Wash delivered the keynote speech at the central bank’s annual meeting; gold plunged over 3%, the U.S. dollar and Treasury yields rose collectively, and U.S. equities fell—how should we interpret this?

U.S. inflation has reached an intolerable level: under the current trajectory, it has exceeded the Federal Reserve’s 2% target for 65 consecutive months. Sixty-two months equals five years—meaning inflation has surpassed expectations every single month for five straight years. Although the U.S. has implemented wage hikes, data show average wage growth stands at only about 3.2%, while the inflation anchor remains above 3.5%. Keep in mind that this ‘average’ in the U.S. is no different from China’s—it follows the same logic of ‘Jack Ma and I jointly averaging our incomes.’ As a result, America’s lower- and middle-income groups have now entered a state of ‘extreme anger.’ I haven’t seen a single post on X (formerly Twitter) praising the U.S. economy in three years—and today, soaring prices are even prompting Americans to seriously question whether socialist or communist models might truly be superior to capitalism and democracy. The U.S. economy is now caught in a classic dilemma. Raising interest rates risks harming the economy: employment data have already weakened, and further hikes would exacerbate recession risks. Yet holding rates steady—or cutting them—risks runaway inflation: with inflation exceeding expectations for 65 straight months, a large-scale rate cut could unleash uncontrollable price surges.

The U.S. economy remains the world’s largest—so why do so many people no longer believe in America’s future?

In August, the U.S. food service and drinking establishments sector added 59,000 jobs; local government education added 42,000; construction added 22,000; and manufacturing added 16,000. Meanwhile, average hourly earnings rose 0.3% month-on-month and 3.1% year-on-year. More importantly, employment figures for June and July were substantially revised upward—adding a combined total of 55,000 jobs beyond prior estimates. This indicates that although the U.S. labor market is no longer as red-hot as it was immediately post-pandemic, it remains remarkably resilient. Thus, the U.S. economy has established a relatively favorable virtuous cycle: employment shows no clear deterioration → household incomes continue rising → consumption expands further → corporate orders remain strong → firms sustain investment and hiring. This dynamic is precisely why the U.S. economy has been able to withstand external shocks. V. Why has the U.S. economy demonstrated even greater resilience following the tariff war and the Iran conflict? So here lies the real question: Why hasn’t the U.S. economy collapsed amid the tariff war and the Iran conflict—but instead shown such strong recovery capacity? First, the core engine of the U.S. economy has always been its vast domestic market. The U.S. does not rely heavily on exports for growth. Household consumption accounts for a high share of GDP, and services dominate the economy. Therefore, even if international trade suffers due to tariffs, as long as household incomes and employment remain stable, the U.S. economy retains powerful endogenous momentum. Second, tariffs have not simply translated one-to-one into higher costs for the U.S. economy. Firms adjust supply chains, seek alternative import sources, improve production efficiency, and pass part of the cost onto consumers. Tariffs certainly raise prices and squeeze profits in certain sectors—but they also stimulate some U.S. companies to expand domestic production and investment. Third, AI has emerged as a critically important new growth engine. One of the most significant structural shifts in the U.S. economy over the past few years has been capital expenditure driven by artificial intelligence—spanning chips, data centers, power infrastructure, networking equipment, software, and related physical infrastructure. This is fueling a new industrial investment cycle. That means even if traditional manufacturing suffers from tariff impacts, the U.S. economy may still find fresh growth impetus through tech-driven investment. Fourth, while the Iran conflict did deliver energy and supply-chain shocks to the U.S. economy, those shocks are not static. The Middle East conflict pushed up energy prices and disrupted shipping—indeed imposing inflationary pressure on the U.S. In August, U.S. manufacturers continued facing raw material price hikes and supply delays. Yet the U.S. possesses robust domestic energy production capacity, and businesses demonstrate strong supply-chain adaptability. Once the initial shock subsides, corporate inventories, production, and service activities can rebound. S&P Global notes that energy prices, supply-chain disruptions, and travel-related disturbances stemming from the Middle East conflict weighed on the economy in Q2—but these drags eased in Q3, allowing the U.S. economy to reaccelerate. Therefore, what truly warrants attention is not that ‘the tariff war and Iran conflict made the U.S. economy stronger,’ but rather that the U.S. economy—after enduring shocks—has displayed formidable absorption capacity, adjustment capacity, and rebalancing capacity. Of course, this does not mean the U.S. economy faces no risks.

US Business Activity Hits Five-Year High Amid Rising Inflation Pressures

Sep 23, 2026

S&P Global reported US business activity reached a five-year high in September with a PMI of 58.4, though supply chain bottlenecks and surging input prices, including record diesel costs, are fueling inflation concerns.

reuters

2026-05-21

US manufacturing activity rises to four-year high in May, S&P Global survey shows

2026-07-01

June US Manufacturing PMI Shows New Orders Up, Costs Still Rising

2026-09-23

US Business Activity Hits Five-Year High Amid Rising Inflation Pressures

US Business Activity Hits Five-Year High Amid Rising Inflation Pressures

FAQ