The ongoing tariff policies of the Trump administration are becoming a significant drag on the United States economy, especially the nation’s export-oriented service sector. As a recent report by the Institute for Supply Management (ISM) indicates, the service sector was failing in July. This historic underperformance is causing alarm and even panic among economists and market watchers. The results indicate that Trump’s administration has had to translate its aggressive rhetoric into concrete policy actions, with significant implications for inflation and the value of the US dollar.
The ISM’s services Purchasing Managers’ Index (PMI) came in below expectations too. This shortfall is a clear marker of a growth rate deceleration in this essential foundation industry. That disappointing performance was compounded Tuesday with the release of another report showing steep cuts in prices. As expected, it showed the greatest rate of price increases since 2022. Meanwhile, inflationary pressures are causing a greater focus on the negative economic impact of tariffs. These tariffs have been a central feature of Trump’s trade agenda since he assumed office.
Even the terribly unpopular (with his political masters) Federal Reserve Chairman Jerome Powell has recently spoken about their inflationary impact. He forecast that the industry market needed to get ready for increasing prices. He anticipates this increase to begin in earnest this coming September. This forecast has caused a commensurate increase in investors’ fears about the long-term effects of tariffs on consumer prices and economic stability.
Trump’s tariff agenda began well before his election victory. That’s about the time he really started talking tough about tariffs on everything from steel to household goods to services. Since then, his administration has pursued and implemented new tariffs at dizzying speed, creating a perfect financial storm. As if the market uncertainty couldn’t get gritty enough, the complexities of the tariffs now reach beyond goods into services.
In response to these unfortunate events, the US dollar has taken a massive hit. The expected USD rally was met with serious headwinds from Trump’s erratic pronouncements and subsequent delays on a Chinese tariff rollout. Experts note that today’s turmoil in the currency markets is a direct result of Trump’s chaos over his policy agenda. Such on-again, off-again antics are leading to huge swings.
The situation is more complicated than it might first appear and developments continue to evolve. Tariffs are meant to protect domestic industries, but in reality they just punish American consumers by raising prices. As the service sector manages this transition, the economy’s most dynamic sector is feeling growing pains that threaten to shake its path of prodigious growth.