A massive wave of investment in artificial intelligence (AI) is masking significant economic damage caused by Donald Trump‘s tariffs, creating a deceptive picture of the U.S. economy's health, according to investor Steve Eisman and CNBC Senior Economics Reporter Steve Liesman.
Unpacking The “K-Shaped” Economy
Speaking on “The Real Eisman Playbook” podcast, the two experts warned that while the AI sector booms, numerous other industries are quietly being squeezed, with the full negative impact yet to materialize.
The discussion highlighted a “K-shaped” economic reality where the fervor around AI props up growth figures while the rest of the economy stagnates or declines under the weight of trade duties.
Liesman argued that the immense stock market gains in AI have diverted attention from the widespread negative effects of the tariffs.
‘Papered Over By AI’: Industries Being Crushed By Tariffs
"Plenty of industries… have been hit by these tariffs and their stocks have fallen tremendously, and it’s been papered over by what’s happening in AI," Liesman stated.
He expressed particular concern for small businesses, which lack the resources of large corporations to absorb costs or navigate complex international supply chains to avoid the duties.
The full brunt of the tariffs has been delayed, Liesman explained, partly because companies are absorbing the initial costs into their profit margins—a strategy that cannot last indefinitely.
Economy Has Only Felt Half Of The Tariffs’ Impact
He pointed to data suggesting that the current effective tariff rate being felt by the economy is only about 10%, while the actual imposed rate is closer to 18%. This gap suggests a significant economic shock is still to come.
"Ergo, we’ve only seen half of the tariffs," Liesman warned, adding that while companies are dynamically finding ways to mitigate costs, the pressure on manufacturers who rely on imported inputs and on the American consumer continues to build quietly beneath the surface of the AI-driven market boom.
Price Action
The S&P 500 index ended 0.16% lower at 6,644.31 on Tuesday, whereas the Nasdaq 100 index declined 0.69% to 24,579.32. On the other hand, Dow Jones gained 0.44% to 46,270.46.
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, rose in premarket on Wednesday. The SPY was up 0.62% at $666.31, while the QQQ advanced 0.84% to $603.01, according to Benzinga Pro data.
On Wednesday, the futures of the S&P 500, Dow Jones, and Nasdaq 100 indices were trading higher.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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