Economic Outlook: CBO’s Projections Amid Trump’s Policies

WASHINGTON (AP) — The nonpartisan Congressional Budget Office (CBO) has released an updated economic forecast indicating that President Donald Trump’s tariff policies, strict immigration measures, and expansive tax and spending legislation are anticipated to contribute to higher unemployment rates, increased inflation, and reduced overall economic growth in the short term. These trends, however, are expected to stabilize in subsequent years.

Updated Economic Projections

On Friday, the CBO unveiled its revised economic projections for the next three years, providing an updated outlook from the initial report released in January, prior to Trump’s inauguration. The latest assessments, which compare changes in the fourth quarter, reveal a pessimistic trend for the current year: unemployment, inflation, and overall growth are now expected to fare worse than earlier estimates.

Impact of Policy Decisions

The CBO’s projections aim to guide policymakers in the congressional and executive branches, focusing on expectations for the economy while not predicting recessions or downturns. However, Friday’s report highlights how Trump’s policy decisions are significantly altering the trajectory of the U.S. economy. Despite hopes for more jobs and decreased budget deficits, the immediate impact has seen economic growth constrained.

Kush Desai, a spokesperson for the White House, attributed these forecasts to a pattern of pessimism encountered during Trump’s first term, asserting that the President’s economic agenda will ultimately yield historic growth and reduced wealth inequality. “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 stated.

Key Economic Indicators

The revised projections indicate a decrease in real GDP growth from 2.5% in 2024 to 1.4% for the current year—a downgrade from the earlier estimate of 1.9%. The slowdown in consumer spending, driven by new tariffs and declining immigration, is primarily responsible for this adjustment.

The CBO report explains, “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.” However, the CBO forecasts GDP growth to improve to 2.2% in 2026, surpassing the January prediction of 1.8%. This growth rate is expected to stabilize at 1.8% in the following two years.

Projected Unemployment and Inflation Rates

The unemployment rate is projected to reach 4.5% in 2025, higher than the previously expected 4.3%. It is anticipated to slightly decrease to 4.2% in 2026 before stabilizing at 4.4% through 2027 and 2028.

Regarding inflation, the CBO now predicts it will rise to 3.1% for the remainder of 2025, an increase from the earlier forecast of 2.2%. Inflation is expected to decline to 2.4% in 2026 and settle at 2% in the following two years.

Long-Term Implications of Immigration Policies

In a related report, the CBO indicated that Trump’s robust immigration enforcement policies aimed at mass deportations will likely result in approximately 320,000 individuals being removed from the country over the next decade. This, combined with a declining fertility rate in the U.S., suggests that the projected population will be 4.5 million lower by 2035 than previously estimated in January.

Conclusion

The CBO’s latest figures depict a challenging economic landscape in the near term, influenced by the current administration’s policies. As the administration continues to advocate for its agenda, the medium and long-term projections point towards potential recovery, leaving many to wonder how these factors will play out in the broader context of the U.S. economy.