Pay attention to what’s about to happen in the US.
The US is about to face a fiscal tightening over the next 3-4 months.
Yes, you read it correctly: a fiscal tightening.
How is this possible?
The US is set to receive $150bn of tariffs for the last 5 months of the year, which means US corporates and consumers will see their margins or their disposable income shrink the same way they would due to a new US tax.
At the same time, over the next 4-5 months there will be no noticeable fiscal impulse to offset this effect. The OBBB will only kick in 2026 with its (not even super large) fiscal stimulus offset.
The net result?
A fiscal tightening for the next 4-5 months.
Take a look at the charts below.
The inflation-adjusted primary deficit spending in 2025 has amounted to 1.54% of , which is already below last year’s levels.
And if my theory on tariffs is correct, the primary deficit impulse will be materially lower than in 2023 and 2024.
How will the US economy handle such a fiscal tightening?
There are some initial signs of weakness emerging already…
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