Economists began 2025 expecting trade chaos and stagnation. They ended the year surprised by how resilient the U.S. economy proved to be—at least on paper.
According to The Wall Street Journal’s latest January survey of 74 academic and business economists, U.S. gross domestic product grew 2.3% in real terms last year, defying earlier forecasts that had pegged growth at just 0.8%.
Those earlier estimates, issued in April 2025, reflected fears that President Donald Trump’s tariffs would choke off trade and derail recovery. Instead, despite volatile tariff stops-and-starts that sent importers scrambling to source goods from countries facing lower rates, overall economic momentum held up better than expected.
A combination of factors helped sustain demand. Rising stock prices buoyed upper-income households, which account for nearly half of all consumer spending—a segment that makes up about 69% of GDP.
The “One Big Beautiful Bill Act,” which introduced sweeping tax cuts, provided additional consumer support, while minimum wage hikes in 19 states gave a modest boost to lower-income earners. The Federal Reserve also eased financial conditions, cutting interest rates at its last three meetings.
“Risks are skewed towards additional rate cuts this year given labor market weakness, continued downside surprises from [inflation] and a slightly more dovish Fed leadership,” James Knightley, chief international economist at ING, told the Journal. Many economists surveyed expect unemployment to hold around 4.5%, suggesting that the worst of the labor-market stress may be over.
Still, not all economists see the picture as reassuring. Adam Posen, president of the Peterson Institute for International Economics, argued in Bloomberg that “many forecasters and investors misinterpret what is happening in the American economy.”
He wrote that mistaken optimism stems from “a fundamental misunderstanding of how government-induced uncertainty affects the economy” and warned that even the investment wave tied to artificial intelligence cannot offset bigger structural risks.
Posen contends that no administration in at least a century has created as much economic uncertainty as the current one. He wrote that emerging “stagflationary effects of Trump’s policies are kicking in and should become too evident to miss as we approach April 2, the first anniversary of his so-called Liberation Day,” referring to an economic mix of weak growth, rising unemployment and persistent inflation.
Much depends on whether the current strength can last. The Journal survey was conducted before Trump announced new tariff measures connected to his renewed push to acquire Greenland—a move that, according to Reuters, has revived investor debate over “sell USA” trade and capital strategies.
Posen also cited what he called a “radical shift in U.S. immigration policy,” pointing to widespread fear among both undocumented and legally residing immigrants, intensified by visible enforcement actions in places like Minneapolis. Those disruptions, he argued, are rippling through industries from manufacturing to commercial real estate construction.
“Besides the changes to trade and immigration policies,” Posen wrote, “the Trump administration’s corrosion of past U.S. norms regarding the rule of law, government corruption and self-dealing; technocratic provision of economic and scientific data; and central bank independence all take their toll.”
While traditional economic models may still accurately describe broad outcomes, he added, they struggle to capture how uncertainty itself can paralyze investment and decision-making.
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