Trump’s Tariff Policies Fuel Economic Concerns, Economists Expect Slower Growth Ahead

A recent survey conducted by The Wall Street Journal reveals that economists have drastically reduced growth estimates and raised inflation and unemployment projections since President Donald Trump assumed office, largely due to his trade policies.

What Happened: The outlet reported on Saturday that economists have adjusted their perspective on the U.S. economy in light of President Trump’s assertive trade policies. The primary driver of this change is the implementation of tariffs, which have been escalated beyond what was expected three months ago.

The survey, which compiled responses from 64 academic and business economists between April 4 and 8, forecasts that the US gross domestic product (GDP) will only grow by 0.8% in the fourth quarter compared to the previous year. This marks a substantial decrease from the 2% GDP growth predicted in January.

Findings from the survey also indicate that economists have raised their estimated likelihood of a recession in the next 12 months to 45%, a significant increase from 22% in January. “We’re dancing with recession,” Joseph Davis, Vanguard’s chief economist told the outlet.

Also Read: Trump Grants Tariff Reprieve to Tech – Including From China – In Surprise Move

In addition, economists anticipate that the average US tariff rate will surge about 19 percentage points by 2025. This is projected to deduct 1.2 percentage points from 2025 GDP growth and contribute an additional 1.1 percentage points to inflation.

James F. Smith of EconForecaster has forecasted 3.1% growth on the assumption Trump will quickly roll back any tariffs because they are “so outrageous.”

“It’s looking like brilliant diplomacy. In the short run, I’d be very surprised to learn that most of the companies with critical supply chains don’t have big inventories in warehouses around the U.S,” Smith said.

The unpredictability of Trump’s trade policies, including his inconsistent stance on tariffs, has further complicated the economic forecast. “No one—including, apparently, Trump himself—knows the final outcome,” the Journal reported.

Why It Matters: The revised economic outlook underscores the potential long-term impact of Trump’s trade policies on the US economy. The expected rise in tariffs and the increased probability of a recession could have significant implications for businesses and consumers alike.

The uncertainty surrounding these policies adds another layer of complexity to economic planning and forecasting.

As such, investors, policymakers, and businesses will need to closely monitor these developments and adjust their strategies accordingly.