US Economy Poised for Solid Growth in 2025 Despite Trump's Policies: BofA

Despite uncertainties surrounding President-elect Donald Trump's economic policies, Bank of America (BofA) expects the US economy to maintain solid growth in 2025, projecting an annualized rate of 2.4%, according to a research note released Monday. This forecast surpasses current consensus estimates of around 2% growth, as reported by Yahoo Finance.

BofA's economists acknowledge the potential risks associated with Trump's proposals, including tariffs on imported goods, corporate tax cuts, and immigration restrictions. These policies are widely viewed as potentially inflationary and could hinder economic growth while exacerbating the already substantial federal budget deficit. Furthermore, these inflationary pressures, coupled with a hawkish tariff policy, could strengthen the US dollar and negatively impact global financial conditions, representing "a major shock, not only for the US economy but the rest of the world," BofA noted.

However, BofA emphasizes the US economy's resilience and its ability to withstand potential economic downturns. "We like to say that the US imports a lot of stuff, but it doesn't import recessions," Aditya Bhave, BofA's senior US economist, told Yahoo Finance. "It only exports recessions."

Bhave argues that any changes in US trade policy would pose greater risks to other developed nations than to the US itself due to the US economy's inherent strength. Recent economic indicators, such as a robust consumer confidence index, strong economic output, exceeding retail sales, low unemployment, and moderating inflation, support this assessment.

"The world right now is one in which the US economy has consistently outperformed [for] almost two years," Bhave stated. "Europe is struggling, China is struggling, so the US is going into any potential disruption to trade policy on much more solid footing than Europe and China are. I think that fact wouldn't be lost on the incoming administration either."

Trump's proposed tariffs, particularly his pledge to impose at least 10% tariffs on all trading partners, including a 60% tariff on Chinese imports, are a major source of uncertainty. However, BofA does not anticipate a full-blown trade war, suggesting a more moderate approach to tariffs. While the firm acknowledges that tariffs can disrupt capital expenditures and exports, it also notes that the US imports significantly more goods and services than it exports from these countries, mitigating the domestic impact.