In his first address to Congress since being re-elected, President Donald Trump is set to discuss the current economic landscape heading into 2025, which shows both resilience and emerging concerns. While the U.S. economy was propelled by strong consumer spending and a robust labor market through 2024, analysts warn of instability as key economic indicators signal possible downturns.
The real gross domestic product (GDP) grew at a steady rate of 2.3% through the end of 2024, showcasing a well-functioning consumer market bolstered by job security. However, a recent forecast by the Federal Reserve Bank of Atlanta cautioned that the economy could contract by 2.8% in the near future, primarily attributed to reduced consumer spending and an influx of imports anticipated ahead of impending tariffs. This development raises questions about whether the economy is truly prepared for potential volatility.
Despite inflation rates cooling since their peak in 2022, challenges persist, especially with recent spikes in essential commodities like food and energy. Reports suggest inflation remains above the Federal Reserve’s target of 2%, driven in part by ongoing concerns over the effects of the Trump administration’s import tariffs, which are projected to affect consumer prices and reignite inflationary pressures.
In a recent effort to address the rising costs of eggs, a symbol of broader inflation issues, the Trump administration introduced a five-pronged strategy aimed at battling avian flu, a contributing factor to heightened prices. While this initiative seeks to stabilize egg prices, agricultural officials caution that relief may take time.
Stock market performance remained strong throughout 2023 and 2024, with indicators suggesting a continued positive outlook as economic conditions support market growth. However, recent trends show apprehension among investors as all three major U.S. indexes ended February on a downward note due to increasing uncertainties surrounding AI spending and geopolitical tensions.
Further complicating the housing market, residential real estate is grappling with low inventory and elevated mortgage rates above 6%, driven by both previous economic recoveries and the political landscape influenced by Trump’s policies. Warnings from homebuilders highlight the potential negative impacts of tariffs and immigration restrictions on housing costs and availability. Budget-conscious Americans face challenges, especially with home prices escalating significantly despite stagnant sales, which hit a nearly three-decade low in 2024.
Recent data indicates that Americans might also experience increased car costs, with average prices for new cars reaching $48,100, reflecting nearly a $10,000 increase since pre-pandemic levels, largely due to supply chain issues and tariff impacts. Analysis suggests that tariffs imposed on imports of vehicles could elevate the production costs of cars made in North America by up to $12,000, further exacerbating affordability concerns for consumers.
As President Trump moves forward with potentially sweeping policy changes aimed at stabilizing the economy, both the legislative agenda and economic performance are under scrutiny. His administration must navigate the line between fostering growth and mitigating risk amid a complicated economic backdrop as 2025 unfolds.