23 Jun 2025
The thing to fear is fear itself
In his inaugural speech in 1933, US President Franklin D Roosevelt used the now famous phrase “the only thing we have to fear is fear itself”. He argued that it was merely fear that was crippling US demand in the aftermath of the Great Depression, rather than any structural issues buried in the foundations of the economy. This quote is relevant to the key risks facing the US, and global economy, today.
The global economy is structurally sound. For the last few years, it has defied calls for recession despite soaring inflation and interest rates, thanks to robust household and corporate balance sheets. The risk is that uncertainty about US policy causes firms and households to pause their spending plans, choosing to wait and see. The thing to fear is fear itself.
At the time of writing there is considerable uncertainty about the scale and scope of tariffs the US will enact on its trading partners. The shocking numbers announced on ‘Liberation Day’ have already retreated but the effective tariff rate on US imports still sits at its highest level since the 1940s (see Exhibit 1). A US trade court ruling against the president’s declaration of emergency to enact sweeping tariffs in late May has added to the uncertainty. With multiple other legal routes for the president to proceed if the reciprocal tariffs are ultimately revoked, we suspect the administration will find ways to keep pursuing their trade policy goals.
Exhibit 1: US tariffs have come down since early April but are still historically high
US effective tariff rate
%, import duties collected as a share of total import value
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The thing to fear is fear itself
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