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Week In Perspective | Tariffs, AI, & the Economy Thumbnail

Week In Perspective | Tariffs, AI, & the Economy

Updated: 5-September-25

Week In Perspective: Tariffs, AI & The Economy

AI is moving fast and the economy may be slowing down. Here are three things you need to know as this week comes to a close.

1. Higher tariffs will start to flow to consumers

Shoppers will likely continue to see higher prices. In the past, companies absorbed tariff costs instead of raising prices. Walmart is now adjusting prices as it restocks inventory at higher post-tariff costs. According to CEO Doug McMillon, price increases are already happening. Companies are expected to share tariff-related costs between supply chains and consumers.

2. AI is powering a new tech investment cycle

Tech companies are spending hundreds of billions of dollars on AI. Much of this money goes toward building data centers, which use a lot of electricity.

This spending has helped certain industries, including:

  • Semiconductor companies
  • Industrial equipment makers
  • Power generation companies

Examples of companies benefiting:

  • Modine Manufacturing (makes cooling systems for data centers): stock rose 22.1% this year (as of August 26th, 2025).
  • Constellation Energy (supplies nuclear power to Meta and Microsoft data centers): stock rose 41.5%.

Some experts worry there could be an "AI bust" like the tech crash in 2000. But today’s situation may be different. The 1990s tech boom was about building hardware and the internet. Today’s AI boom is about using knowledge and data. Modern tech companies have strong earnings and lots of cash. Not all AI investments will pay off, so careful research is important. The biggest winners from AI spending might not exist yet. In the 1990s, companies like Cisco built the internet. That helped new giants like Netflix, Amazon, and Google grow. Today’s AI investment could lead to the rise of new, future companies.

Top Risks to AI Investment in the U.S.

  1. High Costs: A recent MIT study found 95% of businesses investing in AI didn't get meaningful returns, often because projects weren’t used or didn’t fit well with operations. Many AI systems require expensive infrastructure, data, and staff training, and financial benefits often take a long time to show.
  2. Market Volatility & Overhyped Valuations: AI stocks, like NVIDIA and other chipmakers, have recently faced more volatility, signaling investor caution due to rising uncertainty. Many AI companies trade at high price-to-earnings ratios, making them risky if expectations fall short.
  3. Regulation & Reputation Risk: Regulators like the SEC are cracking down on "AI washing," fining companies that overstate their AI use. Emerging rules, such as California’s new AI policy and stricter national standards, could increase compliance costs.
  4. Technical & Operational Challenges: Many AI models suffer from issues like data bias, lack of transparency (“black-box” systems), and performance declines over time (model drift). Organizations struggle with insufficient data infrastructure, energy needs, and access to skilled AI talent.
  5. Cyber & Security Threats: AI systems are vulnerable to data poisoning, reverse engineering, deepfakes, and financial fraud. These issues pose serious business and regulatory risks. Without robust security, businesses face exposure to cyberattacks and systemic failures.
  6. Environmental & Energy Constraints: Running large AI models consumes huge amounts of electricity and water, raising sustainability concerns and operational constraints.
  7. Geopolitical & Competitive Pressure: Rising global competition (e.g., from China) along with U.S. export limits on chips, could weaken domestic AI leadership. Moves to roll back AI safety guardrails, for instance through deregulation, could backfire, increasing risks to U.S. innovation and safety.

3. U.S. Economy: Signs of a Slowdown

Key concerns:

  • Inflation
  • Job growth slowing
  • GDP weakening
  • Stock market prices are high
  • Full effects of tariffs are still unknown

Additional Risks to Watch

  • The Federal Reserve could lose independence due to political pressure
  • Unexpected shocks (like global conflicts, oil price spikes, continued movement to protectionist economic policies, and political instability) could change the outlook
  • An economic slowdown means less room for mistakes, but some current indicators show we may be mid to late cycle. Economic declines begin before a recession is officially declared. In other words, we will feel a recession before we know we’re in one. Many financial institutions are anticipating that the Federal Reserve will implement one to two interest rate cuts in 2025. This shift in outlook follows the release of weaker-than-expected job growth data. While there is a consensus among major banks about the heightened risk of recession, their outlooks vary. JPMorgan and Bank of America are more cautious, anticipating rate cuts and a higher likelihood of economic downturn. In contrast, Goldman Sachs maintains a more optimistic view, citing factors that suggest a lower risk of recession. Economic cycles are impossible to predict in advance. In your household, it's best to be financially prepared. 

Reasons for Optimism

  • AI investments continue to drive growth and innovation
  • Many companies still show strong earnings
  • High-income consumers are still spending
  • The Fed may cut interest rates soon, lowering borrowing costs

How Investors Can Best Prepare

  • Stay diversified: Don’t put all your money in one type of asset. 
  • Keep some cash on hand for new opportunities and emergencies. Maximize use of high yield savings or money markets while rates are still beneficial to do so.
  • Pick quality over hype: Seek companies with strong balance sheets and steady earnings. Yesterday’s winners may not lead tomorrow. Focus on long-term value.
  • Stay informed, not overwhelmed: Pay attention to the Fed and global news, but don’t stress or obsess over every headline. Markets move. Business cycles come and go.
  • Plan for today. Build for tomorrow. Cover your short-term needs, but invest with the long game in mind. Make time and compounding your best friends.
  • Don't wait for the perfect moment. There will NEVER be one. Start making smarter investment decisions today.
  • Focus on what you can control. The right moves now could shape your success for years to come.


This content is developed from sources believed to be providing accurate information. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.