Donald Trump’s broad tariffs and aggressive push to downsize the federal government are expected to slow U.S. economic growth and drive inflation higher, according to a Financial Times survey of leading economists.
Key concerns include:
- Slower growth: Economists forecast 1.6% GDP growth in 2025, down from 2.3% in December’s survey and 2.8% in 2024—the fastest in the G7.
- Rising inflation: The core PCE index (a key Fed inflation metric) is now expected to reach 2.8% by year-end, up from the previous 2.5% estimate.
- Policy uncertainty: The administration’s economic shake-ups—including tariffs on steel and aluminum—have led to declines in new business orders and weaker consumer sentiment.
- Retaliatory trade measures: Canada and China have already imposed counter-tariffs, while the EU is considering further action.
- Data quality risks: The dismantling of a key advisory council raises concerns about the accuracy of U.S. economic data, essential for investors and policymakers.
This comes as the Federal Reserve prepares to release updated economic projections on Wednesday, with many watching for signals on how Trump’s policies may influence interest rates and inflation targets.
