U.S. Economy May Not Be as Strong as It Looks

“Inflation is defeated,” according to President Donald Trump.

That might be an overstatement, but it is fair to celebrate the strength of the US economy—so long as a few lurking risks can be overcome, Adam Clark reported for Barron’s Daily.

World Bank economists now estimate the US economy grew by 2.1% last year, well above the 1.4% growth they expected in June.

The US ended 2025 with consumer-price inflation of 2.7% and an unemployment rate of 4.4%.

Those are solid figures for a year that featured the implementation of tariffs and a prolonged government shutdown. The picture has gradually brightened: World Bank economists now estimate the US economy grew by 2.1% last year, well above the 1.4% growth they expected in June.

This year could be better if some risks are managed. The first is the effect of tariffs. Companies appear to be largely absorbing the cost of import taxes so far, or at least raising prices only slowly.

But executives need stability.

If the White House continues tinkering with tariffs—either by choice or because a Supreme Court decision forces a change—the ability to manage costs caused by the levies could be eroded.

Second is the risk of a geopolitical shock. So far, markets have shrugged off events in Venezuela, but intervention in Iran could provoke a bigger reaction.

Oil prices are at their highest level since late October amid threats of US military action to support protesters against Tehran’s regime.

That is a regional issue, but global concerns include a potential breakdown of NATO over Trump’s desire to acquire Greenland, or Beijing testing US resolve to defend Taiwan.

Third is the issue of waning economic credibility. The biggest danger is the perception that the Federal Reserve is losing its independence as Trump pressures the central bank to lower interest rates.