S&P Global U.S. Forecast Update April 2025

April 11, 2025

By Delaney O’Kray-Murphy, EBRC Research Economist

Reciprocal tariffs dampen growth expectations

S&P Global have released their April 2025 forecast update for the U.S. The current forecast is based on the following assumptions:

This forecast assumes the implementation of an average effective 24% tariff by May along with a 60% tariff on imports from China starting in April. S&P Global assumes a 25% tariff on all steel and aluminum imports, and a 25% general tariff on non-USMCA compliant goods and autos from Canada and Mexico that steps down to 12% over one year (except for autos).
Deportations combined with a sharply reduced inflow of immigrants will reduce U.S. aggregate supply and aggregate demand. This forecast assumes net international migration will be reduced, relative to Census projections, by about 500,000 per year during the four years of the Trump presidency.
The Fiscal Responsibility Act, which suspended the debt-limit, ended on Jan. 1, 2025, and the Treasury has undertaken “extraordinary measures” to meet its obligations. The debt ceiling is assumed raised or suspended prior to the exhaustion of these measures. S&P Global assumes a cumulative 255,000 federal layoffs through August 2025.
Personal income tax cuts related to the 2017 TCJA are extended. Some exclusion of tip and overtime pay from federal taxation is assumed to be adopted. Corporate tax policy now assumes a lower corporate tax rate on corporate income from 21% to 15% for corporations that produce domestically. Scheduled Social Security and Medicare benefits are paid beyond the projected exhaustion of those funds.
After cutting by 100 basis points (bps) in 2024, the Fed cuts once at the end of 2025, during the December meeting. Thereafter, the FOMC cuts by 25 bps at three consecutive meetings through March 2026 before slowing to the pace of every other meeting, bringing the funds rate to 2.75-3.00%. The Fed then raises once back to a neutral rate of 3.00-3.25% in late 2028.
Real foreign GDP rose 2.0% in 2024. The forecast calls for growth to slow to 1.6% in 2025 before rising to 1.8% in 2026.
The price of Brent crude oil rose to $113 per barrel in the second quarter of 2022, up from $80 per barrel in the fourth quarter of 2021. The price is forecast to drop to $72 per barrel in 2025 and $69 in 2026 before gradually rising at the rate of inflation.

The baseline forecast (summarized here) is assigned a 50% probability. The pessimistic scenario is assigned 35%, and the optimistic scenario is assigned the remaining 15%. The pessimistic scenario is 10 percentage points more likely than last month, and the optimistic scenario is 10 percentage points less likely.

After increasing by 2.9% in 2023 and 2.8% in 2024, the baseline forecast calls for real GDP growth to drop to 1.3% in 2025 and 1.5% in 2026. On a quarterly basis, the forecast calls for real GDP to increase through 2034 (no recession).

Headline inflation spiked in 2022 to 8.0%, then decelerated to 4.1% in 2023 and 3.0% in 2024. It is forecast to rise to 3.6% in 2025, as tariffs and other policies take effect, then fall to 2.8% in 2026 and 1.9% in 2027.

The unemployment rate peaked at 8.1% in 2020 but fell to 5.4% in 2021 and again to 3.6% in 2022. It remained at 3.6% in 2023 and rose to 4.0% in 2024. Unemployment is forecast to rise to 4.4% in 2025 and 4.9% in 2026, then peak in 2027 at 5.1% before gradually declining.

Nonfarm payroll jobs nationally dropped by 5.8% in 2020 but rebounded with growth of 2.9% in 2021 and 4.3% in 2022. Jobs rose by 2.2% in 2023 and slowed to 1.3% in 2024. Job growth is forecast to slow further to 0.9% in 2025 and 0.0% in 2026 and 2027.

Housing starts surged in 2021 to 1.61 million units. Activity remained strong in 2022 at 1.55 million. Starts fell to 1.42 million in 2023 and 1.37 million in 2024. They are forecast to rise to 1.40 million in 2025 and drop to 1.34 million in 2026, as high interest rates and inflation take a toll on housing activity.

Exhibit 1 summarizes the April 2025 forecast from S&P Global. Exhibit 2 shows the March 2025 projections and Exhibit 3 shows the difference.