It’s been a year marked by disruption. Geopolitical tensions have flared, sweeping tariffs have taken hold, and markets have seen their share of volatility. Yet, as summer settles in, the picture on the surface feels unexpectedly steady. The economy, for all its crosscurrents, appears to be on solid footing. Growth persists, unemployment remains low, and the worst-case scenarios have yet to materialize. Still, beneath that surface, more complicated questions linger. Why, despite rising tariffs, hasn’t the economy lost its footing? What hidden forces, technological or otherwise, might be keeping growth afloat? How much of what we see is shaped by policy itself versus how people, businesses, and markets adapt despite it? Those questions don’t yet command the news cycle. But they may, in time, tell us more than the headlines do.
The Reactive Cushion of Tariff Scrambling
Over the past year, tariffs, especially those on goods from China, have been a constant undercurrent in economic discussions. In theory, these should translate to higher costs for businesses and consumers, reduced spending power, and a drag on growth. Yet the data paints a more complicated picture.
One explanation lies in how businesses have responded. A recent Barron’s article highlights the role of import front-loading and strategic stockpiling in blunting the immediate effects of tariffs. As EY-Parthenon economist Gregory Daco explains, firms have “front-loaded imports to beat the levies” and made use of bonded warehouses and foreign trade zones to delay tariff payments.1 This is not simply policy at work, it’s behavior shaping outcomes.
This pattern echoes a broader economic truth: when policy creates friction, businesses and consumers often adjust in ways that delay or dilute the intended impact. It doesn’t mean tariffs are inconsequential, but it does mean the timeline for their effects is less predictable.
Artificial Intelligence: The Unseen Stabilizer
While tariffs and Fed policy command headlines, another force is reshaping the economy on the ground: AI. From supply chain optimization to workforce productivity, artificial intelligence is providing a subtle but important offset to inflationary and logistical pressures.
A recent Harvard Business Review analysis underscores how AI is driving efficiencies in manufacturing, logistics, and even professional services, enabling firms to do more with less amid rising input costs.2 In sectors like transportation, AI-driven route optimization reduces fuel expenses. In retail, demand forecasting and inventory management are sharper than ever. And in white-collar industries, automation of repetitive tasks is freeing up human capital for higher-value work.
These advances may not prevent every economic bump, but they are enhancing the system’s ability to absorb shocks; be they tariffs, labor shortages, or geopolitical disruptions. It could be one reason core economic metrics, for now, appear more resilient than many expected.
The Interplay of Policy and Behavior
Tariffs are only one part of the policy equation. Monetary policy remains in sharp focus, with markets largely expecting the Federal Reserve to cut rates by year-end. According to Bloomberg Economics, futures markets have priced in an 80% probability of a rate cut by December, citing slowing payroll growth, muted inflation expectations, and global uncertainties.3
But, as with tariffs, policy announcements themselves often play a secondary role to how businesses and consumers respond. Consider how housing markets react to mere speculation of rate changes: buyers rush to lock in mortgages ahead of potential hikes, pulling demand forward. Or how consumers alter spending in anticipation of tax changes or fiscal stimulus.
This policy-behavior feedback loop complicates clean economic forecasting. It also suggests that durable trends, like AI-fueled productivity, may matter more to long-term economic health than the strategic chess moves of central banks or tariff policies.
Looking Ahead
The U.S. economy enters the second half of 2025 with mixed signals but underlying stability. Front-loaded imports and AI-driven efficiencies have helped offset some of the expected fallout from tariffs. The Fed, for its part, remains cautious, balancing rate decisions against labor market strength and inflation persistence.
What remains clear is that policy alone rarely dictates economic outcomes. Behavior, the adaptive and sometimes unpredictable response of businesses and consumers, plays an equal, if not greater, role. Additionally, in an era where technology evolves faster than legislation, that behavior is changing more rapidly than ever.
The coming quarters will reveal how durable these patterns are. But for now, the economy’s current state is an interesting chemistry of human ingenuity, technological adaptation, and policy design.
- Forsyth, R. W. (2025, July). Financial Conditions: Why the Rate Cuts? Barron’s.
- Harvard Business Review. (2025, May). The Quiet Productivity Boom: How AI is Stabilizing the U.S. Economy. Harvard Business Review.
- Bloomberg Economics. (2025). Market Implied Probabilities for Federal Reserve Rate Cuts. Bloomberg.