Investors and CEOs have completely ditched the idea that tariffs will cause a recession

There’s no doubt execs and analysts are still talking a lot about tariffs, but something major has shifted.

While mentions of “recession” and related terms in S&P 500 companies’ quarterly earnings calls have dropped precipitously to their lowest level since 2005, references to tariffs (while down) remain extremely high relative to history — you can see this in our side-by-side chart.

A Bank of America survey of fund managers showed that while a trade war triggering a global recession remains the biggest tail risk, with 29% deeming it as such, that share is down substantially from 80% in its April survey. That’s despite expectations for the average US tariff rate to steadily rise from 12% in June to 15%, which tracks with the evolution of effective tariff rates.

So what gives?

Unlike Rumsfeld’s “unknown unknowns,” tariffs are a known known and judged to be a manageable risk by the C-suite and market participants.

The levies are not yet playing the starring role in defining the average American’s total inflation experience, but are being offset by other factors.

And tariffs haven’t slowed the continued profitability of US megacap tech companies, which has fueled S&P 500 12-month forward earnings-per-share estimates to an all-time high.

Corporate America’s ability to adapt is another factor preventing tariffs from creating an obviously large hole.

Drilling down on why the tariff announcements that brought the S&P 500 to the verge of a bear market in April haven’t produced anything nearly as dire as feared, Markets Editor Luke Kawa looks back at Fed Chair Jay Powell’s 2022 Jackson Hole speech as a turning point in the inflation narrative. It was when people really woke up and noticed that, “Hey, things are getting hot in here!” It wasn’t that the water around us frogs hadn’t been getting warmer, but it had been a slow, sleepy rise that didn’t seem dire… until it did.

The Takeaway

The third quarter of 2025 may serve as a similar alarm bell regarding the “real growth” side of the US economy. Retail earnings out soon may give us some clues as to whether the lackluster performance of consumer spending year to date is gathering momentum. But there’s also the potential outcome that the fear around these tariffs was worse than the experience of actually living with them.