(The Center Square) – A credit-rating agency said President Donald Trump’s tariffs, combined with slower population growth and federal cost-cutting, could lower economic forecasts.
S&P Global said it expects below-potential U.S. real GDP growth of 1.7% in 2025 and 1.6% in 2026 as growth “is restrained by slower population growth, tariffs, and the federal government’s cost-cutting initiatives.”
“We expect weaker growth in the near-term to soften the labor market further in the next 12 months, with the unemployment rate rising to 4.6% by the first half of next year before gradually returning to its long-run average of 4.1% by mid-2027,” said Satyam Panday, S&P Global Ratings chief economist, U.S. and Canada.
S&P expects tariffs “will settle below their April peak in the coming months but still materially higher than 2024.”
“We therefore anticipate core consumer price inflation of 3.0%-3.5% by the end of the year,” according to the report. “We expect the fed funds rate will be 3.75%-4.00% by end-2025 and will reach its nominal neutral of 3.00%-3.25% by end-2026.”
Economists, businesses and some publicly traded companies have warned that tariffs could raise prices on a wide range of consumer products.
Trump has said he wants to use tariffs to restore manufacturing jobs lost to lower-wage countries in decades past, shift the tax burden away from U.S. families, and pay down the national debt.
A tariff is a tax on imported goods. The importer pays the tax and can either absorb the loss or pass the cost on to consumers through higher prices.
