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Economy forecasts gloomy for 2025

Pause in some import fees bring little hope

By: Paul Davidson
USA Today

..... Forecasters have a bleak outlook on the U.S. economy this year [2025] becase of President Donald Trump's escalating trade war - even amid his 90-day pause of the highest tariffs on more than 50 countries - and they see the odds of a recession as a toss-up.
..... The experts predict the economy will nearly stall in 2025, growing 0.8% down from their projection of 1.7% just last month, [03/2025] according to the average estimate of 46 economists surveyed by Wolters Kluwer Blue Chip Economic Indicators on April 4 and April 7. [2025]
..... They reckon there's a 47% chance of recession, up from 25% in February. [2025]
..... The economy grew a healthy 2.8% last year. [2024]
..... The poll was conducted after Trump unveiled his reciprocal tariffs on dozens of countries on April 2 [2025] but before the announced a 90-day pause on duties as high as 50% on all naitons other than China on april 9. [2025] Yet some of the surveyed economists interviewed April 11 [2025] noted htat Trump, at teh same time, ahs raised the import fee on Chinese shipments to an outsize 145%, more than offsetting the economic benefits of suspending the other charges.
...... "That adds up to even higher (total) tariffs,: said Barclays economist Mare Giannoni.
..... The total effective, or average, U.S. tariff on all imports is now 30%, Giannoni said, up from 23% when Trump announced the reciprocal duties. Before the trade war, the average U.S. tariff rate was 2% to 3%.
..... A separate survey of 31 experts this week [04/14/2025] - 21 of whom responded the day Trump announced the 90-day pause - reveals a similarly our view, according to the poll by the National Association of Business Economics. They expect the economy to grow just 0.7% this year. [2025]
..... The average tariff rate should gradually fall to about 20% this year [2025] and 15% in 2026 as companies import fewer Chinese goods because of the high fees and increasingly source their products from other countries, Giannoni said. Still, he expects overall inflation to rise from 2.4% in March [2025] to 3.4% by the end of the year, based on the consumer price index.

'Solid economy' when the year began

..... Forecasters say the economy was likely to slow this year [2025] after a post-pandemic burst of activity but consumers were in generally good shape, with low debt and wage growth that was still outpacing inflation. The tariffs, however, are expected to drive up prices as manufacturers and retailers pass long much of the fees to consumers.
..... That's likely to sap their spending power, which makes up about 70% of economic activity.
..... "We have a very solid economy at the beginning of the year," [2025] Giannoni said, adding that the tariffs are "weakening activity and weakening demand."
..... "It's a massive shock," said Nationwide chief economist Kathy Bostjancic, who expects the economy to grow 1% this year [2025] and believes the quesion of whehter the nation tips into recession is a borderline call.

Inflation expectation highest since 1981

..... Giannoni figures the nation will experience a mild recession the second half of the year, [2025] with gross domestic product falling 1.5%, net job losses of less than 100,000 and the 4.2% unemployment rate peaking at 4.7%.
..... Besides the hit to consumer spending broadly, Bostjancic said the turmoil in the stock market has reduced the wealth of high-income Americans who have accounted for the loin's share of consumption causing those households to spend less.
..... She also expects the Trump administration's substantial layoffs to deliver another blow to the economy.
..... Consumer sentiment feel to the lowest and Americans; inflation expectations a year form now rose to 6.7%, the highest since 1981, according to a survey by the University of Michigan.
..... Economists expect consumer spending to increase 0.9% this year, [2025] down form 2.8% in 2024, according to the Wolters Kluwer poll.

Uncertainty bad for growth

..... And while the 90-day pause on many tariffs grants a reprieve to many countries as well as consumers, "the disruption we are seeing and the uncertainty we are seeing is already bad for growth," Giannoni said. "the 90-day pause is extending the uncertainty."
..... Business investment is projected to grow about 1.2% this year, [2025] down form 3.6% in 2024, according to the Wolters Kluwer survey.
..... Trump's reciprocal tariffs, theoretically aimed at matching the fees other countries charge for U.S. shipments to their countries, included a minimum 10% fee and additional charges of up to 50% on more than 50 nations.
..... Those took effect Wednesday. [04/09/2025]
..... The president already had imposed a 20% fee on China; 25% on imported steel and aluminum; 25% on all imported cars and light trucks; and 25% on some goods form Canada and Mexico not covered by a trade agreement.

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