Three consecutive quarters of declining growth. That’s what economists are forecasting for the U.S. in 2025, with GDP growth slowing progressively each quarter. The rosy 2.8% expansion of 2024 will be nothing but a distant memory as growth limps along at 1.7% to 2.4% next year.
And forget about a quick bounce-back – 2026 isn’t looking much better at 1.7% to 2.2%.
Trade wars have consequences. Who knew? The planned 10% tariffs on Canada and Mexico, 20% additional tariffs on Chinese imports, and 25% on all steel and aluminum will hit consumers right in their wallets.
Trade wars: where everyone loses, especially your wallet. Tariffs are just taxes with a fancier name.
Economists aren’t mincing words: these trade policies are economic self-sabotage.
The job market isn’t escaping unscathed. Unemployment is expected to climb to 4.2%-4.3%, with monthly job gains averaging just 145,000.
Already, there are warning signs – self-employment plummeted by 316,000 in February 2025, and March showed worrying softness in hiring.
Inflation isn’t playing nice either. Core PCE inflation is projected at 2.7% for 2025, with tariffs pushing goods prices higher.
The Fed has its work cut out, trying to thread the needle between taming inflation and preventing a growth collapse. Two rate cuts are expected, bringing the federal funds rate to 3.75%-4% by year-end.
Consumers are already spooked. The University of Michigan consumer sentiment index has crashed to its lowest level since 2022.
Some shoppers are frantically buying before tariffs kick in – not exactly a sustainable shopping strategy.
Business investment? Stagnating. Equipment spending is fizzling due to tariff uncertainty.
The only bright spot is intellectual property investment, but that can’t carry the whole economy.
The policy mess isn’t helping. Between trade wars, potential government shutdowns, and debt ceiling drama, businesses and consumers are bracing for volatility.
Productivity growth better materialize, or the debt trajectory will become truly terrifying. Economic forecasters now project ten-year productivity growth of 1.60%, which might be the economy’s saving grace if achieved.
The Policy Uncertainty Index has spiked to levels comparable to the Global Financial Crisis and COVID-19 pandemic, creating a toxic environment for business decisions and consumer confidence.
The economy isn’t crumbling yet, but the foundation is definitely showing some nasty cracks.
