The News
The US economy slowed slightly toward the end of last year, but that’s not the biggest worry on economists’ minds.
Gross domestic product, a measure of the value of goods and services, grew at a 2.3% annualized rate in the final months of 2024, according to an advance estimate by the Bureau of Economic Analysis released Thursday. The figure fell short of the 2.6% consensus estimate, but overall, it suggests the economy is on solid ground as the new Trump administration gets underway.
Consumer spending remained strong through the end of the year, although investments dropped: For the year, the US economy grew 2.8%, one point below 2023’s figure.
“The details argue against extrapolating too much … and we won’t make major forecast changes due to the report,” Oxford Economics’ lead US economist Bernard Yaros wrote in a note shared with Semafor. “The biggest risk to our 2025 forecast is an immediate imposition of across-the-board tariffs on key trading partners.”
If Trump enacts his threatened tariffs on Canada, Mexico, and China, it could weaken growth by 1.2 percentage points in 2025, he said.
SIGNALS
Tariffs could hit as soon as Saturday
US President Donald Trump has indicated that his administration could impose 25% tariffs on goods from Mexico and Canada as soon as Saturday — impacting roughly $800 billion in annual trade between the countries. Treasury Secretary Scott Bessent and other Trump administration figures have signaled support for Trump’s proposal, although many economists have cautioned against the move. Mexican President Claudia Sheinbaum has said she doesn’t think Trump will follow through, but that Mexico was prepared: “We don’t expect it will happen, but if it does, we have our plan,” she said, declining to elaborate further, Bloomberg reported.
The Fed treads carefully
The new GDP figures follow the US Federal Reserve’s decision to hold borrowing rates steady Wednesday. While inflation remains above the central bank’s 2% target, unemployment is down and consumer spending is strong, indicating the economy is not in need of the additional boost a rate cut might provide. The Fed is treading cautiously as the new Trump administration comes into focus, with policy proposals like tariffs and deportations that experts warn could stoke inflation. “In the current condition, there’s probably some elevated uncertainty because of significant policy shifts,” Fed Chair Jerome Powell said Wednesday, adding that forecasting would become easier over time.
Latest numbers underscore Biden’s economic legacy
The 2024 year-end figures underscore that over former President Joe Biden’s four years in office, he “presided over the fastest average economic growth of any president since Bill Clinton,” The New York Times wrote. While the pandemic-era recession at the beginning of his term buoyed those increases, the growth that marked the final two years of his presidency — after the economy’s big recovery — still rivals that seen during the tenure of other recent presidents. Biden’s post-COVID economic recovery story, however, “was ultimately undone politically by the fact that he wasn’t able to do enough on cost-of-living issues,” his former economic advisor told the Times.