The US economy has ended 2024 in a relatively stable condition, with inflation cooling and unemployment low. However, the economic outlook for 2025 is uncertain due to President-elect Donald J. Trump’s proposed policies on tariffs, immigration, taxes, and deregulation.
Trump’s proposals could lead to higher prices, slower growth, or both, according to most economic models. He has promised tax cuts for individuals and businesses, which could boost economic growth but also lead to bigger deficits. Additionally, he plans to slash regulations, which could lift corporate profits but potentially increase worker injuries and environmental damage.
Economists predict that US gross domestic product will grow around 2% next year, modestly slower than this year’s 2.5%. However, some experts, like Michael Strain at the American Enterprise Institute, warn that Trump’s policies could lead to a worst-case scenario of steep tariffs discouraging investment, mass deportations limiting employers’ ability to find workers, and mounting deficits driving up borrowing costs.
The economic context is different this time around. The US economy is solid but slowing, with inflation still above the Fed’s target of 2%. Interest rates are high by recent standards, and policymakers may be less tolerant of higher prices than they were during Trump’s first term.
While forecasters have underestimated the resilience of the US economy in recent years, there are reasons to remain optimistic. Households have relatively low debt compared to their incomes, suggesting consumers can continue spending. Productivity growth has been strong, and artificial intelligence could maintain momentum.
Ultimately, the impact of Trump’s economic policies on the US economy will depend on how they play out. As economists like Aditya Bhave at Bank of America note, concerns surround the labor market, with unemployment rates edging up and it taking longer for workers to find jobs.
Source: https://www.nytimes.com/2024/12/18/business/economy/trump-us-economy.html