United States Macro Outlook 2025 – Strong Fundamentals, Policy-Driven Uncertainty

Core Theme: Solid Economy Meets Policy Shock

The U.S. economy enters 2025 with strong fundamentals but faces heightened risks from aggressive trade policy, tariff-driven inflation, and investment uncertainty under President Trump’s second term.

🔧 Policy Outlook – Trump 2.0

Policy AreaExpected ActionImpact
Tariffs60% on China; 10–20% across the board🔺 Inflationary; 🔻 Growth, investment
Tax CutsExtension of 2017 Trump tax cuts➕ Modest fiscal support
DeregulationEnergy & finance sectors➕ Potential marginal investment lift
ImmigrationRhetoric and modest restrictions🔻 Trend employment (longer-term risk)
Industrial PolicyPossible rollback of IRA, CHIPS Act🔻 Green/tech sector investment
Fiscal CutsProposed spending cuts❓ Limited near-term impact (needs Congress)

Growth Outlook: Slower but Resilient

  • 2024: Above-trend growth driven by income strength, not debt or capex booms
  • 2025 forecast: Growth moderates, but no recession
    • Tariffs and trade uncertainty will drag
    • Tax cut extension and deregulation offer partial offset

Investment Outlook

  • Capex still has room to grow, with no signs of overbuilding
  • Pent-up business spending may emerge now that election uncertainty has passed
  • Trade policy risks will weigh on long-term fixed investment decisions

Housing: Sluggish, Not Collapsing

SegmentOutlook
Single-familyTight supply and demographics support demand
MultifamilyOverbuilt; vacancy rising; rental growth slowing
Rates impactHigh mortgage rates remain a constraint

Consumer Spending: Durable but Slowing

  • Income-driven spending cycle, not credit-led
  • Balance sheets remain healthy, though signs of normalization in credit delinquencies
  • Wage growth slowing, but still supports demand

Labor Market: Cooling Without Cracking

  • Unemployment expected to hover slightly above 4%
  • Wage growth: Gradual slowdown, not collapse
  • Layoffs low; businesses face little financial stress
  • Strong labor productivity provides buffer for wages

Inflation: Tariff Shock Delays Disinflation

  • Core inflation will likely stall in H2 2025
  • Tariffs = significant inflation impulse starting Q2 2025
  • Supercore services and wage stickiness add pressure
  • Fed will not look through tariff inflation due to credibility concerns

Federal Reserve: Pausing After March Cut

  • Fed rate forecast:
    • Q1 2025: 25bp cut → 4.125%
    • No further cuts expected in 2025
    • Easing resumes in 2026, once inflation impulse fades
DriverFed Reaction
Tariff inflation👎 Pause cuts
Slowing growth👍 Easier in 2026
Strong labor👎 More restrictive bias

Risks to Outlook

Trade & Tariffs

  • Tariffs may be larger and faster than forecast → stronger inflation shock
  • If tariffs remain a threat (but not enacted), uncertainty still hurts investment

Fiscal Policy

  • Base case: Only 2017 tax cut extension
  • Upside: If Trump pushes through more cuts → stimulus
  • Downside: If deficit cuts occur → drag on demand

Political & Policy Shocks

  • Supply chain disruptions, uncertainty over green policy rollbacks
  • Proposed federal hiring freeze could temporarily reduce government payrolls

Recession Risk (low, but rising)

  • Markets remain sensitive to any labor market stress
  • Elevated valuations could unwind quickly if confidence fades

Macro Summary Table – U.S. 2025

IndicatorOutlook
GDP GrowthSlowing but above stall speed
InflationElevated due to tariffs
Unemployment~4.1–4.3%, gradual rise
Fed Funds RateOne cut to 4.125%, then pause
Consumer SpendingSolid, income-backed
Business InvestmentWeak, policy-constrained
HousingFlat to weak, especially multifamily