Economic Growth and Trade Policy Uncertainty
Stephen Milan, recently appointed to the Federal Reserve Committee, shared insights on Friday regarding the slow economic growth observed in the US this year, attributing a portion of this stagnation to uncertainty around trade policies.
Having just been confirmed in time for a Fed meeting, Milan noted that the economic growth in the first half of the year fell “short of expectations.”
“In fact, the updated data revealed even weaker growth than we initially anticipated,” he remarked. “I think these challenges stem from economic headwinds linked to the ambiguity surrounding trade and tax policies.”
“There’s a looming possibility of the highest tax increases in history, but that’s been temporarily sidelined, replaced by some robust investment incentives. However, uncertainties from trade policies remain, even as we see new trade deals and commitments,” he elaborated.
Trump has frequently cautioned about the potential for increased taxes on Americans if the tax cuts from his first term are not extended.
Milan, who previously served on the White House Economic Advisors Council, optimistically projected that economic growth would rebound later in the year.
According to the Congressional Budget Office (CBO), the effects of Trump’s tariffs and substantial GOP tax cuts are likely to create mixed outcomes for the economy. While tariffs may hinder growth, tax cuts are expected to enhance it by increasing capital and productivity.
In response to ongoing economic challenges, the Federal Reserve opted to lower baseline interest rates by 0.25% this week.
Trump has voiced criticism of the Fed while attempting to stabilize interest rates, and he’s also expressed dissatisfaction with the Bureau of Labor Statistics (BLS) concerning its performance in reporting labor market statistics.
Earlier this month, the BLS revealed that nearly 1 million fewer jobs were created in the country between March 2024 and March 2025.
Trump, after dismissing the BLS director last month, claimed that “actual” employment figures would be discussed with reporters next year before any new data gets released.
Federal Reserve Chairman Jerome Powell has repeatedly cautioned about the likelihood of economic recessions linked to the president’s policies. “It’s possible that taxes could lead to at least a temporary rise in inflation, and the effects might even be more prolonged,” Powell stated earlier this year.
Meanwhile, the legality of Trump’s aggressive trade policies is currently under judicial scrutiny. The Supreme Court has agreed to hear arguments this November regarding the administration’s use of emergency powers to dictate exchange rates.
Last month, a 7-4 decision from the U.S. Court of Appeals for the Federal Circuit upheld a lower court’s ruling, stating that tariffs are not authorized under current law.
In recent weeks, the Trump administration has secured several agreements with foreign partners, including the European Union.
