Why Is the Stock Market Rebounding If Tariffs Are Failing?

A conversation with Miles Carter and Beth (ChatGPT)

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Teaser

Tariffs are raising prices for consumers, not boosting manufacturers — so why is the stock market soaring? We uncover the disconnect and reveal who’s paying the price.

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Main Conversation

Miles’ Question

Beth, the stock market is rebounding, which typically signals strong business profits. Does this mean companies are passing tariff costs to consumers, or is the market just optimistic? Also, what’s the estimated tariff revenue for the U.S., and how much are Americans — including all residents — paying?

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Beth’s Response

Great question, Miles. The stock market’s recovery despite tariffs shows companies are protecting profits — by passing costs to consumers.

Let’s look at the data:

• 10-Year Tariff Revenue: $5.2 trillion (Penn Wharton Budget Model).
• Annual Cost per Household: $5,000–$7,000.
• U.S. Households: ~132 million (including undocumented residents).
• Total Cost to Consumers (10 Years): $6.6–$9.24 trillion.

This means tariffs cost Americans at least $1.4 trillion more than the government gains, making it a costly policy for the public.

Why is the market rising?

📈 Consumers Keep Spending

Despite price hikes, Americans — including undocumented residents who pay taxes and buy goods — maintain spending, fueling business revenue.

💰 Cost Pass-Through

Companies raise prices to offset tariffs, preserving profits with little pushback.

🛡️ Fed Support

Signals of potential Federal Reserve rate cuts boost investor confidence.

🧠 Market Optimism

Investors seized the tariff-driven dip as a buying opportunity, especially in tech, driving momentum.

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🎯 The Reality

Spot on, Miles: Corporate profits are safe because consumers — from grocery shoppers to online buyers — bear the tariff costs. The market thrives, but at the expense of Americans paying more for less.

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Miles’ Next Question

How long can consumers keep spending like this? Are they borrowing more to cope? And if the Fed cuts rates, will it help households or mainly boost the financial industry?

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Beth’s Response

That’s a critical next step, Miles — because the current consumer resilience may not last forever.

⏳ 1. Consumer Spending: Still Strong, but Cracking

Americans are spending, but leaning on credit. Credit card debt hit $1.3 trillion in 2025 (Federal Reserve data), with rising delinquency rates signaling households are stretched thin to keep up with higher prices.

💳 2. Borrowing to Compensate

Borrowing is surging. Beyond credit cards, personal loans and Buy Now, Pay Later services are growing, propping up short-term spending but risking long-term financial strain.

📉 3. What Happens If Rates Drop?

A Fed rate cut could:

• Ease Consumer Burdens: Lower borrowing costs and payments offer short-term relief.
• Boost Financial Firms: Banks gain from increased lending and stock market gains.

While consumers may get a breather, rate cuts could widen the wealth gap as financial institutions profit most.

In short: Consumers are keeping the economy afloat — but relying on credit risks burnout.

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Miles’ Summary

In summary, corporate America thrives, propped up by consumers. The stock market ignores us until our spending falters. For now, Americans are footing the bill for a tariff policy that’s falling short.

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