August 1st is the deadline for the extension of the Liberation Day tariffs. Tariff announcements roiled markets earlier this year, but they have since recovered.

In the meantime, tariff agreements have been negotiated by several leading countries, including a massive deal reached with the European Union (EU) this past weekend, Japan last week, and the Philippines recently.

EU Tariff Deal

The EU agreed to a baseline 15% tariff on European imports, including automobiles, while keeping in place existing 50% duties on steel and aluminum. This nearly across-the-board tariff is half the 30% levy President Trump had threatened to impose beginning on Friday.

In exchange, the EU committed to purchasing $750 billion in American energy products and to investing $600 billion in this country.

The EU also agreed to drop its tariffs on American-made vehicles from 10% to 2.5%, while a 15% tariff will be implemented on all imported EU cars.

Also, importantly, the EU will reduce or eliminate numerous non-tariff barriers that unfairly discriminate against American products. These barriers can be regulations, sanitary and phytosanitary requirements, and licensing rules. They are meant to protect domestic businesses and industries from imported American goods.

Non-tariff barriers levy a heavy penalty against American goods. According to a Federal Reserve of St. Louis analysis, the EU had a higher presence of such barriers than the US in 13 out of 15 broad groups, including food, footwear, and electric machinery. In comparison to the broad and sweeping regulatory approach the EU takes to categories of imported goods, the US takes a targeted approach to specific products.

Winners of this deal include American cattle producers, dairy producers, and aircraft manufacturers. Drug-production hubs like Ireland and Germany, the European auto capital, stand to lose from the tariffs and new competition. Other countries, such as Spain and France, are expected to feel marginal impacts.

Tariff recession fears disappear

The economy grew a robust 3% in Q2 after falling by half a percentage point in Q1. Consumer spending, which accounts for more than two-thirds of economic activity, rose briskly at 1.4% in Q2, up from a 0.5% increase in the first quarter of 2025.

We have not entered recession territory despite fears, from economists and the media reporting economic news. The chorus of economists and most in the media predicted President Trump’s second round of tariffs would spark a recession. The headlines of a coming economic doom abounded. 

Comedian and late-night host Bill Maher recently admitted that he was wrong about the tariffs, saying he bought into the fearmongering that a tariff-driven recession was imminent.

Recession predictors sounded the alarm in the first few months of the year but have since scaled back their assessments:

  • J.P. Morgan Research has reduced the probability of a U.S. and global recession occurring in 2025 from 60% to 40%.
  • Goldman Sachs trimmed its recession forecast in June to 30% from 35%.
  • America’s Credit Unions pegs the chances of a recession at 40%, down from 60% earlier this year.

As the headlines calm down, so have consumer fears. Consumer sentiment ticked up in July following a precipitous decline in June. Their fears of a recession occurring over the next 12 months also declined slightly in July but remain above last year’s levels.

Generally, tariffs increase prices for consumers, depending on how much of the tariffs are passed down the supply chain. However, so far, there has not been a spike in prices across the board due to the tariffs. There may be pockets of price increases, but they have not spiked the inflation readings. Any price increases have largely not been driven by tariffs, but rather, because consumers ramped up their spending. 

Let’s put the tariffs in context. Massive federal spending during the past 4 years sparked inflation to hit 9.1%. Prices were up over 20% when President Trump took office. Americans have struggled under the weight of high gas prices, high energy prices, high grocery prices, and high utility bills for four years. High interest rates from the Federal Reserve’s efforts to combat inflation made car loans, credit cards, personal loans and other consumer debt more expensive for the past two years.

Minimal price increases on specific items from the tariffs, if they ever get passed down, will still be far less than Biden inflation.

This is all the more reason that a pro-growth agenda that cuts taxes (like the One Big Beautiful Law), deregulation, cuts federal spending, and

Bottom Line

The economy is strong and prices aren’t spiking despite the tariffs. In the meantime, the negotiated tariffs signal a rebalancing of trade globally meant to bring greater fairness to America.