The US economy is currently performing well, with economists from Bank of America (BofA) projecting continued growth into 2025. According to a research note released on Monday, the bank’s economics team, led by Claudio Irigoyen, anticipates the economy will expand at an annualized rate of 2.4% in 2025. This projection surpasses the consensus estimates, which expect growth of around 2%. Despite the challenges posed by President-elect Donald Trump’s economic policies, including proposed tariffs, corporate tax cuts, and restrictions on immigration, BofA maintains a positive outlook.
These proposed policies, which many economists view as inflationary, could slow economic growth and add pressure to the already high federal deficit. In particular, the Federal Reserve’s decision-making regarding interest rates could be complicated, given the potential economic effects of these policies. Higher rates, combined with a tough tariff stance, would likely strengthen the US dollar, creating ripple effects across global financial markets. BofA has warned that such a combination could lead to “a major shock, not only for the US economy but the rest of the world.”
Despite these concerns, BofA emphasizes that the US is better positioned than many other nations to weather any economic disruptions stemming from Trump’s policies. “We like to say that the US imports a lot of stuff, but it doesn’t import recessions,” said Aditya Bhave, senior US economist at Bank of America, during a press briefing on Monday. “It only exports recessions.” Bhave explained that any changes in US trade policy are more likely to affect other economies than the US itself, due to the inherent resilience of the US economy compared to other developed countries.
Recent economic data supports this optimistic view. Consumer confidence in the US is at its highest level in 18 months, and economic output has reached levels not seen since April 2022. Retail sales in October exceeded expectations, and the unemployment rate remains steady at around 4%. Inflation has also moderated, moving closer to the Federal Reserve’s target of 2%. “The world right now is one in which the US economy has consistently outperformed [for] almost two years,” Bhave said. “Europe is struggling, China is struggling, so the US is going into any potential disruption to trade policy on much more solid footing than Europe and China are.”
One of the most discussed elements of Trump’s economic agenda is his stance on tariffs. The president-elect has promised to impose blanket tariffs of at least 10% on all trading partners, with a particularly harsh 60% tariff on Chinese imports. If other countries retaliate with their own tariffs, the resulting trade war could lead to prolonged inflationary pressures. However, BofA does not expect this scenario to materialize in full. The bank’s baseline forecast anticipates tariffs on China and other countries, but it expects the actual tariffs to be lower than those promised during the campaign. BofA remains “moderately optimistic” that a full-blown trade war can be avoided.
Despite these risks, Bhave noted that tariffs would likely have a larger impact on capital expenditures and exports than on the US itself. “Tariffs can be very disruptive in terms of capital expenditures [and] obviously exports,” he said. However, since the US imports more goods and services from other countries than it exports, the impact of tariffs would be more detrimental to those regions than to the US. “Just by definition, the tariffs pose a much greater threat to those regions than to the US,” Bhave explained.
While there are uncertainties surrounding Trump’s trade policies and other proposed economic changes, BofA’s outlook on the US economy remains positive. The country’s economic resilience, along with strong domestic growth trends, positions it well to handle potential disruptions in global trade. The combination of consumer confidence, strong retail sales, and a steady labor market are key factors supporting this outlook. Furthermore, while tariffs may cause short-term disruptions, their long-term effects are expected to be less severe for the US than for other countries that rely more heavily on exports to the US.
As the US economy heads into 2025, it faces some challenges, but the fundamentals appear strong. The Bank of America’s optimistic forecast of 2.4% growth for the year ahead reflects the confidence that many economists have in the resilience of the US economy. Although trade policies and other economic changes could create uncertainties, the US is better equipped than other nations to manage these challenges. According to Bhave, “The US imports a lot of stuff, but it doesn’t import recessions.” The US economy, supported by strong consumer confidence, solid economic output, and low unemployment, is likely to continue outperforming other developed economies in the years to come.
