Economy·Tariffs and tradeCBO slashes economic growth forecast for 2025 as Trump tariffs heat up inflationBy Fatima HusseinBy The Associated PressBy Fatima HusseinBy The Associated Press The CBO on Friday released new economic jections for the next three years, updating the outlook it originally released in January.J.
Scott Applewhite—AP PhotoPresident Donald Trump’s tariff policy, immigration crackdowns and sweeping tax and spending laware expected to increase jobless rates and inflation and lower overall growth this year before they imve next year, according to a new report from the nonpartisan Congressional Budget Office.
The CBO on Friday released new economic jections for the next three years, updating the outlook it originally released in January, before Trump’s inauguration.
The figures, which compare fourth quarter changes, show the unemployment rate, inflation and overall growth are expected to be worse this year than initially jected, while the economic picture is expected to steady in subsequent years.
The CBO outlooks attempt to set expectations for the economy in order to help choices made by congressional and executive branch policymakers.
It does not forecast economic downturns or recessions, with its estimates generally reverting back to an expected average over time.
But Friday’s outlook showed the degree to which Trump’s choices are altering the path of the U.S.
economy, suggesting that growth has been hampered in the near term by choices that have yet to show the mised upside of more jobs and lower budget deficits.
Kush Desai, a White House spokesperson, told The Associated Press, “Americans heard similar doom-and-gloom forecasts during President Trump’s first term, when the President’s economic agenda unleashed historic job, wage, and economic growth and the first decline in wealth inequality in decades.” “These same policies of tax cuts, tariffs, deregulation, and energy abundance are set to der — and ve the forecasters wrong — again in President Trump’s second term,” he said.
Overall, the CBO expects real GDP growth to decrease from 2.5% in 2024 to 1.4% this year, a downgrade from the initial jection of 1.9%.
The CBO attributes the jected decline to a slowdown in consumer spending stemming from new tariffs and a decrease in immigration, which would also impact consumer spending.
The tariffs “raise prices for consumer goods and services, thereby eroding the purchasing power of households; they also increase costs for es that use imported and import-competing inputs in duction,” the report says.
However, GDP is set to grow to 2.2% in 2026, which is higher than the CBO’s January prediction of 1.8%. GDP would then level off to 1.8% in 2027 and 2028, the CBO says in its report.
Additionally, unemployment is expected to hit 4.5% in 2025, higher than the 4.3% initially expected, according to the CBO.
The jobless rate is expected to reach 4.2% in 2026 — slightly lower than the 4.4% originally anticipated — and even out at 4.4% in 2027 and 2028.
And inflation is now expected to hit 3.1% for the rest of 2025, according to the CBO, up from its 2.2% jection in January.
Inflation would then lower to 2.4% in 2026, higher than the initial expectation of 2.1%, before leveling off at 2% the next two years.
The CBO on Wednesday issued a report that shows Trump’s plans for mass deportations and other hard-line immigration measures will result in roughly 320,000 people removed from the United States over the next ten years.
Coupled with a lower fertility rate in the U.S., the reduction in immigration means that the CBO’s jection of the U.S.
population will be 4.5 million people lower by 2035 than the nonpartisan office had jected in January. Fortune Global Forum returns Oct. 26–27, 2025 in Riyadh.
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