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4w ago

Economists Warn of Potential Contraction as U.S. Economy Faces Trade Policy Challenges

Despite 2.8% GDP growth in 2024, new tariffs and trade uncertainty under the Trump administration raise concerns for early 2025 economic performance.

FILE - A consumer places a flat of eggs in a shopping cart in a Costco warehouse Tuesday, Feb. 18, 2025, in Sheridan, Colo. (AP Photo/David Zalubowski, File)
People walk around the Financial District near the New York Stock Exchange (NYSE) in New York, U.S., December 29, 2023. REUTERS/Eduardo Munoz/File Photo
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Overview

  • The U.S. economy grew by 2.8% in 2024, with strong consumer spending and a sharp rebound in corporate profits in the fourth quarter.
  • Fourth-quarter GDP growth was revised up to 2.4%, though it marked a slowdown from 3.1% in the third quarter.
  • The Trump administration's recently implemented tariffs on imports, including a 25% tax on foreign autos, are expected to disrupt investment and increase inflationary pressures.
  • Economists predict a significant slowdown in GDP growth for Q1 2025, with some warning of potential negative growth due to trade policy impacts.
  • The Federal Reserve's preferred inflation gauge, the PCE price index, rose to 2.4% in Q4 2024, exceeding its 2% target, complicating monetary policy decisions.