed left its key short-term interest rate unchanged for the fifth time this year, at about 4.3%, as was expected. But Powell also signaled that it could take months for the Fed to determine whether Trump’s sweeping tariffs will push up inflation temporarily or lead to a more persistent bout of higher prices. His comments suggest that a rate cut in September, which had been expected by some economists and investors, is now less likely.
“We’ve learned that the process will probably be slower than expected,” Powell said. “We think we have a long way to go to really understand exactly how” the tariffs will affect inflation and the economy.
There were some signs of splits in the Fed’s ranks: Governors Christopher Waller and Michelle Bowman voted to reduce borrowing costs, while nine officials, including Powell, favored standing pat. It is the first time in more than three decades that two of the seven Washington-based governors have dissented. One official, Governor Adriana Kugler, was absent and didn’t vote.
The choice to hold off on a rate cut will almost certainly result in further conflict between the Fed and White House, as Trump has repeatedly demanded that the central bank reduce borrowing costs as part of his effort to assert control over one of the few remaining independent federal agencies.
Powell has in the past signaled during a news conference that a rate move might be on the table for an upcoming meeting, but he gave no such hints this time. The odds of a rate cut in September, according to futures pricing, fell from nearly 60% before the meeting to just 45% after the press conference, the equivalent of a coin flip, according to CME Fedwatch.
“We have made no decisions about September,” Powell said. The chair acknowledged that if the Fed cut its rate too soon, inflation could move higher, and if it cut too late, then the job market could suffer.
Major U.S. stock indexes, which had been trading slightly higher Wednesday, went negative after Powell’s comments.
“The markets seem to think that Powell pushed back on a September rate cut,” said Lauren Goodwin, chief market strategist at New York Life Investments.
Powell also underscored that the vast majority of the committee agreed with a basic framework: Inflation is still above the Fed’s target of 2%, while the job market is still mostly healthy, so the Fed should keep rates elevated. On Thursday, the government will release the latest reading of the Fed’s preferred inflation gauge, and it is expected to show that core prices, excluding energy and food, rose 2.7% from a year earlier.
Gus Faucher, chief economist at PNC Financial, says he expects the tariffs will only temporarily raise inflation, but that it will take most of the rest of this year for that to become apparent. He doesn’t expect the Fed to cut until December.
Trump argues that because the U.S. economy is doing well, rates should be lowered. But unlike a blue-chip company that usually pays lower rates than a troubled startup, it’s different for an entire economy. The Fed adjusts rates to either slow or speed growth, and would be more likely to keep them high if the economy is strong to prevent an inflationary outbreak.
Earlier Wednesday, the government said the economy expanded at a healthy 3% annual rate in the second quarter, though that figure followed a negative reading for the first three months of the year, when the economy shrank 0.5% at an annual rate. Most economists averaged the two figures to get a growth rate of about 1.2% for the first half of this year.
The dissents from Waller and Bowman likely reflect jockeying to replace Powell, whose term ends in May 2026. Waller in particular has been mentioned as a potential future Fed chair.
Michael Feroli, an economist at JPMorgan Chase, said in a note to clients this week if the pair were to dissent, “it would say more about auditioning for the Fed chair appointment than about economic conditions.”
Bowman, meanwhile, last dissented in September 2024, when the Fed cut its key rate by a half-point. She said she preferred a quarter point cut instead, and cited the fact that inflation was still above 2.5% as a reason for caution.
Waller said earlier this month that he favored cutting rates, but for very different reasons than Trump has cited: Waller thinks that growth and hiring are slowing, and that the Fed should reduce borrowing costs to forestall a rise in unemployment.
There are other camps on the Fed’s 19-member rate-setting committee — only 12 of the 19 actually vote on rate decisions. In June, seven members signaled that they supported leaving rates unchanged through the end of this year, while two suggested they preferred a single rate cut. The other half supported more reductions, with eight officials backing two cuts, and two — widely thought to be Waller and Bowman — supporting three reductions.
The dissents could be a preview of what might happen after Powell steps down, if Trump appoints a replacement who pushes for the much lower interest rates the White House desires. Other Fed officials could push back if a future chair sought to cut rates by more than economic conditions would otherwise support.
Overall, the committee’s quarterly forecasts in June suggested the Fed would cut twice this year. There are only three more Fed policy meetings — in September, October, and December.
When the Fed cuts its rate, it often — but not always — results in lower borrowing costs for mortgages, auto loans and credit cards.
Some economists agree with Waller’s concerns about the job market. Excluding government hiring, the economy added just 74,000 jobs in June, with most of those gains occurring in health care.
“We are in a much slower job hiring backdrop than most people appreciate,” said Tom Porcelli, chief U.S. economist at PGIM Fixed Income.
Treasury Secretary Scott Bessent said Wednesday that the Trump administration was committed to protecting Social Security hours after he said in an interview that a new children’s savings program President Donald Trump signed into law “is a back door for privatizing Social Security.”
Bessent said Wednesday evening that the accounts created under Trump’s tax break-and-spending cut law “will supplement the sanctity of Social Security’s guaranteed payments.”
“This is not an either-or question: our Administration is committed to protecting Social Security and to making sure seniors have more money,” Bessent said in a post on X.
Bessent’s remarks about privatizing Social Security, which he made at a forum hosted by Breitbart News, were striking after Trump’s repeated promises on the campaign trail and in office that he would not touch Social Security. It also reignited an issue that has dogged Republicans for years.
The White House did not respond to a request for comment.
Democrats quickly seized on the comment as a sign the GOP wants to revive a dormant but unpopular push to privatize the long-running retirement program.
“A stunning admission,” Senate Democratic leader Chuck Schumer said in a Senate speech. “Bessent actually slipped, told the truth: Donald Trump and government want to privatize Social Security.”
The idea of privatizing Social Security has been raised by Republicans before, but quickly abandoned. Millions of Americans have come to rely on the certainty of the federal program in which they pay into the system during their working years and then receive guaranteed monthly checks in their older age.
Privatization proposals would shift the responsibility for the retirement savings system away from the government and onto Americans themselves. Through personal savings accounts, people would need to manage their own funds, which may or may not be enough to live on as they age.
Under the GOP’s “big, beautiful bill,” as the law is called, Republicans launched a new children’s savings program, Trump Accounts, which can be created for babies born in the U.S. and come with a potential $1,000 deposit from the Treasury.
Much like an individual retirement account, the Trump Accounts can grow over time, with a post-tax contribution limit of $5,000 a year, and are expected to be treated similarly to the rules for an IRA, and can eventually be tapped for distribution in adulthood.
But Bessent on Wednesday allowed for another rationale for the accounts, suggesting they could eventually be the way Americans save for retirement.
“In a way, it is a back door for privatizing Social Security,” Bessent said while speaking about the program.
The Treasury Department later issued a statement that said, “Trump Accounts are an additive government program that work in conjunction with Social Security to broaden and increase the savings and wealth of Americans. Social Security is a critical safety net for Americans and always will be.”
Ever since the George W. Bush administration considered proposals to privatize Social Security more than 20 years ago, Republicans have publicly moved away from talking about the issue that proved politically unpopular and was swiftly abandoned.
In the run-up to the 2006 midterms, Democrats capitalized on GOP plans to privatize Social Security, warning it would decimate the program that millions of Americans have come to rely on in older age. They won back control of both the House and the Senate in Congress.
The Democrats warned Wednesday that Bessent’s comments showed that Republicans want to shift the government-run program to a private one and are again trying to dismantle the retirement program that millions of Americans depend on.
“Donald Trump’s Treasury Secretary Scott Bessent just said the quiet part out loud: The administration is scheming to privatize Social Security,” Tim Hogan, a spokesperson for the Democratic National Committee, said in a statement.
“It wasn’t enough to kick millions of people off their health care and take food away from hungry kids. Trump is now coming after American seniors with a ‘backdoor’ scam to take away the benefits they earned,” Hogan said.
The Social Security program has faced dire financial projections for decades, but changes have long been politically unpopular.
Social Security’s trust funds, which cover old age and disability recipients, will be unable to pay full benefits beginning in 2034, according to the most recent report from the program’s trustees.
Those officials have said those findings underline the urgency of making changes to programs.
Trump, attuned to Social Security’s popularity, has repeatedly said he would protect it.
Throughout his 2024 presidential campaign, Trump repeatedly said he would “always protect Social Security” and said his Democratic opponents, President Joe Biden and Vice President Kamala Harris, would destroy the program.
During the 2024 primary, he accused other Republicans who have expressed support for raising the age for Social Security of being threats to the program.
Trump said in an interview with NBC’s “Meet the Press” in December after he won the presidential election that “we’re not touching Social Security, other than we might make it more efficient.”
His White House this year said Trump “will always protect Social Security.”
Social Security Administration Commissioner Frank Bisignano, a Wall Street veteran, was asked at his confirmation hearing in March about whether Social Security should be privatized. He said he’d “never heard a word of it” and “never thought about it.”
The Federal Reserve kept interest rates unchanged at between 4.25% and 4.5% following the most recent Federal Open Market Committee meeting Wednesday. The Fed’s decision could be felt by President Trump as a rebuke after Trump continuously called for the Fed and Chairman Jerome Powell to cut rates.
The Federal Reserve maintained rates on Wednesday, holding up against the pressure of President Donald Trump and his recently escalated rhetoric.
The Fed, while it brought down rates several times last fall, has stayed the course following the past four Federal Open Market Committee meetings. On Wednesday, the Fed did the same, holding interest rates between 4.25% and 4.5%, down from their peak over the past two years but still higher than pre-COVID levels of between 1.5% and 1.75%. In its decision, the Fed cited low unemployment and a solid labor market in its decision to hold rates steady.
Wednesday’s decision included two dissenting votes from the majority, Fed governors Michelle Bowman and Christopher Waller. It is the first time in more than 30 years that two governors have dissented in a single meeting.
The U.S. economy has maintained some resilience despite analyst warnings about impending financial turmoil partly caused by Trump’s tariffs. The unemployment rate fell slightly to 4.1% in June and has remained basically stable over the past 12 months. Meanwhile, annualized second quarter GDP growth increased 3%, bouncing back from the 0.5% contraction in the first quarter.
This combination of stable unemployment and a return to GDP growth likely played into the Fed’s preference for keeping rates unchanged, despite recent skepticism over data published by the Bureau of Labor Statistics, said Luke Tilley, a former Philadelphia fed adviser and chief economist at Wilmington Trust.
“When they see the unemployment rate remaining low, when GDP has bounced back to a positive, when they don’t see any imminent problems, then they’re really reluctant to start cutting, or even say that they’re going to be cutting, because it’s much harder to unring that bell once they say markets are sort of off to the races,” Tilley told Fortune.
At the same time, the most recent GDP number shows weakness when stripped down to the core components of consumer spending and business investment, Van Hesser, chief strategist at the Kroll Bond Rating Agency, told Fortune. Core inflation, which excludes volatile food and energy prices, also increased to 2.9% in June, up from 2.8% the prior month.
While concerns about unemployment have been at the forefront for the Fed in recent months, potential signs of lagging growth are bringing more equilibrium than before to the Fed’s dual mandate, said Hesser.
Trump’s tariff policies are likely to weigh on consumers and businesses in the second half of the year, and the Fed is likely waiting for more data to assess these effects. Still, Hesser said despite Wednesday’s rate cuts, he believes the Fed will cut rates later in the year, possibly at its last meeting of the year in December.
“I would expect to hear some commentary today acknowledging that the risks of inflation and the risks of to the labor market, which is really growth, are coming into better balance, and so it kind of sets up for what we’ve expected, which is, fourth quarter rate cuts—two cuts of 50 basis points,” he said.
As the Trump administration continues to negotiate trade deals with its allies, including, most recently, with the EU, the threat of tariffs and their effects on inflation has worried market onlookers. On Wednesday, Trump said he would impose a 25% tariff on imports from India because of the country’s high tariffs on U.S. goods. Trump also claimed India buys much of its military equipment and energy from Russia, which warranted an unspecified “penalty.”
Since before he was elected President in November, Trump has continuously criticized Powell and the Fed for not dropping interest rates as fast as he would like. Trump has ramped up his rhetoric recently by repeatedly wishing for Powell to resign and insulting him as “Mr. Late” and “one of my worst appointees,” among others. The president has also seized upon a previously scheduled remodel of the Federal Reserve’s headquarters in Washington D.C. to publicly shame Powell and hint at his possible dismissal.
The Bureau of Economic Analysis published real GDP data for the second quarter of 2025 on Wednesday.
Liao Pan/China News Service/VCG via Getty Images
Real GDP increased at an annualized rate of 3% in the second quarter, more than expected.
That reverses the shrinking economy in the first quarter, but tariffs cloud future performance.
The report is just one of several this week that highlight how the economy is doing.
US real gross domestic product grew at an annualized rate of 3% in the second quarter, surpassing the forecast of 2.5% and a sharp rebound from the first quarter's decline.
"Compared to the first quarter, the upturn in real GDP in the second quarter primarily reflected a downturn in imports and an acceleration in consumer spending that were partly offset by a downturn in investment," the Bureau of Economic Analysis said.
Real personal consumer spending rose 1.4% in the second quarter, surpassing the 0.5% increase in the first. Fixed investment rose just 0.4% in the second quarter after a 7.6% increase in the first quarter.
After a 37.9% increase in the first quarter, imports fell 30.3% in the second quarter as President Donald Trump's tariff push heated up. Imports are subtracted in the GDP calculation. Exports fell 1.8% in the second quarter, after a 0.4% rise in the first.
"The consumer has been resilient despite recent volatility and policy uncertainty, and any employment weakness will be viewed as a bellwether for weakening consumption, which would likely push the Fed to resume cutting rates sooner," said Ryan Weldon, investment director and portfolio manager at IFM Investors.
Other releases beyond Wednesday's Bureau of Economic Analysis report indicate how the economy is doing. The Federal Reserve's Beige Book covering economic conditions between late May and early July said five of the 12 Fed districts had slight or modest economic gains and another five reported flat activity, compared to three with slight economic growth and three with no change in activity in the previous report.
The Beige Book also said there was a slight improvement in employment. Analysts and economists told Business Insider that the labor market is good if you have a job, and is not so great if you're a job seeker.
Trump's widespread tariffs are supposed to start on August 1 after a few pauses. The US and EU announced a trade deal on Sunday, including a 15% tariff rate on goods imported from the EU with some exceptions, Europe purchasing billions of dollars in US energy, and eliminating tariffs on US industrial goods.
On Wednesday afternoon, the Federal Reserve will announce its newest decision on interest rates, which economists and analysts expect to be held steady for the fifth straight decision. More data will be out this week, including the jobs report from the Bureau of Labor Statistics and monthly consumer spending from the Bureau of Economic Analysis.
In a market landscape still fixated on fears of stagflation and modest recoveries, Bank of America is sounding a contrarian—and decidedly bullish—note.
According to new note from BofA Research analysts, the next phase for the U.S. economy and equities might not be a routine recovery, but an outright boom.
“Today a confluence of factors argue that the key tail risk that may not be priced in is not just a cyclical recovery, but a boom,” they said.
5 reasons for a boom
BofA analysts cited five pillars supporting this more bullish case.
First is political will, arguing that with U.S. midterm elections a few quarters away, policymakers have strong incentive for near-term, pro-growth initiatives.
Second is Washington’s “One Big Beautiful Bill Act” (OBBBA) targeting domestic manufacturing.
Third is the massive overseas jolt gathering, with Germany recently enacting the largest stimulus package in EU history, while global reflationary forces are building elsewhere.
Fourth, BofA sees a broad expansion of capital expenditures, with hyperscalers such as Amazon, Meta, Microsoft, and Alphabet set for nearly $700 billion in capital expenditures between 2025 and 2026. In addition, more non-U.S. companies plan to expand manufacturing capacity in the U.S., while municipalities are focused on updating aging infrastructure.
Fifth, BofA cited its proprietary “Regime Indicator,” a blend of macro signals including corporate revisions to earnings per share, GDP forecasts, and other emerging signals. It’s on the verge of flipping from a “Downturn” to a “Recovery”—a change that historically presages a rally in value stocks.
The dominant narrative in this indicator remains conservative, according to the BofA team, led by Savita Subramanian. In June, 70% of fund managers still predicted stagflation, with only 10% foreseeing a “boom” of above-trend growth and inflation. Yet, BofA argues, the catalyst for an upside breakout is real and imminent. If the Regime Indicator does indeed flip to “Recovery” in early August, historical precedent suggests a rapid rotation is likely.
So how healthy are these five factors actually looking?
Will there be enough spending?
Top economies have already pledged massive stimulus. In March, China unveiled plans to issue 1.3 trillion yuan ($179 billion) in special treasury bonds this year, plus 4.4 trillion yuan of local government special-purpose bonds.
Meanwhile, much of the EU’s stimulus still flowing from the earlier NextGenerationEU package is worth up to €806.9 billion (about $880 billion) through 2026. Major European economies have supplemented this with additional investments and, in some cases, targeted fiscal expansion.
Japan, South Korea, Canada, and Australia have adopted smaller-scale but still significant fiscal measures in 2025 to address sector-specific slowdowns, energy security, and household purchasing power. Most are focusing on targeted transfers, green investments, and industrial support.
Meanwhile, American companies have announced billions in new U.S. manufacturing, infrastructure, and technology investments since Trump took office, but these initiatives were announced before passage of the OBBBA.
Many investments are phased and slated for completion over the next decade, and it’s unclear how much can come online soon enough to play a role in the boom that BofA Research is projecting. Some of them, such as OpenAI’s $500 billion Stargate project, are reportedly struggling to raise funding to match the big numbers initially announced.
For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing.
The U.S.-EU trade deal has been blasted as too lopsided in favor of President Donald Trump, as it sets tariffs higher than Europe wanted and pledges hundreds of billions of dollars to be spent in America. But according to an analyst at the Brookings Institution, that ignores a crucial geopolitical angle: The EU needs U.S. weapons to help Ukraine fight Russia.
The trade deal President Donald Trump announced Sunday with European Commission President Ursula von der Leyen didn’t go over well in some parts of Europe.
One French executive said Trump “humiliated us,” and French Prime Minister François Bayrou described the deal as “submission.” Economist Olivier Blanchard blasted it as “completely unequal” and a defeat for the EU.
That’s as the U.S. sets a 15% tariff rate for most EU products, less than the 30% Trump threatened but more than the 10% Europe sought. The EU also pledged to invest $600 billion in the U.S., buy $750 billion of American energy products, and load up on “vast amounts” of U.S. weapons.
But according to Robin Brooks, a senior fellow at the Brookings Institution, the deal isn’t a defeat if you look at it from a different point of view.
“Instead, it’s recognition of economic and geopolitical realities whereby the EU needs the U.S. more than the other way around,” he wrote in a Substack post. “At the end of the day, the EU needs U.S. weapons to keep Ukraine afloat into its struggle for survival against Russia. That just isn’t a setting where you escalate a trade conflict.”
In fact, Trump has warmed up considerably toward the European view on Ukraine, which has been fighting off Russia’s invasion for more than three years.
After expressing deep skepticism on U.S. support for Kyiv, berating Ukrainian President Volodymyr Zelensky in the White House, and temporarily cutting off military aid, Trump has helped reinforce Ukraine.
Earlier this month, he vowed to send more Patriot missile-defense systems to Ukraine and agreed to a plan where European nations buy American weapons, then transfer them to Ukraine.
Trump has also indicated he’s fed up with Russian President Vladimir Putin’s lack of progress in peace talks. And on Monday, Trump gave Moscow less than two weeks to reach a deal or else face steep sanctions.
Meanwhile, analysts at Macquarie also noted that after markets previously saw the U.S. abandoning its global security obligations, the recent deals with the EU, the U.K., and Japan signal an effort to heal those relationships.
“In the background has been a renewed commitment to U.S. geopolitical engagement, too, of course—a recommitment to Ukraine’s security, taking out Iran’s nuclear assets, etc.,” they said in a note.
To be sure, Europe has also committed to rearming its own military forces and has pledged massive spending increases, including money for homegrown defense contractors.
But that will take time, as NATO forces are already highly reliant on and integrated with American weapons systems.
In February, the Danish Defense Intelligence Service assessed the risk from Russia once its Ukraine war stops or freezes in place.
Russia could launch a local war against a bordering country within six months, a regional war in the Baltics within two years, and a large-scale attack on Europe within five years if the U.S. does not get involved, according to a translation of the report from Politico.
“Russia is likely to be more willing to use military force in a regional war against one or more European NATO countries if it perceives NATO as militarily weakened or politically divided,” the report said. “This is particularly true if Russia assesses that the U.S. cannot or will not support the European NATO countries in a war with Russia.”
In just seven years, Social Security will reach a fiscal cliff that could leave millions of American retirees with drastically reduced benefits, according to a recent analysis by the Committee for a Responsible Federal Budget (CRFB). The think tank’s new report projects that, unless Congress acts, Social Security’s main trust fund will be insolvent by the end of 2032, triggering automatic and painful benefit cuts for everyone relying on the program.
How painful? Around $18,000 less-per-year for retirees who depend on the program. This is not the first time the CRFB has warned about this, and it’s a common refrain from no less than the Oracle of Omaha himself: famed investor Warren Buffett.
The ticking clock
Social Security and Medicare, the two bedrock programs supporting older Americans, are drawing closer to insolvency than many might realize. The most recent data, compiled from the programs’ own trustees and enhanced by CRFB calculations, forecasts that by late 2032, Social Security’s retirement program will no longer be able to pay out promised benefits in full. At that point, the law dictates that payments must be limited to the amount coming in from payroll taxes—resulting in an immediate, across-the-board benefit reduction.
The scope of the cut: $18,100 shortfall for typical couples
For millions of future retirees, the numbers are stark. CRFB’s estimate reveals that a typical dual-earning couple retiring at the start of 2033 would see their annual Social Security benefit drop by approximately $18,100. The percentage cut is projected to be 24% for that year, instantly slashing retirement incomes for over 62 million Americans who depend on the program.
The pain would be widespread but would vary by income and household type. For example, Single-earner couples could see a $13,600 cut, low-income, dual-earner couples face an $11,000 shortfall, and high-income couples might lose up to $24,000 a year.
Major cuts are headed for social security, the CRFB says.
Committee for a Responsible Federal Budget
While the dollar cut is smaller for lower-income households, the relative burden is even more severe, devouring a larger share of retirement income and past earnings. Also, these cuts are in nominal dollars; adjusted to 2025 dollars, the actual cut would be about 15% less.
What’s causing the crisis?
Social Security is funded by a dedicated payroll tax, but the gap between what goes out in benefits and what comes in through taxes is growing. The newly enacted One Big Beautiful Bill Act (OBBBA) has accelerated the timeline by reducing Social Security’s revenue through tax rate cuts and an expanded senior standard deduction. According to CRFB, these policies increase the necessary benefit reduction by about one percentage point; if the changes become permanent, the benefit cuts would be even deeper.
Over time, the gap is expected to worsen: by the end of the century, CRFB adds, Social Security could face required benefit cuts of over 30%, unless lawmakers shore up the program’s finances. Despite these dire projections, many policymakers have pledged not to alter Social Security, promising to keep benefits untouched. But if nothing changes, the law automatically enforces cuts when the trust fund runs dry.
The CRFB report urges policymakers to be candid about the situation and to work towards bipartisan solutions that secure Social Security’s future. Ideas could include new revenue sources, adjusting benefits, or a combination—anything to avoid the “steep and sudden” cut that looms for tens of millions. Without meaningful congressional action before 2032, the Social Security safety net will be abruptly—and dramatically—shrunk, so Americans approaching retirement will at least want to pay close attention to Congressional action on the looming cliff.
Buffett’s bugbear
Warren Buffett has been vocal about the dangers of Social Security insolvency and the looming benefit cuts that millions of retirees could face if action is not taken soon. The retiringBerkshire Hathaway CEO has stated that reducing Social Security payments below their current guaranteed levels would be a grave mistake, and urged prompt Congressional action.
Buffett, who has signed the Giving Pledge and has advocated for higher taxes on higher earners, has criticized the cap on income subject to Social Security taxes, arguing that higher earners—including himself—should contribute more. He’s also suggested that Social Security’s finances could partially be eased by raising the retirement age, with the 95-year-old investing legend himself working well beyond the standard end of most careers.
CRFB background
The CRFB is not just any think tank, either, it’s a respected bipartisan institution that stretches back to 1981. Its board has consistently included former members and directors of key budgetary, fiscal, and policy institutions, such as the Congressional Budget Office, the House and Senate Budget Committees, the Office of Management and Budget, and the Federal Reserve. The CRFB regularly produces analyses of government spending, tax proposals, debt and deficit trends, and trust fund solvency (such as Social Security and Medicare), as well as recommendations and scorecards for major fiscal legislation.
The CRFB has consistently advanced a centrist position on budgetary matters, regularly advocating for reducing federal deficits and controlling the growth of national debt. The organization has often criticized large spending bills that are not offset by reductions elsewhere, as well as tax cuts that are not revenue-neutral.
The think tank favors reforms to federal “entitlement” programs, especially Social Security and Medicare, aiming to make them fiscally sustainable, an emphasis that has drawn criticism from the left. For example, Paul Krugman characterized it as a “deficit scold” when he was still with The New York Times.
In the Social Security sphere, the CRFB has supported or proposed ideas like raising the retirement age, adjusting cost-of-living increases (using the chained CPI), increasing the amount of wages subject to payroll tax, and progressive indexing (where benefits grow more slowly for higher earners). They have also weighed proposals for new revenue streams and some means-testing of benefits. On the right wing, the CRFB’s proposed reforms to Social Security have drawn criticism for, as Charles Blahous of the Manhattan Institute put it, creating a structure more like “welfare” than an earned income benefit.
Still, the CRFB is widely respected in policy circles as a knowledgeable, data-driven budget watchdog, with a long track record of analysis and advocacy for sustainable fiscal policy.
For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing.
U.S. existing home sales fell sharply in June 2025, dropping to their lowest level in nine months as elevated mortgage rates and record-high prices continued to sideline many prospective buyers. According to the National Association of Realtors (NAR), existing home sales slipped 2.7% from May to a seasonally adjusted annual rate of 3.93 million transactions, exceeding analysts’ expectations for a more modest decline. Compared with last year, sales were flat overall, with concentrated declines in several regions.
The housing market is traditionally busiest in spring, but this year’s key buying season proved lackluster. The month-over-month decline largely reflected affordability challenges: Mortgage rates hovered close to 7% throughout April and May, when most June closings would have entered contract.
“Existing home sales have been in purgatory since mortgage rates spiked in 2022,” Lance Lambert, editor-in-chief of ResiClub, told Fortune Intelligence. “Some of that’s because strained affordability in many markets is making it harder for sellers to find a buyer at their asking price—which is also why active inventory is rising. And some of it is because many would-be home sellers, who’d like to sell and buy something else, either can’t afford that next payment or don’t want to part with their lower mortgage rate and payment. No matter how you look at it, this is an unhealthy housing market.”
Sky-high prices
On a nationwide basis, home prices climbed to an all-time high, underpinning the market’s affordability squeeze. The median price for existing homes reached $435,300 in June, up 2% from the same month a year earlier and marking the 24th consecutive month of yearly price gains. NAR chief economist Lawrence Yun sounded an optimistic tone about this staggering climb: “The record-high median home price highlights how American homeowners’ wealth continues to grow—a benefit of homeownership. The average homeowner’s wealth has expanded by $140,900 over the past five years.”
Despite weak sales, inventory is slowly rebuilding: 1.53 million homes were listed for sale at the end of June, up nearly 16% from a year ago—the highest level in years—though still 0.6% lower than in May owing to seasonal factors. This puts the market’s unsold inventory at a 4.7-month supply, matching pre-pandemic norms and up from 4.0 months a year prior.
Regional dynamics varied. Sales dropped in the Northeast, Midwest, and South, but edged higher in the West, with year-over-year changes mirroring these splits. Single-family home sales slipped 3%, while sales of condominiums and co-ops were stable compared with May but down 5.3% against June 2024.
One positive for buyers: more supply and slightly longer time on market. Realtor.com reported that active inventory for June rose for the 20th straight month, climbing nearly 29% year over year to 1.08 million homes, and the average home spent 53 days on market, five days longer than a year earlier. However, these gains are offset by persistent undersupply when compared with the pre-pandemic market, and price cuts became more common, with nearly 21% of listings experiencing downward adjustments—the highest June share since 2016.
“Multiple years of undersupply are driving the record-high home price,” Yun said, noting that construction continues to lag population growth and is holding back first-time buyers. “If the average mortgage rates were to decline to 6%, our scenario analysis suggests an additional 160,000 renters would become first-time homeowners and a boost in activity from existing homeowners,” Yun added.
If mortgage rates decrease in the second half of this year, Yun said, he expects home sales to increase across the country owing to strong income growth, healthy inventory, and a record-high number of jobs. For now, though, it’s a familiar story of peak prices and affordability as the main obstacles for would-be homebuyers in the U.S.
For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing.
When Amrita Bhasin, 24, learned that products from South Korea might be subject to a new tax when they entered the United States, she decided to stock up on the sheet masks from Korean brands like U-Need and MediHeal she uses a few times a week.
“I did a recent haul to stockpile,” she said. “I bought 50 in bulk, which should last me a few months.”
South Korea is one of the countries that hopes to secure a trade deal before the Aug. 1 date President Donald Trump set for enforcing nation-specific tariffs. A not-insignificant slice of the U.S. population has skin in the game when it comes to Seoul avoiding a 25% duty on its exports.
Asian skin care has been a booming global business for a more than a decade, with consumers in Europe, North and South America, and increasingly the Middle East, snapping up creams, serums and balms from South Korea, Japan and China.
In the United States and elsewhere, Korean cosmetics, or K-beauty for short, have dominated the trend. A craze for all-in-one “BB creams” — a combination of moisturizer, foundation and sunscreen — morphed into a fascination with 10-step rituals and ingredients like snail mucin, heartleaf and rice water.
Vehicles and electronics may be South Korea’s top exports to the U.S. by value, but the country shipped more skin care and cosmetics to the U.S. than any other last year, according to data from market research company Euromonitor. France, with storied beauty brands like L’Oreal and Chanel, was second, Euromonitor said.
Statistics compiled by the U.S. International Trade Commission, an independent federal agency, show the U.S. imported $1.7 billion worth of South Korean cosmetics in 2024, a 54% increase from a year earlier.
“Korean beauty products not only add a lot of variety and choice for Americans, they really embraced them because they were offering something different for American consumers,” Mary Lovely, a senior fellow at the Peterson Institute for International Economics, said.
Along with media offerings such as “Parasite” and “Squid Games,” and the popularity of K-pop bands like BTS, K-beauty has helped boost South Korea’s profile globally, she said.
“It’s all part and parcel really of the same thing,” Lovely said. “And it can’t be completely stopped by a 25% tariff, but it’s hard to see how it won’t influence how much is sold in the U.S. And I think what we’re hearing from producers is that it also really decreases the number of products they want to offer in this market.”
Senti Senti, a retailer that sells international beauty products at two New York boutiques and through an e-commerce site, saw a bit of “panic buying” by customers when Trump first imposed punitive tariffs on goods from specific countries, manager Winnie Zhong said.
The rush slowed down after the president paused the new duties for 90 days and hasn’t picked up again, Zhong said, even with Trump saying on July 7 that a 25% tax on imports from Japan and South Korea would go into effect on Aug. 1.
Japan, the Philippines and Indonesia subsequently reached agreements with the Trump administration that lowered the tariff rates their exported goods faced — in Japan’s case, from 25% to 15% — still higher than the current baseline of 10% tariff.
But South Korea has yet to clinch an agreement, despite having a free trade agreement since 2012 that allowed cosmetics and most other consumer goods to enter the U.S. tax-free.
Since the first store owned by Senti Senti opened 16 years ago, beauty products from Japan and South Korea became more of a focus and now account for 90% of the stock. The business hasn’t had to pass on any tariff-related costs to customers yet, but that won’t be possible if the products are subject to a 25% import tax, Zhong said.
“I’m not really sure where the direction of K-beauty will go to with the tariffs in place, because one of the things with K-beauty or Asian beauty is that it’s supposed to be accessible pricing,” she said.
Devoted fans of Asian cosmetics will often buy direct from Asia and wait weeks for their packages to arrive because the products typically cost less than they do in American stores. Rather than stocking up on their favorite sunscreens, lip tints and toners, some shoppers are taking a pause due to the tariff uncertainty.
Los Angeles resident Jen Chae, a content creator with over 1.2 million YouTube subscribers, has explored Korean and Japanese beauty products and became personally intrigued by Chinese beauty brands over the last year.
When the tariffs were first announced, Chae temporarily paused ordering from sites such as YesStyle.com, a shopping platform owned by an e-commerce company based in Hong Kong. She did not know if she would have to pay customs duties on the products she bought or the ones brands sent to her as a creator.
“I wasn’t sure if those would automatically charge the entire package with a blanket tariff cost, or if it was just on certain items,” Chae said. On its website, YesStyle says it will give customers store credit to reimburse them for import charges.
At Ohlolly, an online store focused on Korean products, owners Sue Greene and Herra Namhie are taking a similar pause.
They purchase direct from South Korea and from licensed wholesalers in the U.S., and store their inventory in a warehouse in Ontario, California. After years of no duties, a 25% import tax would create a “huge increase in costs to us,” Namhie said.
She and Greene made two recent orders to replenish their stock when the tariffs were at 10%. But they have put further restocks on hold “because I don’t think we can handle 25%,” Namhie said. They’d have to raise prices, and then shoppers might go elsewhere.
The business owners and sisters are holding out on hope the U.S. and Korea settle on a lower tariff or carve out exceptions for smaller ticket items like beauty products. But they only have two to four months of inventory in their warehouse. They say that in a month they’ll have to make a decision on what products to order, what to discontinue and what prices will have to increase.
Rachel Weingarten, a former makeup artist who writes a daily beauty newsletter called “Hello Gorgeous!,” said while she’s devoted to K-beauty products like lip masks and toner pads, she doesn’t think stockpiling is a sound practice.
“Maybe one or two products, but natural oils, vulnerable packaging and expiration dates mean that your products could go rancid before you can get to them,” she said.
Weingarten said she’ll still buy Korean products if prices go up, but that the beauty world is bigger than one country. “I’d still indulge in my favorites, but am always looking for great products in general,” she said.
Bhasin, in Menlo Park, California, plans to keep buying her face masks too, even if the price goes up, because she likes the quality of Korean masks.
“If prices will go up, I will not shift to U.S. products,” she said. “For face masks, I feel there are not a ton of solid and reliable substitutes in the U.S.”
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AP audience engagement editor Karena Phan in Los Angeles contributed to this report.
The Trump administration’s decision to impose a 17% duty on fresh tomatoes imported from Mexico has created a dilemma for the country providing more tomatoes to U.S. consumers than any other.
The import tax that began July 14 is just the latest protectionist move by an administration that has threatened dozens of countries with tariffs, including its critical trading partner Mexico. It comes as the Mexican government tries to also negotiate its way out of a 30% general tariff scheduled to take effect Aug. 1.
While the impacts of the tomato tariff are still in their infancy, a major grower and exporter in central Mexico shows how a tariff targeting a single product can destabilize the sector.
Surviving in times of uncertainty
Green tomato plants stretch upward row after row in sprawling high-tech greenhouses covering nearly six acres in the central state of Queretaro, among the top 10 tomato producing states in Mexico.
Climate controlled and pest free, Veggie Prime’s greenhouses in Ajuchitlan send some 100 tons of fresh tomatoes every week to Mastronardi Produce. The Canadian company is the leading distributor of fresh tomatoes in the U.S. with clients that include Costco and Walmart.
Moisés Atri, Veggie Prime’s export director, says they’ve been exporting tomatoes to the U.S. for 13 years and their substantial investment and the cost to produce their tomatoes won’t allow them to make any immediate changes. They’re also contractually obligated to sell everything they produce to Mastronardi until 2026.
“None of us (producers) can afford it,” Atri said. “We have to approach our client to adjust the prices because we’re nowhere near making that kind of profit.”
In the tariff’s first week, Veggie Prime ate the entire charge. In the second, its share of the new cost lowered when its client agreed to increase the price of their tomatoes by 10%. The 56-year-old Atri hopes that Mastronardi will eventually pass all of the tariff’s cost onto its retail clients.
Mexican tomato exports brought in $3 billion last year
Experts say the tariff could cause a 5% to 10% drop in tomato exports, which last year amounted to more than $3 billion for Mexico.
The Mexican Association of Tomato Producers says the industry generates some 500,000 jobs.
Juan Carlos Anaya, director general of the consulting firm Grupo Consultor de Mercados Agrícolas, said a drop in tomato exports, which last year amounted to more than 2 billion tons, could lead to the loss of some 200,000 jobs
Experts: U.S. will have difficulty replacing fresh Mexican tomatoes
When the Trump administration announced the tariff, the Commerce Department justified it as a measure to protect U.S. producers from artificially cheap Mexican imports.
California and Florida growers that produce about 11 million tons would stand to benefit most, though most of that production is for processed tomatoes. Experts believe the U.S. would find it difficult to replace Mexico’s fresh tomato imports.
Atri and other producers are waiting for a scheduled review of the measure in two months, when the U.S. heads into fall and fresh tomato production there begins to decline.
In reaction to the tariff, the Mexican government has floated the idea of looking for other, more stable, international markets.
Mexican Agriculture Secretary Julio Berdegué said Thursday that the government is looking at possibilities like Japan, but producers quickly cast doubt on that idea, noting the tomatoes would have to be sent by plane, raising the cost even more.
Atri said the company is starting to experiment with peppers, to see if they would provide an option at scale.
President Claudia Sheinbaum said recently her administration would survey tomato growers to figure out what support they need, especially small producers who are already feeling the effects of a drop of more than 10% in the price of tomatoes domestically over fears there will be a glut in Mexico.
A worker prunes plants inside a greenhouse at the Veggie Prime tomato farm, which exports to the United States, in Ajuchitlan, Mexico, Wednesday, July 23, 2025.
S&P 500 futures traded up this morning on news that the U.S. and the EU, America’s largest trading partner, have struck a deal that imposes 15% tariffs on imported goods. The U.S. markets love that certainty. But the devil is in the details—which is why European stocks are rising faster than U.S. futures this morning.
Stocks are up this morning on the certainty of a new trade deal between the U.S. and the EU. American businesses and consumers will now face a 15% tariff on all imports from Europe, while President Trump confirmed the EU tariff level has been reduced to zero. Previously, the tariff level on both sides was just under 3%.
President Trump, visiting his golf courses in Scotland, is positioning the deal as a win. The agreement includes a large amount of direct investment into the U.S. by Europe, including: $750 billion of energy purchases, $600 billion in extra direct investment, and the purchase of “a vast amount of military equipment,” the president said.
S&P 500 futures moved up 0.27% this morning but the STOXX Europe 600 rose by more than double that in early trading.
Why are investors in Europe so happy about Trump’s great victory over them? The devil is in the details, and the pact seems to contain several advantages for the EU.
The auto tariffs, for instance, now benefit European manufacturers over North American competitors. The 15% level is lower than that faced by Canada and Mexico, which are much nearer the U.S. auto market. “How can the administration square a 15% tariff on cars from Europe and Japan, while manufacturers in the U.S., Canada and Mexico are laboring under 25% tariffs?” Patrick Anderson, CEO of the Anderson Economic Group, told The New York Times.
The deal does not require the EU to alter its digital services tax on large tech companies.
There is also no current change in drug pricing rules. The pharma industry is one of Europe’s biggest, and Trump has long complained that Europeans get drugs cheap because companies inflate pricing in the U.S.
Meanwhile the “new” direct investment and military purchases may likely have happened anyway—Europe is fighting a war against Russia on its Eastern flank, after all.
“Europe is already the largest foreign investor in the U.S., with European direct investment increasing by roughly $200 billion from 2023 to 2024. Three times that over an undefined period is hardly a great coup,” The Wall Street Journal’s editorial board noted.
Simon Nixon, who writes the Wealth of Nations Substack, said: “The real win from the EU’s perspective is that it has successfully fended off Trump’s demands that it rewrite its regulatory rulebook to benefit U.S. companies. In particular, Trump had been demanding changes to EU digital services rules, agricultural rules and pharmaceutical pricing.
“The irony is that this is the one thing that U.S. companies would have most wanted out of any trade deal. Instead, they have been hit with a massive hike in tariffs on imports … without any increase in EU market access.”
In Europe, analysts seem to be concluding that deal is mostly Scotch mist. The tariff level itself is much lower than what Trump previously threatened, and the accompanying investment will get lost in the mail.
“The EU and the U.S. agreed that U.S. consumers should pay more tax—levied at 15% for imports from the EU. EU President von der Leyen made vague pledges to buy stuff from and invest in the U.S., without the necessary authority to make those pledges reality. Pharmaceuticals and steel seem to be excluded from this deal. The result is better for the U.S. economy than the worst-case scenario, but worse for the U.S. economy than the situation in January this year,” UBS’s Paul Donovan told clients this morning.
Here’s a snapshot of the action prior to the opening bell in New York:
S&P 500 futures were up 0.3% this morning, premarket, after the index closed up 0.4% on Friday, hitting a new all-time high at 6,388.64.
STOXX Europe 600 was up 0.67% in early trading.
The U.K.’s FTSE 100 was up 0.14% in early trading.
President of the European Commission Ursula von der Leyen shakes hands with U.S. President Donald Trump during a meeting at Trump Turnberry golf club on July 27, 2025 in Turnberry, Scotland.
President Donald Trump said the EU will invest $600 billion in the U.S., buy $750 billion of American energy products, and purchase “vast amounts” of weapons as part of a trade deal that sets a 15% tariff. It comes a week after a similar agreement with Japan, which pledged to invest $550 billion in key U.S. industrial sectors.
Now that trade deals have been clinched with the European Union and Japan, the U.S. looks to focus on China as the world’s two biggest economies prepare for high-stakes talks.
Negotiations between Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng are scheduled to start on Monday in Stockholm.
That comes as a trade truce between the two sides is due to end Aug. 12, though they are reportedly going to extend the deadline by 90 days.
U.S. deals with Japan and the EU could offer a blueprint for China. The EU will invest $600 billion in the U.S., buy $750 billion of American energy products and purchase “vast amounts” of weapons, according to Trump.
It comes a week after a similar agreement with Japan, which vowed to invest $550 billion in key U.S. industrial sectors. Both the EU and Japan will face a 15% tariff on most of their exports to the U.S.
Bessent highlighted the $550 billion pledge as a key reason the U.S. and Japan were able to settle on a levy that was lower than the 25% rate Trump had threatened earlier.
“They got the 15% rate because they were willing to provide this innovative financing mechanism,” he told Bloomberg TV on Wednesday, when asked if other countries could get a similar rate.
Similarly, Trump had hinted that the EU would have to “buy down” the threatened tariff rate of 30% and pointed to the Japan deal.
But talks with Beijing may be tougher.
“When Japan broke down and made a deal the EU had little choice,” Jamie Cox, managing partner for Harris Financial Group, said in a note on Sunday. “The biggest piece in the trade deal puzzle still remains, and the Chinese are unlikely to be as willing to fold.”
Without a lasting agreement between the U.S. and China, tariffs could soar back to prohibitively high levels that would effectively cut off trade. In April, Trump had set tariffs on China at 145%, prompting Beijing to retaliate with its own levy of 125%.
Meanwhile, the U.S. has reached deals elsewhere in Asia, with the Philippines and Indonesia facing 19% tariffs while Vietnam has a 20% duty. That’s as Trump seeks to discourage the trans-shipment of Chinese goods via other countries in the region.
Any pledges of investment in the U.S. also come as Trump’s tariffs face legal challenges, with a court hearing scheduled Thursday on whether the president has authority under the International Emergency Economic Powers Act to impose wide-ranging duties.
On Sunday, European Commission President Ursula von der Leyen confirmed that the EU’s $750 billion in U.S. energy purchases would come over the next three years, meaning they will happen while Trump is in office.
But U.S. tariffs could be invalidated before any money is spent, and Wall Street is skeptical that Japan will fully deliver on a target that isn’t a binding commitment.
“Our trading partners and major multinationals know Trump’s tariffs are on shaky legal ground,” they wrote. “Therefore, we find it hard to believe many of them are going to make massive investments in the US they would not have otherwise made in response to tariffs that may not last.”
President Donald Trump and European Commission President Ursula von der Leyenmet in Scotland on Sunday to iron out a U.S.-EU trade deal. Without an agreement, the EU was due to get hit with a 30% tariff rate on Aug. 1, up from the current “reciprocal” duty of 10%. Last week, Trump reached a trade deal with Japan that set a 15% rate.
The U.S. and European Union agreed on trade terms that include a 15% rate on most EU products as well as hundreds of billions of dollars of investments in American industry.
President Donald Trump and European Commission President Ursula von der Leyen met in Scotland on Sunday to iron out the agreement.
Trump said the EU will invest $600 billion in the U.S. and buy $750 billion worth of U.S. energy products, with “vast amounts” of American weapons in the mix. He also said the EU will be “opening up their countries at zero tariff.”
Von der Leyen said the 15% rate was “all inclusive,” but Trump later added that it didn’t apply to pharmaceuticals and metals though it does to autos.
“I think that basically concludes the deal,” he told reporters. “It’s the biggest of all the deals.”
Von der Leyen also said the agreement would “rebalance” trade between the two partners. The U.S. goods trade deficit with the 27-member EU was $235.6 billion in 2024, a 12.9% increase from 2023, according to the Office of the U.S. Trade Representative.
She later confirmed that the $750 billion in U.S. energy purchases would come over the next three years, while adding that both sides will drop tariffs to zero on aircraft, plane parts, certain chemicals, and chip equipment, as well as some farm products, generic drugs, and raw materials. No decisions have been made on a rate for wine and spirits, she added.
The Distilled Spirits Council of the United States hailed the agreement, though U.S. and EU tariffs on spirits still must be negotiated.
“We are optimistic that in the days ahead this positive meeting and agreement will lead to a return to zero-for-zero tariffs for U.S. and EU spirits products, which will benefit not only our nation’s distillers, but also the American workers and farmers who support them from grain to glass,” CEO Chris Swonger said in a statement.
But von der Leyen also introduced some uncertainty by saying the 15% rate does apply to pharmaceuticals while also suggesting more details will come from the U.S. and that pharma overall is “on a different sheet of paper.”
A deal with America’s biggest trading partner removes a key source of market uncertainty and the threat of a damaging trade war.
Michael Brown, senior research strategist at Pepperstone, said in a note that European carmakers are among the big winners from the deal as tariffs on autos will drop to 15% from the current 25%, securing a carve-out similar to what Japan obtained last week. U.S. defense and energy stocks also stand to gain.
“Stocks hardly need much of an excuse to rally right now, and agreement of the ‘biggest ever deal’—Trump’s words, not mine—not only removes a key left tail risk that the market had been concerned about, but also yet again reiterates that the direction of travel remains away from punchy rhetoric, and towards trade deals done,” he wrote.
Heading into their meeting, Trump and von der Leyen said they saw a fifty-fifty chance of reaching a deal. Trump ruled out pharmaceuticals from any deal and said the tariff rate on the EU wouldn’t go below 15%.
The EU already faces a 50% U.S. tariff on steel and aluminum. Without a deal by Aug. 1, the EU was set to get hit with a 30% “reciprocal” tariff, up from 10%.
Last week, Trump reached a trade deal with Japan that set a 15% rate and included a pledge for Tokyo to invest $550 billion in key U.S. industrial sectors, with Trump able to direct the funds.
In fact, Trump hinted that the EU would have to “buy down” the threatened tariff rate of 30% and pointed to the Japan deal.
In case no deal with the U.S. was made, the EU had already preplanned retaliatory tariffs of up to 30% on more than $100 billion worth of American exports, such as aircraft, cars, and bourbon.
Meanwhile, other U.S. trading partners are staring down the Aug. 1 deadline, and Commerce Secretary Howard Lutnick said Sunday that no further extensions will be given.
But the U.S. and China are reportedly extending their trade truce by 90 days as talks between Bessent and Chinese Vice Premier He Lifeng are scheduled to start on Monday in Stockholm. Without an extension, their tariff pause was scheduled to end on Aug. 12.
“When Japan broke down and made a deal the EU had little choice. The biggest piece in the trade deal puzzle still remains, and the Chinese are unlikely to be as willing to fold,” Jamie Cox, managing partner for Harris Financial Group, said in a note. “The next big durable theme in markets is security, and the EU deal only accelerates it.”
US and China are expected to extend their tariff truce by another three months, the South China Morning Post reported, citing unnamed sources.
The two countries will not impose additional tariffs on each other during the extension, one of the sources told the newspaper. The current pause was to end Aug. 12.
The report comes ahead of trade talks between US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng scheduled to start on Monday in Stockholm.
Bessent said Tuesday that he expected a trade-truce extension to emerge from the next round of negotiations this week, which he said will include broader range of topics including Beijing’s purchases of oil from Russia and Iran.
US President Donald Trump and EU chief Ursula von der Leyen were set for make-or-break talks in Scotland Sunday, aimed at ending a months-long transatlantic trade standoff, as negotiations went down to the wire.
Trump has said he sees a one-in-two chance of a deal with the European Union, which faces an across-the-board US levy of 30 percent unless it strikes a trade pact by August 1 — with Washington warning Sunday there would be “no extensions.”
Von der Leyen’s European Commission, negotiating on behalf of EU countries, is pushing hard for a deal to salvage a trading relationship worth an annual $1.9 trillion in goods and services.
According to an EU diplomat briefed ahead of the meeting, set for 4:30 pm (1530 GMT), the contours of a deal are in place after talks went late into Saturday night — but key issues still need settling.
And of course the final word lies with Trump.
“A political deal is on the table — but it needs the sign-off from Trump, who wants to negotiate this down to the very last moment,” the diplomat told AFP.
The proposal, they said, involves a baseline levy of around 15 percent on EU exports to the United States — the level secured by Japan — with carve-outs for critical sectors including aircraft and spirits, though not for wine.
Any deal will need to be approved by EU member states — whose ambassadors, on a visit to Greenland, were updated by the commission Sunday morning, and would meet again after any accord.
According to the EU diplomat, the 27 countries broadly endorsed the deal as envisaged — while recalling their negotiating red lines.
Baseline tariff
The Trump-von der Leyen meeting was taking place in Turnberry on Scotland’s southwestern coast, where the president owns a luxury golf resort. He was out on the course for much of the weekend.
The 79-year-old Trump said Friday he hoped to strike “the biggest deal of them all” with the EU.
“I think we have a good 50-50 chance,” the president said, citing sticking points on “maybe 20 different things”.
The EU is focused on getting a deal to avoid sweeping tariffs that would further harm its sluggish economy — while holding out retaliation as a last resort.
Under the proposal described to AFP, the EU would commit to ramp up purchases of US liquefied natural gas, along with other investment pledges.
Pharmaceuticals — a key export for Ireland — would also face a 15-percent levy, as would semi-conductors.
The EU also appears to have secured a compromise on steel that could allow a certain quota into the United States before tariffs would apply, the diplomat said.
Questions on auto sector
Hit by multiple waves of tariffs since Trump reclaimed the White House, the EU is currently subject to a 25-percent levy on cars, 50 percent on steel and aluminium, and an across-the-board tariff of 10 percent, which Washington threatens to hike to 30 percent in a no-deal scenario.
It was unclear how the proposed deal would impact tariff levels on the auto industry, crucial for France and Germany, with carmakers already reeling from the levies imposed so far.
While 15 percent would be much higher than pre-existing US tariffs on European goods — averaging 4.8 percent — it would mirror the status quo, with companies currently facing an additional flat rate of 10 percent.
Should talks fail, EU states have greenlit counter tariffs on $109 billion (93 billion euros) of US goods including aircraft and cars to take effect in stages from August 7. Brussels is also drawing up a list of US services to potentially target.
Beyond that, countries like France say Brussels should not be afraid to deploy a so-called trade “bazooka” — EU legislation designed to counter coercion that can involve restricting access to its market and public contracts.
But such a step would mark a major escalation with Washington.
Ratings dropping
Trump has embarked on a campaign to reshape US trade with the world, and has vowed to hit dozens of countries with punitive tariffs if they do not reach a pact with Washington by August 1.
US Commerce Secretary Howard Lutnick said Sunday the August 1 deadline was firm and there will be “no extensions, no more grace periods.”
Polls suggest however the American public is unconvinced by the White House strategy, with a recent Gallup survey showing his approval rating at 37 percent — down 10 points from January.
Having promised “90 deals in 90 days,” Trump’s administration has so far unveiled five, including with Britain, Japan and the Philippines.
One of the provisions of the trade deal that set a 15% tariff on Japan is a pledge from Tokyo to invest $550 billion in key American sectors. The White House said the money will be deployed “at President Trump’s direction,” potentially giving him a bigger say in U.S. industrial policy. But details remain thin, and analysts are skeptical.
The pledge from Japan to invest $550 billion in key U.S. industries could show other countries how to clinch a trade deal with the U.S., even as analysts question how real that money is.
As part of the agreement that set a 15% tariff rate on Japan, the White House said it includes a “Japanese/USA investment vehicle” that will be deployed “at President Trump’s direction” into strategic sectors.
They include energy infrastructure and production, semiconductors, critical minerals, pharmaceuticals, and shipbuilding, according to a fact sheet from the administration. The U.S. would retain 90% of the profits, though the Japanese government believes profits will be split based on “the degree of contribution and risk taken by each party,” according to the Financial Times.
Still, Treasury Secretary Scott Bessent highlighted the fund as a key reason the U.S. and Japan were able to settle on a levy that was lower than the 25% rate Trump had threatened earlier.
“They got the 15% rate because they were willing to provide this innovative financing mechanism,” he told Bloomberg TV on Wednesday, when asked if other countries could get a similar rate.
Indeed, analysts at Bank of America said that the Japan deal “looks like a reasonable blueprint” for other auto-exporting countries like South Korea.
Both countries have similar trade characteristics with the U.S., such as high current account surpluses, high U.S.-bound exports, and less open domestic markets via non-tariff measures, the bank said in a note on Friday.
At the same time, the U.S. is also negotiating deals with the European Union and other trading partners ahead of an Aug .1 deadline, when Trump’s pause on his reciprocal tariffs will expire.
But Wall Street has serious doubts that the $550 billion will actually materialize. Takahide Kiuchi, executive economist at Nomura Research Institute and a former Bank of Japan policymaker, said in a note Wednesday that the investment pledge is merely a target and not a binding promise.
“In reality, under the Trump administration, many Japanese companies likely view the business environment in the U.S. as deteriorating due to tariffs and other factors,” he explained. “Furthermore, at current exchange rates, labor costs in the U.S. are extremely high, providing little incentive for Japanese firms to expand investment there. If anything, we may see a stronger trend toward diversifying investments away from the U.S.”
Meanwhile, Council on Foreign Relations senior fellow Brad Setser, a former U.S. Trade Representative advisor and Treasury Department official, similarly expressed skepticism about the money.
“Odds are it is vapor ware, beyond the known deals (Alaska LNG),” he posted on X on Wednesday, likening it to a highly touted product that may never become available, “but it would be strange (and would potentially set up future problems) if the US relied almost entirely on other people’s money to fund its own industrial strategies.”
He later added “there is a lot less here than meets the eye,” and pointed out that the industrial sectors highlighted as areas for investment are already logical ones for Japan, given current supply-chain concerns.
A source familiar with the matter acknowledged to Fortune that a lot of details of the $550 billion have yet to be ironed out. That includes the timeframe of the investment as well as an advisory board and guardrails against potential conflicts of interest.
But the source added that the investment would be funded by the Japanese government and is not a just pledge from Tokyo to buy commodities or for Japanese companies to steer investments into the U.S.
It also means Japan is fronting the cash to finance projects that are likely to be in the private sector, the source said, offering a hypothetical example of a chip company looking to build a U.S. plant.
Under this scenario, the investment vehicle could finance construction of the factory and lease it out at favorable terms to the chip company, with 90% of the rent revenue going to the U.S. government.
The $550 billion pledge also comes as Trump’s tariffs face legal challenges, with a court hearing scheduled Thursday on whether the president has authority under the International Emergency Economic Powers Act to impose wide-ranging duties.
That could make it attractive for countries to promise a lot of money sometime in the future to obtain immediate tariff relief, while running out the clock as legal battles play out.
Analysts at Piper Sandler have concluded that Trump’s tariffs are illegal and noted that the $550 billion Japanese investment comes with few concrete specifics.
“Our trading partners and major multinationals know Trump’s tariffs are on shaky legal ground,” they wrote. “Therefore, we find it hard to believe many of them are going to make massive investments in the US they would not have otherwise made in response to tariffs that may not last.”
Delta Air Lines is having a good 2025, reporting strong second-quarter earnings and reinstating its April profit guidance, leading to a substantial stock bump (up roughly 16% from June to July). True, its guidance is down from its January projections, but it’s weathering the storm of the tricky global economy well, maintaining its status as America’s leading premium airline. As Fortune‘s Shawn Tully reported in March 2025, it has somehow managed the trick of being America’s most profitable airline, while giving billions back to employees in the form of profit sharing.
At the start of the year, CEO Ed Bastian kicked off a celebration of Delta’s centenary by announcing “a new era in premium travel” with the opening of Delta One lounges, a step above its usual Sky Clubs. The Delta One locations will offer “amenities for the premium traveler” ranging from fine dining to spa-like wellness treatments and valet services. Bastian clarified that Delta will continue to invest in its Delta Sky Clubs, with more openings planned to come.
But there is more to the story for Delta, America’s leading premier airline. The Sky Clubs are coming off years of turbulence, with significant customer backlash following several of Delta’s attempts to improve a lounge experience that has become overcrowded. These problems date back several years, to the beginning of the “revenge travel” boom that accompanied post-pandemic reopening. Bastian told Fortune in 2022 that even he was shocked by the level of demand: “People talk about revenge travel, or pent-up travel—this is beyond anything that people can classify as truly pent-up,” he said, adding that his team calculated a whopping $300 billion burst of travel thirst. “That gap is $300 billion—with a B,” Bastian emphasized.
America’s leading premium airline has long offered a standard lounge experience through its Sky Clubs, with free wi-fi, buffets of cold snacks and heated steam trays, and a range of complimentary drinks. The Sky Clubs were no match for the burst of revenge travelers. Bastian’s efforts to fix these problems in 2023—barring Basic Economy passengers and capping the number of visits allowed for credit card holders—sparked backlash on customers’ part and soul-searching for Bastian. “We are victims of our own success,” he told Fast Company‘s Stephanie Mehta in 2024, as he explained changes to benefits including access to Sky Club lounges. “It’s hard to tell someone who’s been at a certain status for many years that what they’ve earned is no longer as valuable.”
That’s why the declining pleasure of the airport lounge resonates for a deeper reason: it’s a metaphor for the declining prospects of the upper middle class in an age of “elite overproduction,” which argues that certain societies grow so rich and successful that they produce too many people of premium education for the number of premium jobs—or premium experiences—that the economy can actually support.
The elites have been so overproduced that you can literally see them—in lines stretching out of airport lounges.
The elite lounge overproduction theory
Several factors make Delta’s overcrowding issue particularly severe, and they have to do with how Delta is really trying—and, as Bastian says, succeeding—in offering a premium service to a large, affluent customer base. Delta offers more comprehensive food and beverage options than many competitors, so travelers linger longer, compounding capacity issues. Indeed, when reached for comment, Delta confirmed that its SkyMiles program has seen “unprecedented engagement,” and its member satisfaction is higher than ever. Delta said it’s committed to continuous investment to further please customers, which includes “modernizing and expanding our lounges.”
Generous lounge access deals with American Express (including non-Delta-branded Platinum Card holders) have greatly expanded eligibility, overwhelming facilities. As more travelers achieve status or purchasehigh-tier tickets, both due to credit card spending and business travel rebounds, demand for lounge space has increased beyond what legacy facilities can handle.
Delta isn’t alone in its lounge struggles, as shown by its partner, American Express, which has tried to physically expand many of its Centurion Lounges. Those have gone from the epitome of exclusivity and comfort to another kind of crowded waiting room—albeit with arguably better snacks and Wi-Fi.
The root of the problem is the same: too many people now have access. The proliferation of premium credit cards, airline status programs, and paid day passes has democratized lounge entry, eroding the exclusivity that made these spaces desirable in the first place.It is unclear if Delta expanded too far, too fast, or if it was surprised by the number of lounge lovers in its clientele.UBS Global Wealth Management has noted a surprising trend in the upper middle class: the rise of the “everyday millionaire,” or people whose assets fall between $1 million and $5 million. These are exactly the kind of people who would see themselves as lounge-worthy, and likely frustrated to find their small-M millionaire status doesn’t go so far.
The consequences for travelers are palpable. Social media and travel forums are rife with stories of travelers paying hundreds of dollars in annual fees only to find long lines clogging, say, New York’s JFK terminals on a daily basis. The proof is abundant on TikTok.On the other hand, expectations are heightened. Travel research firm Airport Dimensions has conducted an “airport experience report” for over a decade and found in 2024 that airport lounges are a contradiction: the definitive democratic travel luxury.
This widespread expectation—and dissatisfaction—is not just a matter of comfort. For many, the lounge was a symbol of having “made it”—a reward for loyalty, status, or financial success. Its decline has become a source of frustration and even embarrassment, especially for those who remember a more exclusive era. There’s an emotional trigger behind an unpleasant lounge experience.
The theory behind the malaise: elite overproduction
The overcrowding of airport lounges is more than a logistical headache—it’s a microcosm of a broader societal phenomenon. University of Connecticut professor emeritus Peter Turchin has developed a controversial theory of “elite overproduction” which posits that frustration and even instability result when a society produces more people aspiring to elite status than there are elite positions. It’s an unorthodox theory from an unorthodox academic: Turchin is an emeritus professor at UConn, research associate at the University of Oxford and project leader at the Complexity Science Hub-Vienna, leading research in a field of his own invention: Cliodynamics, a type of historical social science.
The catch with Turchin’s theory is that his own type of complexity science takes on a pseudo-prophetic quality, similar in some ways to William Strauss and Neil Howe’s “Fourth Turning.” And Turchin has foreseen that the United States has reached a stage repeated in civilizations throughout history, when it has produced too many products of elite education and social status for the realistic number of jobs it can generate. Decline and fall follows, Roman Empire-style. The Atlanticprofiled Turchin in 2020, warning “the next decade could be even worse.” Several writers have expanded on his ideas since then, approaching it from their distinctive and different sensibilities.
Ritholtz Wealth Management COO Nick Maggiulli posted to his “Of Dollars and Data” blog on the subject of airport lounges specifically, writing that the “death of the Amex lounge” simply shows that “the upper middle class isn’t special anymore,” although he did not specifically link this to the concept of elite overproduction. “There are too many people with lots of money,” he concluded.
In the context of airport lounges, the “elite” are not just the ultra-wealthy, but the vast upper middle class—armed with a combination of higher degrees, status, and premium credit cards—now jostling for the same perks. But what if much of society has been turning into some version of an overcrowded airport lounge?
In an interview with Fortune Intelligence, Turchin said this theory makes sense and fits with his thesis when presented with the similarities. “The benefits that you get with wealth are now being diluted because there are just too many wealth holders,” he said, citing data that the top 10% of American society has gotten much wealthier over the past 40 years. (Turchin sources this statement to this working paper from Edward Wolff.)
Turchin said lounges are not by definition restricted from expansion in the same way that political offices are, with a core element of his thesis being there are too many sociopolitical elites for the number of positions open to them, but “it’s the same thing” in light of the difficulties many providers have in expanding lounge access. “There is a limited amount of space, but many more elites now, so to speak … low-rank elites.” Turchin said these low-rank elites, or “ten-percenters,” don’t have the status typically associated with elite status. “The overproduction of lower-ranking elites results in decreased benefits for all.”
When asked where else he sees this manifesting in modern life, Turchin said “it’s actually everywhere you look. Look at the overproduction of university degrees,” he added, arguing that declining rates of college enrollment and high rates of recent graduate unemployment support the decreasing value of a college diploma. “There is overproduction of university degrees and the value of university degree actually declines. And so the it’s the same thing [with] the lounge.”
Noah Smith argues that elite overproduction manifests as a kind of status anxiety and malaise among the upper middle class. Many find themselves struggling to afford or access the very symbols of success they were promised—be it a prestigious job, a home in a desirable neighborhood, or, indeed, a peaceful airport lounge. He collects reams of employment data to show that Turchin’s theory has significant statistical support from the 21st century American economy.
Freddie DeBoer largely agrees, framing the issue as “why so many elites feel like losers.” He focuses more on the creator economy than Smith, but asserts that he sees “think many would agree with me about “a pervasive sense of discontent among people who have elite aspirations and who feel that their years toiling in our meritocratic systems entitles them to fulfill those aspirations.”
Delta’s plan to restore status
In its lounge strategy, Delta is trying to walk a fine line: Offering a premium service to a class of consumers that is becoming more and more mass-market. CEO Ed Bastian acknowledged as much on the company’s latest earnings call. While touting the fortunes of Delta’s target customers, households making $100,000 or more a year, Bastian noted the income cutoff “is not, by the way, an elite definition—that’s 40% of all U.S. households.”
Beginning February 2025, Delta implemented new caps on annual lounge visits for American Express cardholders, setting a maximum of 15 visits per year and requiring exceptionally high annual spending ($75,000+) to re-unlock unlimited access. Basic Economy passengers, meanwhile, are permanently excluded from lounge access, further tightening entry. Travelers can only enter lounges within three hours of their flight’s departure time, discouraging extended stays and unnecessary early arrivals.
Delta is opening and upgrading lounges in key markets: New Delta One Lounges in Seattle, New York-JFK, Boston, and Los Angeles feature larger spaces, exclusive amenities, and new design concepts for premium passengers. Major expansions are under way in hubs like Atlanta, Orlando, Salt Lake City, and Philadelphia, with multiple new or enlarged clubs opening between spring and late 2025—some over 30,000 square feet in size, making them among the largest in the network. Renovations to existing lounges (e.g., Atlanta’s Concourses A and C) are aimed at maximizing capacity and improving guest experiences. Delta is also exploring emergency overflow options and flexible staffing to address unpredictable surges, especially during weather and operational delays.
Delta executives are optimistic. They predict that by 2026, most crowding issues—aside from extreme disruptions—will be resolved on “almost all days.” Continued investments in larger, better-designed lounges, coupled with tighter access controls, are expected to restore the premium experience customers expect.
However, critics note that crowding still occurs at peak times, especially in flagship locations, and design/layout flaws occasionally undermine even the newest clubs. The success of Delta’s fix-it agenda is being closely watched by both rivals and loyal travelers.
But Delta may be overmatched in rehabilitating the overcrowded airport lounge as a potent symbol of this broader malaise. What was once a marker of distinction is now a crowded, noisy, and often disappointing experience. The democratization of luxury, while laudable in some respects, has left many feeling that the rewards of success are increasingly out of reach—or at least, not what they used to be.
As airlines grapple with how to restore the magic of the lounge, they are also confronting a deeper truth: in an age of elite overproduction, the promise of exclusivity is harder than ever to keep.
For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing.
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-Colato 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.
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.
The highest spike in core goods in two years.
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.
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