Tariffs, Resilience and Risk: Why U.S. Growth Has So Far Weathered Heavy Import Levies

When a broad slate of import duties was enacted last year, forecasters warned of a marked slowdown; instead, measured growth has persisted and several feared outcomes have not materialized in full. Much of that resilience reflects a combination of political bargaining and private-sector adaptation: midyear accords and case-by-case negotiations cut many proposed levies or introduced caps and carve-outs that lowered effective rates and narrowed the direct impact on import flows. Firms and foreign sellers also adjusted behavior — accelerating purchases ahead of levies, building inventories, rerouting sourcing, establishing new capacity abroad, discounting to retain market share, or absorbing costs rather than immediately passing them to consumers. Strong domestic demand, including elevated digital and AI-related investment and ongoing fiscal support, has further buffered aggregate spending. These mechanisms help explain why tariff collections and trade frictions have been measurable but not large enough to tip a multi-trillion-dollar economy into contraction. At the same time, recent trade data show fault lines beneath that surface calm: November saw a sharp swing in the goods deficit to about $56.8 billion (raising the cumulative goods gap through November to roughly $839.5 billion), and episodic widening with particular partners highlights how tariff measures can shift imbalances across relationships rather than correct them uniformly. International responses — from EU and bilateral pacts to private reconfiguration of value chains into Europe, Latin America and parts of Africa — are accelerating a reordering of trade routes that reduces near-term exposure for some firms but raises compliance costs and margin pressure for others. Financial markets and currency desks have already adjusted positioning around policy unpredictability, and investors are rebalancing toward markets perceived as less exposed to U.S. tariff volatility. The net effect is a complex mix: short-run pass-through to consumer prices has been muted, but that muted pass-through partly reflects temporary absorptions by exporters and companies and the dampening effect of negotiated exemptions. As those buffers unwind, the risk of more persistent inflation, compressed corporate margins, and distributional costs across sectors and households will rise — potentially entangling monetary-policy decisions and diplomatic trade negotiations. For policymakers and modelers, the episode reinforces two lessons: real-world bargaining and firm-level responses materially change how trade policy transmits to the economy, and monitoring should expand beyond headline GDP to include pass-through rates, sectoral price shifts, trade-balance volatility, and the durability of newly formed supply networks.