The U.S. Economy Is Regaining Its Swagger

Consumers are spending again after the spring's tariff chill, but some expect growth to be slow

- Rachel Wolfe & Konrad Putzier

When President Trump slapped tariffs on nations across the globe this spring, many economists feared higher prices and spending cuts would flatten the economy.

Consumer sentiment collapsed. The S&P 500 stock index fell by 19% between February and April. The world held its breath and waited for the bottom to drop out.

But that didn't happen. Now businesses and consumers are regaining their swagger, and evidence is mounting that those who held back are starting to splurge again.

The stock market is reaching record highs. The University of Michigan's consumer sentiment index, which tumbled in April to its lowest reading in almost three years, has begun climbing again. Retail sales are up more than economists had forecast, and sky-high inflation hasn't materialized—at least not yet.

"We've been surprised again and again by consumers," said Jonathan Millar, senior U.S. economist at Barclays. In April, Millar predicted that the U.S. economy would likely go into recession this year. He now expects it to keep growing, albeit at a slow pace.

As soon as Donald Trump was elected, Tyler Ahn decided she wasn't going to take any chances with the possibility of tariffs—or, worse, a broader economic collapse. The 46-year-old product manager stocked up, buying survival gear (flashlights, window-breaking devices and water-purification tablets), a mop bucket and an entire case of French rosé.

Throughout the rest of the winter and early spring, Ahn sat tight, trying to spend as little as possible while attempting to follow Trump's evolving tariff threats.

But recently, she gave up. "I decided, well 'it is what it is; my money will buy what it will buy,' said Ahn, who is based in Portland, Ore. "What am I going to do? I've gotta live."

She just got back from a two-week trip to Italy and France. Even with a weaker dollar, she said she spared no expense on hotels, meals and gelato.