The United States economy started 2025 on strong footing, subsequent to a year of robust growth. However, a combination of proposed policies may weigh on this growth, and leave inflation raised, as 2025 progresses. This can ultimately result in a more patient policy stance from the Fed. As per Kavan Choksi, post-election revival in certain industries and labour market strength supporting solid growth in personal income for consumers may contribute to a strong growth momentum in the first quarter of 2025.
Kavan Choksi sheds light on the United States being a global growth leader in 2025
The United States economy has maintained a solid growth trajectory in 2024. This growth was supported by robust consumer spending, as well as healthy employment and income growth, along with strong productivity momentum that played a critical role in taming inflationary pressures. These positive dynamics are likely to carry through 2025, enabling the Fed to pursue cautious and gradual policy re-calibration. However, the overall outlook for the future is clouded by uncertainties surrounding immigration, tax and trade policy. In the first half of 2025, the economy is likely to benefit from stronger private sector confidence and deregulation. However, lower immigration and tariffs may give rise to inflationary growth headwinds in the second half of the year. The Trump administration may push for diverse household and corporate tax cuts in 2025.
Nonetheless, the United States economy is widely expected to remain the global growth leader in 2025. Its position is driven by easing monetary policy, accommodating fiscal policy, pro-cyclical productivity growth and solid income growth. The real GDP growth in major economies across the world is expected to realign with trend growth. However, the United States would be among the exceptions where this convergence shall be from above-potential GDP growth toward 2.2%. There are two-fold implications of this. The United States economy shall be the key driver of global economic resilience; however, softer momentum would limit the global pull.
As Kavan Choksi says that as regulatory, immigration, trade and tax policy changes in the United States, it might represent opportunities and risks worldwide. The magnitude, timing and composition of policy shifts are not yet certain. But are expected to have a consequential impact on inflation and economic dynamics in 2025 and beyond. Trade policy would play a significant role in shaping the global economy in late 2025 and 2026. The implementation of tariffs and other protectionist measures could have a profound impact. It may potentially drive the global economy into a state of “stagflation” if these policies are fully enacted. On the other hand, tax cuts and increased private sector confidence driven by expectations of pro-business policies and deregulation may boost spending and investment in the near term.
Broadly speaking, the United States economy has the fundamentals to be positioned for a healthy 2025, especially with the labour market in better equilibrium and inflation gradually returning towards the Federal Reserve’s 2% target. U.S. growth is likely to remain resilient in 2025, and U.S. investment is expected to continue contributing to global growth.
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