Economic Outlook Dims Under Trump Administration’s New Policies

WEST PALM BEACH, Fla. — President Donald Trump addressed the media aboard Air Force One on March 28, 2025, as economic forecasts reveal a troubling stagflationary outlook for the U.S. economy. According to the latest CNBC Rapid Update, growth for the first quarter of 2025 is projected at a mere 0.3%, significantly down from the 2.3% reported just three months earlier.

This forecast marks the weakest quarterly growth since 2022, indicating a potential economic slowdown as the nation grapples with the impact of new tariffs and policy uncertainty. The update includes averages from 14 economists who are examining the expectations for GDP and inflation.

Core Personal Consumption Expenditures (PCE) inflation, the Federal Reserve’s preferred measurement, is anticipated to hover around 2.9% for most of 2025, before it is expected to decline in the fourth quarter. Such figures highlight a challenging economic landscape amid waning consumer and business sentiment.

The Commerce Department reported that inflation-adjusted consumer spending in February rose by just 0.1%, following a decline of 0.6% in January. This has led Action Economics to downgrade its forecast for spending growth this quarter to just 0.2%, down from a previous estimate of 4% in the last quarter of 2024.

“Signs of slowing in hard activity data are becoming more convincing, following an earlier worsening in sentiment,” Barclays stated over the weekend, underscoring the growing concerns within the economy.

Additionally, a significant increase in imports is adding pressure to GDP calculations, as these imports were recorded ahead of the new tariffs. Despite this, only two of the twelve economists surveyed predict negative growth in Q1, and none foresee back-to-back quarters of economic contraction.

According to Oxford Economics, which currently provides the lowest growth estimate for Q1 at -1.6%, the situation is expected to improve in the second quarter. They project GDP will rebound to 1.9% as the influx of imports contributes positively to inventory or sales figures.

Most economists anticipate a gradual recovery, forecasting a second quarter GDP growth of 1.4%, a 1.6% rise in the third quarter, and concluding the year with a growth of 2%.

However, a sluggish growth rate of 0.3% presents a risk of slipping into negative territory. As new tariffs are set to be implemented this week, uncertainty looms over the potential for an economic rebound.

Mark Zandi from Moody's Analytics warned, “While our baseline doesn’t show a decline in real GDP, given the mounting global trade war and cuts to jobs and funding, there is a good chance GDP will decline in the first and even the second quarters of this year. A recession will be likely if the president doesn’t begin backtracking on the tariffs by the third quarter.”

Moody’s forecasts an anemic growth of 0.4% for Q1, with a modest recovery to 1.6% by year-end. Nonetheless, persistent inflation will complicate the Federal Reserve’s response to lackluster growth, as inflation is expected to stay elevated at around 2.8% this quarter, rising to 3% in the next.

As economists battle uncertainty, the Fed may find it difficult to justify rate cuts unless inflation declines considerably by the end of the year. These economic indicators paint a complex picture as the U.S. navigates potential challenges in 2025.