US Economy: Fragile Second Half as Tariffs, Tight Labor, and Policy Risks Weigh on Growth

The global economy’s surprising strength in the first half of 2025 is giving way to a slower, more fragile outlook for the remainder of the year, according to UOB’s latest quarterly analysis. The report attributed the early-year rebound to a temporary pause in US tariffs that boosted exports and manufacturing, but warned that new trade barriers, tighter immigration rules, and political interference with the Federal Reserve could stall momentum.

UOB economists noted that US GDP growth accelerated to an annualised 3.3% in the second quarter, lifted by strong business spending and a surge in exports during the tariff pause. However, the bank expects growth to moderate to 1.7% for the full year, with the Fed likely to deliver three rate cuts beginning in September to cushion the slowdown.

US Economy: And Tariffs

Trump’s new tariff regime—among the steepest since the 1930s—has become the central risk to the global economy. The report highlights tariffs of up to 50% on key materials such as steel, copper, and possibly semiconductors, with China’s tariff pause extended to November. Despite a US court setback, UOB expects Trump to press ahead using alternative legal provisions, given that tariffs are projected to reduce the fiscal deficit by US$4 trillion over the next decade.

While the bank does not foresee a US recession, it projects unemployment to rise to 4.5% by year-end and inflation to average 2.9% for 2025. UOB remains bullish on gold, raising its 2026 forecast to US$4,000 per ounce, and expects a weaker US dollar to accompany slower growth and rate cuts.

Overall, UOB described 2025 as “a year of two halves”—front-loaded with artificial strength from tariff pauses, followed by a tougher, more uncertain path for the US and global economy.

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