​Washington’s Mid-2025 Business Outlook: Tariffs, Inflation, and Policy Uncertainty

​Washington’s Mid-2025 Business Outlook: Tariffs, Inflation, and Policy Uncertainty

The July 2025 Washington Business Outlook report provides an in-depth examination of how national and state economic trends are shaping the business environment. This quarterly publication from the Association of Washington Business Institute is guided by a panel of economists who analyze the key factors affecting employers and industries across the state. While the U.S. economy has slowed, it has not yet tipped into recession. The report highlights that the first-quarter economic activity contracted by 0.5%, mainly due to tariff-driven import surges, and that both businesses and consumers are showing caution as they wait to see how federal policy will develop in the coming months.

One of the central themes of this edition is policy uncertainty. Constant changes in federal trade and fiscal policies have made it difficult for companies to plan ahead or make investments. Rising inflation expectations also present a challenge, as surveys show that consumers expect inflation to run above 3% over the next year. Although the Federal Reserve has maintained steady interest rates, there is growing tension between the White House and the Fed, with future rate cuts depending on whether inflation will continue to cool.

The report also notes that, while equity markets regained strength after a sharp dip in April, global trade disputes remain a major source of instability. Tariffs are beginning to affect prices for both manufacturers and service providers, with surveys showing that many businesses are passing on these costs directly to customers. Simultaneously, fuel prices have remained flat or even declined slightly, which has helped slow the pace of inflation. However, Washington’s gas prices remain about a dollar higher than the U.S. average, creating additional cost pressures for residents and businesses in the state.

Agriculture remains one of the most affected sectors. Uncertainty over immigration enforcement impacts the availability of seasonal labor, and new tariffs disrupt trade relationships. This combination of policy changes is pushing fruit prices higher for apples and pears, while lowering prices for sweet cherries due to larger harvests. Industry leaders worry that a prolonged period of aggressive tariffs could shrink markets for Washington crops overseas and increase the cost of domestic goods.
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Overall, the mid-year 2025 economic outlook underscores how national policy choices shape the local economic conditions. Business leaders in Washington are advised to stay alert, plan cautiously, and prepare for periods of ongoing volatility. For a complete and detailed analysis of these economic trends, the full report can be accessed at https://www.awb.org/wp-content/uploads/JUL_2025_EconomicReport_072525.pdf.