S&P Global Ratings has warned that recent U.S. trade, immigration, and fiscal policies are creating downside risks for the economy. Rising tariffs, a shrinking labor force, and tighter federal cost controls are slowing growth below trend and could weigh on overall credit stability.

The agency expects U.S. real GDP growth to ease to around 1.1% year-on-year by the fourth quarter of 2025, before gradually rebounding to 1.9% by the end of 2026. In the first half of 2025, annualized growth stood at 1.2%, well below the 2.5% pace seen in the previous year, underscoring the cooling momentum.

One major factor is the sharp rise in tariffs. The effective U.S. tariff rate has climbed above 18%, compared to just 2.3% in 2024. This surge risks pushing consumer prices higher, eroding purchasing power, and straining household budgets.

Labor market dynamics are also adding pressure. Employment fell by about 1.2 million in July compared with the same period last year. This contraction is attributed to both demographic shifts, such as an aging workforce, and policy changes that have reduced immigration levels. Together, these factors threaten to dampen consumer spending, business investment, and federal outlays through the remainder of the year.

Despite these challenges, S&P pointed to some potential offsets. Elements of recent tax and spending packages, alongside expected interest rate cuts, could help lift demand. Housing and non-residential investment are forecast to recover, supporting growth momentum as the U.S. heads into 2026.