CBO: Trump Economic Policies to Weaken 2025 Growth Before Rebound in 2026

President 👤Donald Trump’s tariff hikes, immigration crackdowns, and sweeping tax-and-spending agenda are expected to slow the U.S. 💰Economy in 2025 — raising joblessness and inflation while reducing growth — before stabilizing in later years, according to a new report from the nonpartisan Congressional Budget Office (CBO).

The report, released Friday, offers the CBO’s updated economic projections through 2028, revising earlier forecasts made in January — before Trump returned to office, according to The Associated Press.

While the CBO does not explicitly forecast recessions or downturns, it provides economic estimates to inform policymaking across Congress and the executive branch. The new figures reflect a notably dimmer short-term outlook compared to earlier projections, suggesting that Trump’s second-term policy agenda is reshaping the near-term trajectory of the U.S. 💰Economy.

The updated forecast projects that real GDP growth will slow to 1.4% in 2025, down from 2.5% in 2024 and below the 1.9% previously forecast in January. The report attributes this to a drop in consumer spending driven by new 💵Tariffs and a sharp decrease in immigration.

“The 💵Tariffs raise prices for consumer goods and services, thereby eroding the purchasing power of households; they also increase costs for businesses that use imported and import-competing inputs in production,” the report states.

Unemployment is now expected to reach 4.5% in 2025, compared to the 4.3% forecast earlier this year. However, the jobless rate is expected to decline slightly to 4.2% in 2026 — better than the original 4.4% projection — and stabilize at 4.4% in 2027 and 2028.

Inflation, measured by the consumer price index, is projected to hit 3.1% in 2025, a significant revision upward from the 2.2% estimate made in January. The CBO projects inflation to ease to 2.4% in 2026, still above its previous expectation of 2.1%, before leveling off to 2% in 2027 and 2028.

Despite the near-term slowdown, the economic picture is expected to improve. The CBO estimates that GDP growth will climb to 2.2% in 2026, exceeding its earlier projection of 1.8%, before gradually returning to long-term trend growth of 1.8% in subsequent years.

The White House defended its policies, emphasizing long-term gains and rejecting what it described as premature pessimism.

“Americans heard similar doom-and-gloom forecasts during President Trump’s first term, when the President’s economic agenda unleashed historic job, wage, and economic growth and the first decline in wealth inequality in decades,” said Kush Desai, a White House spokesperson, in a statement to the Associated Press.

“These same policies of tax cuts, 💵Tariffs, deregulation, and energy abundance are set to deliver — and prove the forecasters wrong — again in President Trump’s second term,” he added.

The CBO also released a related report this week outlining the demographic consequences of Trump’s proposed mass deportations and hard-line immigration policies. According to the office, such policies will result in the removal of approximately 320,000 individuals over the next ten years.

Combined with declining fertility rates, the reduced immigration levels mean the U.S. population is now projected to be 4.5 million lower by 2035 than previously expected in the CBO’s January forecast.

The figures come as Congress and the White House face growing scrutiny over how Trump’s signature policies — from economic protectionism to immigration restrictions — will shape America’s long-term economic trajectory.

While the administration argues that the policies are necessary to rebalance trade, protect domestic jobs, and restore fiscal discipline, critics warn of short-term pain with uncertain long-term gain — a tension clearly reflected in the CBO’s latest outlook.