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Current forecasts regarding the U.S. economy present a grim picture as concerns mount over President Donald Trump’s escalating trade war. Despite a temporary 90-day pause on imposing high tariffs affecting over 50 countries, many economists now consider the likelihood of a recession to be an even bet.
Recent projections indicate a significant slowdown in economic growth, with an anticipated increase of just 0.8% in 2025—down from a previous estimate of 1.7%—according to a survey of 46 economists conducted by Wolters Kluwer Blue Chip Economic Indicators.
The possibility of a recession is now assessed at 47%, a substantial rise from February’s estimate of 25%.
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Last year, the economy posted a robust growth rate of 2.8%, but this new wave of tariffs is bringing volatility to the economic landscape. The survey took place after Trump launched reciprocal tariffs on multiple countries but before announcing a temporary delay on tariffs as high as 50% on all nations except China.
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Some economists have highlighted that the tariffs on imports from China have surged to an unprecedented 145%, which neutralizes any potential benefits from the recent trade concessions. Barclays economist Marc Giannoni remarked, “That adds up to even higher total tariffs,” as the effective U.S. tariff on imports increased to 30%, a stark rise from the 23% rate before the announcement of reciprocal duties. Historically, these rates hovered between 2% and 3% before the trade conflict began.
In an unexpected move, the Trump administration later announced exemptions for specific electronics, which could reduce the effective tariff rate back to 23%. Giannoni noted that while this might alleviate some inflationary pressures, it does not alter Barclays’ expectations of an impending recession.
Commerce Secretary Howard Lutnick confirmed on April 13 that these exemptions would only be temporary, with plans for future duties specifically on computer chips slated for implementation soon, which could further curtail any economic relief.
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A different survey by the National Association of Business Economics, which included 31 experts, presented a similarly pessimistic outlook, suggesting growth of merely 0.7% for this year.
Experts predict that the average tariff rate will gradually decline to around 20% in 2025 and drop further to 15% by 2026 as U.S. businesses shift away from Chinese imports in response to high tariff costs. However, Giannoni foresees inflation increasing from 2.4% in March to 3.4% by the year’s end, according to the Consumer Price Index.
While consumer sentiment remains generally stable, many forecasters predict that the recent tariffs will heighten prices as businesses transfer increased costs to consumers, potentially undermining consumers’ spending prowess, which constitutes about 70% of the economic activity.
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Giannoni emphasized that the tariffs are exerting pressure on the economy, stating, “The tariffs are…weakening activity and weakening demand.” Nationwide Chief Economist Kathy Bostjancic echoed these sentiments, predicting a modest 1% growth this year while acknowledging the precarious nature of the economy’s trajectory toward recession.
Looking ahead, Giannoni projects a minor recession in the latter half of the year, with a potential GDP contraction of 1.5%, net job losses under 100,000, and an uptick in the unemployment rate peaking at 4.7%.
Bostjancic pointed out that the turbulent stock market is also adversely affecting high-income individuals, who typically make up a substantial portion of consumer spending. Additionally, she indicated that anticipated job cuts stemming from the Trump administration’s recent actions will likely contribute to economic downturns.
Consumer sentiment has dropped to its lowest point since June 2022, with inflation expectations rising to 6.7%—the highest level since 1981, according to a University of Michigan survey.
Forecasters predict that consumer spending will grow by only 0.9% this year, a significant decline from 2.8% in 2024, as observed in the Wolters Kluwer survey.
While the temporary pause on tariffs provides brief relief, Giannoni warned that the disruption and ongoing uncertainty related to trade policies will ultimately hinder economic growth. “The 90-day pause is extending the uncertainty,” he stated.
Business investments are also expected to rise by a mere 1.2% this year, a considerable reduction from 3.6% in 2024, as indicated in the Wolters Kluwer survey.
Trump’s recent reciprocal tariffs, intended to match fees imposed by other nations on U.S. exports, include a minimum 10% charge and additional tariffs of up to 50% on various countries. These were set to take effect this week, adding further complexity to the trade environment.
Prior to these measures, the president had already instituted a 20% tariff on goods from China, alongside 25% tariffs on imported steel, aluminum, and vehicles, which have affected significant trade relationships with Canada and Mexico as well.
This article originally appeared on USA TODAY: Economists predict weak growth or US recession from Trump tariffs
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finance.yahoo.com