1) The Consumer Has Not Disappeared — But the Price Point Has Changed
U.S. consumption is not collapsing in physical terms. Volumes remain relatively stable.
What has changed is the price sensitivity of the consumer.
Retail data shows a clear concentration toward medium- to medium-low-priced goods and services.
Households are trading down, optimizing spending, and avoiding high-ticket discretionary upgrades.
This reflects prudence and more cautious expectations about future income and economic stability.
The Strategic Question for AI
This environment raises an important structural question:
how will markets absorb AI products and services that begin life at premium price levels,
designed to amortize high research, infrastructure, and energy costs?
History provides a guide. In the early 2000s, mobile communication services were extremely expensive
as telecom companies attempted to offset massive infrastructure investment.
Prices eventually fell, adoption broadened, and market structures repriced dramatically.
The same risk exists today. If consumers are consolidating spending around value,
high-priced AI deployments may experience slower adoption curves
unless pricing adjusts rapidly.
Innovation does not fail because it lacks utility — it stalls when price and consumer reality diverge.
2) The Ineffectiveness of Tariff Policy in Rebuilding Domestic Production
Tariffs can increase Treasury revenues.
They can also serve as political signaling tools.
But they do not automatically rebuild domestic industrial capacity.
Why Tariffs Alone Do Not Work
- They raise input costs for domestic manufacturers.
- They do not fix structural competitiveness gaps (labor, energy, regulation, scale).
- They do not guarantee capital investment without margin visibility.
Meanwhile, major exporting nations such as China and Japan operate
aggressive pricing strategies aimed at protecting market share —
often accepting reduced margins to maintain industrial dominance.
If import prices remain contained or decline,
the incentive for U.S. firms to commit large-scale domestic production investment remains weak.
Revenue vs. Industrial Strategy
In practical terms, tariffs function more as a revenue mechanism than as a
comprehensive industrial policy.
Without coordinated investment incentives, productivity gains,
and supply chain restructuring,
tariffs alone cannot generate a manufacturing renaissance.
The current data suggests limited transmission from tariff policy
into measurable domestic production expansion.
Conclusion: A Structural Mismatch
The economy currently displays two clear dynamics:
- Consumers are consolidating around value-driven, mid-priced goods,
signaling caution rather than exuberance. - Tariff policy has not translated into a meaningful surge in domestic industrial investment.
If AI products remain priced for margin recovery rather than mass adoption,
and if trade policy remains focused on taxation rather than structural competitiveness,
the growth trajectory will likely be slower and more selective.
Markets adapt — but pricing power and policy effectiveness must align with economic reality.