The economy is good right now (although it could be fairer). With Trump as president the economy won't get any fairer, but it could get worse. Here are five areas that economists will be watching in 2025:
1. Tariffs
Trump’s plans to impose sweeping tariffs are likely to be one of the biggest threats to the economy, experts say.
The president-elect has vowed to penalize the country’s largest trading partners by levying tariffs — an extra 10 percent on Chinese goods and 25 percent on imports from Mexico and Canada — that economists say could quickly raise prices. The necessities that could soon be getting costlier range from big-ticket items such as cars and appliances to everyday basics like groceries and gas. During his campaign, Trump also discussed sweeping tariffs on all imports, not just from those countries, which would affect even more goods if implemented.
“Tariffs make things more expensive,” Alex Durante, an economist at the Tax Foundation, a right-leaning think tank, told The Washington Post. “They shrink the economy, and they make people poorer.”
2. Deportations
A recent surge in immigration has helped power economic growth and boost the job market. But economists say Trump’s plans to deport millions of undocumented migrants and curb immigration more broadly could hobble the labor market.
3. Tax cuts
The sweeping tax cuts Trump signed into law in his first term are set to expire at the end of 2025. Those will “almost certainly” be extended, according to Howard Gleckman, a senior fellow at the Tax Policy Center.The gains, though, would be concentrated at the top: The wealthiest Americans would see the largest gains, with families making over $450,000 reaping nearly half the benefits if existing tax cuts are extended, according to an analysis by the Tax Policy Center.
4. Inflation
The Federal Reserve has made strides in bringing down inflation with a series of aggressive interest rate hikes. But lately, progress has stalled, and economists say it could unravel even further next year if Trump moves forward on some of his more draconian tariff and immigration plans.
Deutsche Bank estimates thatone measure of inflation — now at 2.8 percent — could rise to as much as 3.9percent next year if the new tariffs are enacted, up from original estimates of about 2.5 percent.
5. Stocks
During his last term, Trump routinely boasted about the stock market’s performance, which reached new highs under his watch. But economists say a repeat performance may be tough to pull off.
Stocks have continued their ascent under Biden, with all three major indexes — the S&P 500, Dow Jones Industrial Average and Nasdaq composite index — hitting all-time highs in recent weeks. That’s boosted the portfolios of the country’s wealthiest, allowing them to keep spending in a way that’s powering the economy.
But the market’s heyday may soon be coming to an end: Stocks tumbled after the Federal Reserve suggested in mid-December that it is rethinking how often it will cut interest rates next year.And economists warn that any additional curveballs, including government policies that hamper growth, could quickly reverse recent gains.
