LEILA FADEL, HOST:
Let's dig in deeper on the state of the global economy with Diane Swonk. She's the chief economist for the large accounting firm KPMG U.S. Diane, thanks for coming back on the program. Good morning.
DIANE SWONK: It's great to be here.
FADEL: So the increase in energy prices around the world, is that all to blame on the Iran war?
SWONK: It is very linked to the Iran war. That is just such a huge choke point. And now we have several choke points in the Middle East. As the war - the situation - expands, and that is really where we're seeing the problems. We also saw because of the conflict that many of the buffers that we use to slow down the increase in prices, the strategic oil reserves being drained globally have now been drained. And that means that even as the oil begins to flow again, there'll be sort of fits and starts to them replenishing those inventories as well.
FADEL: Now, there's no sign that the oil will begin to flow again very easily. The Strait of Hormuz is still a point of conflict. You have the Houthis threatening to restrict the Bab el-Mandeb Strait. I mean, how bad could things get for the global economy?
SWONK: This is really costly. We're now at over $700 million a day just in the U.S., and we're not feeling the pain as much as the rest of the world. So that is extraordinary. It's already cost the U.S. in terms of a tax $130 billion. And much of what we heard in recent global finance minister meetings was about how much both tariffs and the conflict in the Middle East were suppressing global growth.
FADEL: How is all of this showing up in people's everyday lives here in the U.S.?
SWONK: What really is showing up in, you know, the trade-offs people are making at the stores. You're seeing retailer after retailer report about not only a reduction in sort of foot traffic from low- and middle-income households, but also a pullback in spending. Spending at grocery stores has been hit the hardest, and they've been trying to - we've seen big box discounters try to use their tariff refunds, along with grocery chains to offer targeted discounts. But, you know, what consumers are really looking for is a decline in prices, and this is just eating into their discretionary budgets, even as affluent households, you know, sort of go - continue to spend with abandon.
FADEL: Now, GasBuddy petroleum analyst Patrick De Haan said in a post on X yesterday that Americans have collectively spent over a hundred billion dollars more on gasoline and diesel since March 1, compared to the same period a year ago. I found that number quite shocking. Can you put that into perspective for us?
SWONK: You know, that is - what's important is that's almost as big as the tariff revenues after the - we lost the - some of the other IEEPA revenues. And so it is another tax on top of the tariff tax that people are paying. And inflation is its own regressive tax, and it's suppressing growth. We're running around 2% growth in the overall economy for 2026, about the same as 2025. But that's a big step down from 2.5% that we saw prior to that, and it, you know, starting to shave not just tenths, but now several tenths off of growth.
And that's what we're really seeing is also a hesitancy to hire. And even though the unemployment rate is very low, people are - because these costs are so high, they're not getting raises. They're seeing it in benefit costs, and benefit costs are driving service sector inflation, but that's now actually cutting into their wage gains as well.
FADEL: Let's say the Iran war is resolved tomorrow hypothetically, how well positioned is the U.S. economy to recover?
SWONK: The U.S. economy is still moving forward, and that's the important thing. So it's the best of those economies to move forward. But even if it were to end tomorrow, the higher oil prices would not disappear overnight because of the damage we've already seen to refining capacity.
FADEL: Diane Swonk is the chief economist at KPMG U.S. Thank you for your time and for your insights.
SWONK: Thank you.
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