Survey shows economic slowdown: Forecasters are increasingly pessimistic about the US economy due to President Donald Trump’s escalating trade war, despite a recent 90-day pause on certain tariffs. The experts predict a significant slowdown in economic growth, with some even forecasting a recession.
Economic Growth Forecast
The US economy is expected to grow a mere 0.8% in 2025, down from 1.7% just last month, according to a survey of 46 economists by Wolters Kluwer Blue Chip Economic Indicators. This represents a substantial decline from the 2.8% growth rate achieved in 2024. The survey also revealed a 47% chance of recession, up from 25% in February.
Still on Survey shows economic slowdown
Impact of Tariffs
The Trump administration’s tariffs are seen as a major contributor to the economic slowdown. Despite the 90-day pause on duties as high as 50% on all nations other than China, the effective US tariff rate on all imports has risen to 30%, up from 23% when Trump announced the reciprocal duties. To put this in perspective, the average US tariff rate before the trade war was 2% to 3%. The recent increase in tariffs on Chinese shipments to 145% has more than offset the economic benefits of the concessions.
Temporary Exemptions
The Trump administration has announced exemptions for smartphones, computers, chips, and other electronics products, which could lower the effective tariff rate back to 23%. However, Commerce Secretary Howard Lutnick has stated that these exemptions are temporary and tariffs for those items would be included in a duty on computer chips that Trump plans to impose in a month or two. This would further mitigate any economic benefit from the exemptions.
Recession Predictions
Some economists, like Barclays’ Marc Giannoni, predict a mild recession in the second half of the year, 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%. Nationwide Chief Economist Kathy Bostjancic expects the economy to grow 1% this year and believes the question of whether the nation tips into recession is a borderline call.
Factors Contributing to Economic Slowdown
Several factors are contributing to the economic slowdown, including
– Tariffs: Weakening activity and demand, according to Giannoni.
– Stock Market Turmoil: Reduced wealth of high-income Americans, leading to decreased spending.
– Layoffs: Trump administration’s substantial layoffs expected to deliver another blow to the economy.
– Consumer Sentiment: Fell to the lowest level since June 2022, with Americans’ inflation expectations rising to 6.7%, the highest since 1981.
Business Investment
Business investment is projected to grow about 1.2% this year, down from 3.6% in 2024, according to the Wolters Kluwer survey. The disruption and uncertainty caused by the trade war are already having a negative impact on growth, and the 90-day pause is extending the uncertainty.
Tariffs Implemented
The Trump administration has implemented various tariffs, including:
– Reciprocal Tariffs: Minimum 10% fee and additional charges of up to 50% on more than 50 nations.
– Cphina Tariffs: 20% fee on Chinese imports, with plans to increase to 145%.
– Steel and Aluminum Tariffs: 25% on imported steel and aluminum.
– Automotive Tariffs: 25% on all imported cars and light trucks.
– Canada and Mexico Tariffs: 25% on some goods not covered by a trade agreement.
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