US Services Sector Expansion Brings Tariff Uncertainty and Inflation Concerns
U.S. services sector growth unexpectedly picked up in February, with prices for inputs increasing amid a surge in raw material costs, suggesting that inflation could heat up in the months ahead. Rising price pressures are worsened by tariffs triggered by President Trump's new levies on Mexican and Canadian goods, as well as a doubling of duties on Chinese goods to 20%. The Institute for Supply Management survey showed resilience in domestic demand but was at odds with so-called hard data indicating a sharp slowdown in gross domestic product this quarter.
- The increasing uncertainty surrounding tariffs and their impact on the economy raises important questions about the role of governments in regulating trade and managing inflation, which could have far-reaching consequences for consumers and businesses alike.
- Will the Federal Reserve's response to these economic challenges - including the potential for rate hikes or cuts - ultimately determine the trajectory of U.S. economic growth in the coming quarters?