Macro Signals for September 2025

Trade and Geopolitics 

Tariffs Face Legal Uncertainty.

What happened: An August 29^th court judgement by the US Federal Court of Appeals ruled that several of the Administration's sweeping tariffs go beyond the President's authority, setting up a legal battle that could reshape the White House’s trade policy strategy.

Why it Matters: The unpredictability of US trade policy and its impact on the economy have been the key drivers of business and consumer uncertainty this year. However, throughout the summer, new trade agreements with the EU and Japan, alongside the Administration's decision on steel and aluminum tariffs, had begun to give business managers some medium-term clarity.

An index by the San Francisco Fed that tracks business sentiment in the Western US found that through mid-July, business managers’ optimism was beginning to rebound from a multi-year low in April.

The recent US Court of Appeals decision upends much of that certainty, giving the Administration until just October 14^th to appeal the ruling. In response, the White House has petitioned the US Supreme Court to expedite the review of the judgment, setting the stage for several weeks of heightened policy uncertainty.

Placing the merits of the tariffs and new trade agreements aside, a final ruling that upends the legal underpinnings of the White House’s moves could usher in a fresh wave of economic uncertainty that rivals the volatility experienced earlier this year.

Monetary Policy

The Fed is poised for a September rate cut, but concerns about inflation persist.

What Happened: Data from the BLS showing that hiring has come to a virtual standstill this summer all but cements a Fed rate cut in September. A shift in tone by Federal Reserve Chair Jerome Powell at his August address in Jackson Hole, alongside various statements by other FOMC officials, suggests that the Fed views labor market risks as shifting to the downside.

The change in tone followed downward revisions to US employment numbers from the Spring, and the latest jobs data has prompted fed futures markets to price a 99% chance of a September rate cut.

However, not all officials have signaled that they are on board. Cleveland Fed President Beth Hammack stated in an August 21^st Q&A that inflation remains too high and "has been trending upwards over the past year." Hammack expressed concerns that shifting to an accommodative monetary stance could “reinvigorate the inflationary pressures” that the committee has worked for several years to bring back to target.

Why it matters: Hammack’s comments came a couple of weeks before the August 2025 jobs report showed that US firms added just 22,000 jobs during the month. Government data released over the summer has portrayed a US economy with fewer job openings, fewer hires, and slowing GDP. It places the Federal Reserve in a bind as officials decide whether to shift to accommodate the US job market or guard against a potential resurgence of inflation induced by tariffs.

Some officials, such as Fed Governor Christopher Waller, believe that tariff-induced inflation would be a temporary, one-time price increase, thereby limiting the inflation risk that a rate cut would produce.

However, several economists believe that most of the tariffs’ impact has yet to be reflected in consumer prices—and warn that such effects could materialize as rate cuts loosen activity and potentially upend inflation expectations.

For the housing market, a rate cut could provide some relief to developers and potential buyers who are hampered by rising and prohibitive costs. It could also support job growth critical to housing demand.

But if inflation expectations become unanchored, it risks altering consumer activity that could sustain price increases even if the underlying effect of tariffs is temporary. Fed officials on both sides of the debate will be keen to walk the line carefully.

Housing

Lumber and furniture tariffs blow in fresh headwinds to the housing market.

What happened: The recently finalized US-EU trade framework retains a 15% duty on lumber imports from Europe, while the Department of Commerce also announced its plan to more than double duties on Canadian softwood lumber imports from 6.74% to 14.63%.

Why it matters: Lumber and auxiliary products such as plywood, OSB, and other construction goods make up a considerable share of total material costs for a home. While US lumber prices currently sit at some of their lowest levels all year, futures prices have been highly volatile. The National Homebuilders Association (NAHB) warns that, due to wholesaler/retailer dynamics in a market with rising lumber prices, these higher costs tend to be rapidly passed on to builders, directly impacting the price of a home.

Source: National Association of Home Builders 

The NAHB has advocated for a long-term deal with Canada and increased domestic lumber production as a counterweight to current lumber price risks to the housing market. Recent moves out of Ottawa suggest that the Canadians are attempting to strike a middle ground with the White House on its most pressing priorities.

Nonetheless, a recently announced investigation into imported furniture, scheduled to conclude over the next two months, could open a new front in the trade war and with some non-benign consequences for the housing market.

A potentially new, undetermined import levy on home furnishings could reduce the feasibility of someone considering purchasing a home in the short term. Amid falling new home sales and pessimistic builder sentiment, these trade-related headwinds could complicate an already softening homebuying demand environment.