By Sangeetha G

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Chennai: The US economy is beginning to show some strains as domestic demand has been moderating in the US and job growth slowing. On the global front, the front-loading of imports has helped some countries keep themselves resilient. Despite the trade deals, the effective tariff rates on US-bound imports are well above 2024 levels and policy uncertainty remains elevated, finds the IMF.“What we’ve seen over the past few years is that the US economy has proven to be quite resilient. We do see now that some strains are beginning to show. Domestic demand has been moderating in the US, and job growth is slowing. The front-loading of imports early in the year and anticipation of tariffs did lead to volatility in the activity data for the first half of the year,” said Julie Kozack, Director of the Communications Department, IMF.Inflation is on a path toward the US Federal Reserve’s 2 per cent target. We also see that there are some upside risks to inflation, largely as a result of the tariffs. So, of course, the Fed’s job is a challenging one, balancing this, the path of inflation, but also the fact that the labour market has been weakening and there’s downside risk to employment.Given the downside risks to full employment, there is scope for the Fed to begin to lower policy rates and should proceed cautiously, of course, in a data-dependent way in the coming months. “I think I would just say that we do see scope for lowering rates, given the downside risks to the labour market and to full employment,” she said.As far as the global economy is concerned, since the IMF had its World Economic Outlook update in July, especially with respect to the data of the second quarter, growth has been generally resilient. In Asia, factors like some additional front loading on the trade side and fiscal support provided by some of those countries has helped keep them resilient. And for the US, investment in technology, but also net trade, has been supportive of growth in the US.“Although trade deals have lowered the effective tariff rate in the US relative to the highs that we saw in April, the effective tariff rates are still well above the 2024 levels. And of course, as we’ve been saying, policy uncertainty remains elevated,” she added.