The United States economy is booming this quarter as tax cuts influence consumers and businesses. However, risks are growing and economist believe the robust economy will be short-lived.
The housing market is struggling to progress as a result of supply constraints and soaring property values along with a surprisingly large drop in construction permits. Manufacturing has increasingly longer order backlogs and accelerating input prices, mostly for oil and partly due to tariffs imposed on metals. What’s more, President Donald Trump has brought the U.S. to the verge of a trade war with China that could cause taxes on hundreds of billions of dollars in goods.
It all amounts from the increasingly strong economic growth that has a fair shot this quarter at reaching 4 percent. The Trump Administration said with such a robust economy, it is a perfect time to tighten the screws on U.S. trading partners, especially China. Markets, however, gave a less confident opinion, stating the prolonged pain from trade will complicate the path for companies and consumers.
As reported by Bloomberg, the U.S. pledged Friday to levy tariffs on $50 billions of Chinese imports. Trump then delivered another blow, asking the administration to identify $200 billion in Chinese products for additional tariffs of 10 percent, along with another $200 billion after that if the Asian nation retaliates. Beijing vowed to respond “forcefully” to President Trump’s move.
Data of housing in May showed mixed progress. While housing starts jumped to its strongest in over a decade, it was mainly due to a surge in the Midwest and helped by conducive weather. Permits, on the other hand is dropping which will cause homebuilders to face problems in meeting the demand for housing.
Though hardly anyone expects the rate of expansion to hold at second-quarter levels, the several risks make such rapid gains even less likely in the future.