A growing divide is emerging within the U.S. economy, with America’s largest technology and financial firms reporting robust earnings while consumer-oriented businesses face rising costs and shrinking margins—largely due to the impact of President Donald Trump’s tariffs.
Boom for Big Tech and Banks
Second-quarter earnings have been especially strong for major tech giants like Apple, Meta, and Microsoft, as well as leading financial institutions such as JPMorgan and Goldman Sachs. Collectively, the top ten companies on the S&P 500 now account for roughly one-third of the index’s total profits. The technology sector saw year-on-year earnings growth of 41%, while financials grew by 12.8%, according to FactSet data.
This performance supports Trump’s claim earlier this week that the U.S. remains the “hottest country anywhere in the world” economically.
Challenges Beneath the Surface
Despite the strong showing from Wall Street and Silicon Valley, a different story is unfolding across the broader economy. Consumer staples and materials companies have reported a 0.1% and 5% decline in earnings, respectively. More than half (52%) of S&P 500 companies that reported results saw falling profit margins, suggesting that rising costs are eating into earnings.
Andrew Lapthorne, global head of quantitative research at Société Générale, noted that even with rising sales, companies are feeling pressure as they struggle to pass increased costs on to consumers.
Tariffs Take a Toll on Key Sectors
Industries with direct exposure to trade disruptions—such as carmakers, airlines, and manufacturers of household goods—have been hit hardest. Ford, for instance, reported a surprise quarterly loss attributed in part to an $800 million cost from Trump’s tariffs. According to Strategas Securities’ Ryan Grabinski, these sectors have seen the largest downward revisions in net income projections.
On Friday, Trump escalated trade tensions further by raising tariffs on countries including Taiwan, Canada, Switzerland, and India—pushing the U.S. effective tariff rate to its highest level in decades.
Mixed Economic Signals
Despite this turbulence, the Federal Reserve kept interest rates steady at 4.25%–4.5%, citing continued economic resilience. However, recent data paints a more cautious picture. Job growth between May and July slowed significantly, with only 106,000 jobs added—down from 380,000 in the prior three months.
Additionally, GDP grew at a slower pace of 1.1% annualized in the first half of 2025, compared with 2.9% in the latter half of 2024, indicating broader economic deceleration.
Investor Reaction and Outlook
The market response has been telling. Companies that reported disappointing earnings results have seen their stock prices fall an average of 5.6% around their announcements—more than double the five-year average decline.
Yet optimism persists in the tech sector. Microsoft reported a 25% jump in profits, while Meta’s net income soared by 36%. Analysts highlight continued investment in artificial intelligence (AI) as a key driver of future growth. David Stubbs, chief investment strategist at AlphaCore, remarked that tech investors are bullish on AI-related spending.
However, Stubbs also cautioned that the broader economy could face headwinds, noting that benefits from fiscal spending and increased migration may have peaked.
Conclusion
While Wall Street and Silicon Valley enjoy record gains, many American businesses and workers are beginning to feel the pain of trade wars and economic uncertainty. The contrasting fortunes underscore the uneven impact of current U.S. economic policies and the widening rift between corporate giants and the broader economy.