{"id":351859,"date":"2025-08-17T14:48:13","date_gmt":"2025-08-17T14:48:13","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/351859\/"},"modified":"2025-08-17T14:48:13","modified_gmt":"2025-08-17T14:48:13","slug":"will-the-us-dodge-a-recession-economist-weighs-in-on-trump-policies","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/351859\/","title":{"rendered":"Will the US dodge a recession? Economist weighs in on Trump policies"},"content":{"rendered":"

\"play\"<\/p>\n

Trump’s budget bill will impact every aspect of the economy<\/p>\n

The budget bill just passed and signed into law will touch the lives of every American, one way or another. Will you be better or worse off?<\/p>\n

President Donald Trump<\/a>\u2019s aggressive economic policies will likely significantly slow U.S. growth<\/a> and push up inflation<\/a> but stop short of causing a recession<\/a> or \u201cstagflation\u201d<\/a> \u2013 the dire scenarios that forecasters envisioned before he took office, a report says.<\/p>\n

\u201cThe totality of the policies does not push the economy to the brink of recession but it significantly diminishes growth\u201d during Trump’s four-year term, said economist Justin Begley of Moody\u2019s Analytics.<\/p>\n

He added, \u201cIt\u2019s not yet stagflation but it\u2019s edging that way.\u201d<\/p>\n

Stagflation is an economy characterized by high inflation, slow or stagnant growth and high unemployment \u2013 an unusual and toxic cocktail. Typically, a sluggish economy leads to low inflation, allowing the Federal Reserve<\/a> to cut interest rates to stimulate more borrowing and activity.<\/p>\n

Will the Fed lower rates in September?<\/p>\n

The Fed, however, faces a dilemma because lowering rates to bolster a softening labor market<\/a> could further drive up inflation. Consumer price increases generally have eased substantially after a pandemic-related spike but recently edged higher, in part because of Trump’s sweeping import levies.<\/p>\n

His policies are imposing countervailing forces on the economy. Tax cuts and increased spending on border security and defense are set to juice growth. But those positive catalysts are expected to be more than offset by the tariffs, a historic immigration crackdown, layoffs of hundreds of thousands of federal workers<\/a> and big cuts to social services programs such as Medicaid and food stamps, Begley said.<\/p>\n

During Trump\u2019s presidential race against former Vice President Kamala Harris<\/a> last year, Moody\u2019s, among other research firms, predicted Trump\u2019s economic blueprint would spark a recession by mid-2025. Moody\u2019s has updated its forecast in part because the contours of his plan recently have become more clearly defined, Begley said.<\/p>\n

\u201cWe have a better view where things are going,\u201d he said.<\/p>\n

What tariffs has Trump imposed?<\/p>\n

For example, high double-digit tariffs are in place for steel and aluminum, foreign cars and Chinese imports. And the White House has reached deals with trading partners such as Japan, South Korea, Vietnam and the UK that set tariffs at 10% to 20%.<\/p>\n

Trump\u2019s deportations and constraints on Southern border crossings are well under way. And his huge budget bill, which he signed into law on July 4, expanded his 2017 tax cuts, beefed up military and border security outlays, and slashed some entitlement spending.<\/p>\n

How is the economy doing under Trump?<\/p>\n

All told, Moody\u2019s projects Trump\u2019s policies will reduce economic growth by an average 0.4 percentage points annually \u2013 nearly half a point \u2013 during his term. That would leave the economy expanding an average 1.7% annually over the four years, with growth bottoming at 1.4% next year and peaking at 2.2% in 2028.<\/p>\n

The economy grew at an annual rate of 1.2% the first half of 2025. It’s projected to grow at slightly less than a 1% pace in the second half, according to economists surveyed by Wolters Kluwer Blue Chip Economic Indicators.<\/p>\n

By contrast, the economy averaged 2.3% growth the decade after the Great Recession of 2007-2009 and 3.5% during former president Joe Biden<\/a>‘s term. The latter, however, included unusually strong gains as the nation emerged from the pandemic recession. In 2024, Biden\u2019s last year in office, the economy grew a healthy 2.8%.<\/p>\n

Growth had been expected to downshift no matter who won the 2024 election as a post-COVID-19 surge in consumer demand petered out, Americans depleted government pandemic aid and other government stimulus measures faded.<\/p>\n

But by the end of Trump\u2019s term in 2028, the economy will be 1.3% smaller than if his policies had not been enacted, Begley wrote in a report. Also, the unemployment rate is expected to peak at 4.7% in 2027 before falling to 4.4% by the time Trump leaves office. Without his policies, unemployment would broadly hold steady at about 4% and there would be about 885,000 additional jobs, Moody\u2019s said.<\/p>\n

Is inflation ever going to go down?<\/p>\n

Trump’s policies similarly are poised to push up inflation by an average of nearly half a percentage point a year. That would leave annual inflation averaging 2.6% during Trump’s term and peaking at 3.1% in 2026, based on the Commerce Department\u2019s personal consumption expenditures price index. Inflation then would decline and nearly reach the Fed\u2019s 2% goal in 2028, the last year of his term.<\/p>\n

Absent the president\u2019s policies, inflation would achieve the Fed\u2019s target next year, Begley\u2019s analysis shows.<\/p>\n

Are tariffs contributing to inflation?<\/p>\n

Tariffs, by far, represent both the biggest drag on growth and the largest contributor to inflation, Begley said. Companies are expected to pass most of the costs of the duties to consumers, driving up prices. And that\u2019s expected to sap their buying power and reduce consumption, which makes up 70% of economic activity.<\/p>\n

Without the tariffs, the net effects of Trump\u2019s policies on growth would be slightly positive, Begley said. The benefits of tax cuts and increased defense and border spending would outweigh the toll taken by the immigration crackdown, federal layoffs and cutbacks to Medicaid and food stamps, he said.<\/p>\n

What are the negative effects of deportations?<\/p>\n

Another big hit comes from the deportations.<\/p>\n

Like the tariffs, the immigration crackdown is projected to both curtail growth and boost inflation. A reduced supply of workers in industries such as construction, agriculture and hospitality is expected to drive up wages and prices. And a smaller population of immigrants means less consumer spending.<\/p>\n

Here’s why Moody\u2019s forecast of the effects of Trump’s policies is less dire than it was before he took office:<\/p>\n

Less retaliation from tariffs<\/p>\n

Although Trump\u2019s tariffs are higher than anticipated, Moody\u2019s expected more significant retaliation from foreign countries that would batter U.S. manufacturers’ exports. At least so far, those nations have taken a more restrained approach.<\/p>\n

Fewer deportations than expected<\/p>\n

Moody\u2019s figured the Trump administration would seek to deport about 1 million immigrants who lack permanent legal status each year. But Begley said that has proven logistically challenging. Goldman Sachs estimates monthly deportations have averaged an annualized pace of about 600,000. \u00a0<\/p>\n

Tax cuts give middle-class Americans more spending money<\/p>\n

Although Trump vowed during his campaign to eliminate taxes on tips and overtime, Moody\u2019s didn\u2019t necessarily expect him to follow through. The budget bill, however, scraps taxes on tips up to $25,000 a year and over time up to $12,500.<\/p>\n","protected":false},"excerpt":{"rendered":"Trump’s budget bill will impact every aspect of the economy The budget bill just passed and signed into…\n","protected":false},"author":2,"featured_media":351860,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5311],"tags":[6890,5492,5483,32,3647,1700,9648,5491,5498,20088,20091,22300,22302,6888,6889,714,6887,2175,6584,12,5179,6591,46,285,20089,20090,1757,49,978,659],"class_list":{"0":"post-351859","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-united-states","8":"tag-biden","9":"tag-branch","10":"tag-donald","11":"tag-donald-trump","12":"tag-economics","13":"tag-economy","14":"tag-economy-news","15":"tag-executive","16":"tag-executive-branch","17":"tag-federal","18":"tag-federal-reserve-system","19":"tag-fiscal","20":"tag-fiscal-policy-news","21":"tag-harris","22":"tag-joe","23":"tag-joe-biden","24":"tag-kamala","25":"tag-kamala-harris","26":"tag-negative","27":"tag-news","28":"tag-overall","29":"tag-overall-negative","30":"tag-policy","31":"tag-politics","32":"tag-reserve","33":"tag-system","34":"tag-trump","35":"tag-united-states","36":"tag-us","37":"tag-usa"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/115044660355826767","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/351859","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=351859"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/351859\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/351860"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=351859"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=351859"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=351859"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}