National Economy Snapshot

The National Economy

The economic outlook for the United States in late 2025 reflects a cautiously optimistic trajectory amid evolving domestic and global conditions. According to recent analyses from the Federal Reserve, the Congressional Budget Office (CBO), and private sector economists, real GDP growth is forecast to reach approximately 2.0% for the year, a slight deceleration from 2024’s 2.4% pace but still indicative of a stable expansion.

Consumer spending remains a central pillar of growth, with personal consumption expenditures accelerating to an annualized rate of 3.0% in Q3 2025. This uptick follows a slower first half and suggests that households are maintaining spending levels despite pressures from weaker real income growth and continued elevated interest rates. Business investment, particularly in artificial intelligence, data centers, and other high-tech sectors, has also contributed positively, although rising capital costs and trade policy shifts are beginning to weigh on corporate sentiment.

The labor market presents a more mixed picture. Employment growth has softened, reflecting both a slowdown in labor supply and demand. The unemployment rate has edged up to 4.3%, and job openings have come into closer alignment with the number of unemployed workers. Net immigration—a key driver of workforce expansion—has declined sharply, further constraining labor supply. The September jobs report was delayed due to a federal government shutdown, but alternative data sources from the private sector suggest continued softness in hiring.

Inflation remains above the Federal Reserve’s 2% target, with the core Personal Consumption Expenditures (PCE) deflator rising 2.9% year-over-year in August. Goods prices, influenced by recent tariff increases, are seeing upward pressure, while services inflation is gradually moderating. Economists expect inflation to remain elevated through Q4 2025, with a gradual easing projected into 2026 and 2027 as the effects of trade policy changes dissipate.

In response to these dynamics, the Federal Reserve is expected to adopt a more accommodative stance. Analysts still anticipate two 25 basis point rate cuts before year-end, followed by additional reductions in early 2026, although there is increasing uncertainty as to this forecast.

Risks to this outlook include geopolitical tensions, policy uncertainty, continued trade and tariff disputes and potential volatility in financial markets. The CBO notes that higher interest rates and slower household formation have dampened residential investment, while equity markets have shown increased sensitivity to inflation data and policy signals.

In summary, the U.S. economy is navigating a period of moderated growth with underlying resilience. Consumer and tech-driven investment are buoying activity, but inflation and labor market imbalances pose ongoing challenges. Policymakers remain focused on maintaining stability while adapting to shifting conditions, and the path forward will depend on how effectively these pressures are managed.

Trade and Tariffs

The United States’ trade and tariff outlook for the remainder of 2025 is marked by sweeping changes under President Donald Trump’s administration, which has implemented a series of aggressive tariff measures aimed at rebalancing trade relationships and bolstering domestic industries. These actions represent a significant departure from previous administrations’ multilateral approaches and have triggered widespread economic and geopolitical ripple effects.

Since January 2025, the administration has invoked emergency powers and trade statutes to impose tariffs across a broad spectrum of imports. Notably, a universal 10% “reciprocal tariff” was enacted on nearly all U.S. imports in April, with elevated rates for countries running large trade surpluses with the U.S.: 34% for China, 24% for Japan, and 20% for the European Union. Some specific sectors faced even higher tariffs.

These measures have disrupted global supply chains, increased costs for U.S. manufacturers and consumers, and provoked retaliatory tariffs from key trading partners including, most notably, China. While the administration argues that these policies will revitalize domestic production and reduce trade deficits, critics warn of inflationary pressures and reduced manufacturing competitiveness.

Agricultural exports have been particularly affected by retaliatory tariffs.

Negotiations are ongoing with several countries, including the EU, Japan, and the UK, with some preliminary agreements having been reached. However, considerable uncertainty remains, especially as legal challenges to the tariffs proceed through federal courts.

Looking ahead, businesses must brace for continued volatility in trade policy, with potential for further tariff escalations or selective rollbacks depending on diplomatic progress and domestic economic impacts.