According to a report from the nonpartisan Congressional Budget Office (CBO) on September 12, CBO projects that President Donald Trump’s tariffs, immigration controls, and sweeping tax and spending bills will push up unemployment and inflation this year and suppress overall economic growth before improving next year.
The CBO released new economic forecasts for the next three years on Friday, revising its outlook released in January, before Trump took office.
Compared to previous forecasts, the latest figures show that unemployment, inflation, and overall growth are all projected to be worse this year than initially predicted, while the economy is expected to stabilize in subsequent years.
The CBO’s outlook reports attempt to set economic expectations to help policymakers in Congress and the executive branch formulate political and economic policies. Its forecasts generally do not include assessments of economic downturns or recessions, and its estimates typically regress to expected averages over time.
However, Friday’s outlook shows that Trump’s political choices have significantly altered the trajectory of the U.S. economy, constraining economic growth in the short term. These choices have yet to deliver the positive results he promised, such as increased employment and reduced budget deficits.
“Americans heard similar gloomy predictions during President Trump’s first term, when his economic policies drove historic gains in jobs, wages, and the economy, and narrowed the wealth gap for the first time in decades,” Kush Desai, a spokesperson for the White House, told reporters.
“These same policies of tax cuts, tariffs, deregulation, and energy expansion will work again in a second term for President Trump and prove forecasters wrong,” he said.
Overall, the CBO projects real gross domestic product (GDP) growth will slow from 2.5% in 2024 to 1.4% this year, a further downward revision from its initial forecast of 1.9%. The CBO attributes the expected decline to slower consumer spending due to the new tariffs and reduced immigration.
The report says tariffs “have increased prices for consumer goods and services, thereby weakening household purchasing power; they have also increased the costs for businesses using imported and import-competing raw materials.”
However, GDP growth is projected to rebound to 2.2% in 2026, up from the 1.8% projected in the CBO’s January forecast. It will then stabilize at 1.8% in 2027 and 2028, the CBO said in its latest report.
In addition, the CBO projects the unemployment rate to reach 4.5% in 2025, up from its initial forecast of 4.3%. The unemployment rate is projected to reach 4.2% in 2026, slightly lower than the initial forecast of 4.4%, and then stabilize at 4.4% in 2027 and 2028.
Inflation is projected to reach 3.1% for the remainder of 2025, up from the 2.2% forecast in January. Inflation will then fall to 2.4% in 2026, higher than the initial forecast of 2.1%, before stabilizing at 2% for the next two years.
A report released Wednesday by the Congressional Budget Office shows that Trump’s mass deportation plan and other tough immigration measures will result in the expulsion of approximately 320,000 people from the United States over the next decade.
Combined with the United States’ lower fertility rate, the reduced immigration means that the Congressional Budget Office’s 2035 population forecast will be 4.5 million fewer than the nonpartisan agency’s January projection.
