By Dr. Christopher Kuehl and Mr. Keith Prather of Armada Corporate Intelligence

Published: December 23, 2024 

As we approach 2025, the global economy stands at a pivotal juncture, with the United States playing a central role in shaping the global economic landscape. The recent election of Donald Trump as the 47th President of the United States signals a potential shift in policy direction, bringing both opportunities and challenges for domestic and international markets. The U.S. economy is projected to maintain an average growth trajectory in 2025, with a Real GDP growth forecast of 2.1%, according to the latest Federal Reserve Summary of Economic Projections.  
 
While this represents moderation from the 2.7% growth anticipated in 2024, it still slightly outpaces the long-term trend of 1.8% in the years following the 2008-2009 financial crisis. On the international stage, the global economy is expected to expand by around 3%, according to the World Economic Outlook, which is within its historical range.  China will be a drag on global growth with its growth forecasted at 4.1%, a notable deceleration from its average of 6.7% between 2010 and 2024.

Inflation, unemployment, and a new administration

 
Inflation, as measured by the Personal Consumption Expenditures (PCE) price index, is projected to average around 2.5% in 2025. Core inflation (stripping out food and energy) may persist above 2.5% for much of the year, driven by potential policy-induced inflationary pressures (tariffs primarily). The Federal Reserve is likely to navigate this landscape cautiously remaining data-driven, with the federal funds rate expected to decrease to 3.9% by the end of 2025.
 
In the financial markets, Treasury yields are expected to trend lower in 2025, with the 10-year yield potentially moving toward the 4.0% to 4.25% range. However, this forecast is subject to change based on inflation trends and Federal Reserve policy decisions. Corporate bond issuance is projected to grow moderately in 2025 according to S&P Global, with global bond issuance expected to increase by 4%. This growth, while positive, represents a slowdown from the robust 17% growth anticipated for all of 2024.
 
The labor market is anticipated to remain relatively tight, with the unemployment rate forecasted at 4.3% in 2025. This low unemployment rate, coupled with rising wages (currently at a 4% annual rate through November), could contribute to persistent inflationary pressures. However, a potential productivity boom, fueled by advancements in artificial intelligence and technology, could help offset some of these pressures and support economic growth.
 
The new administration's fiscal policy is expected to be expansionary, potentially including tax cuts and increased spending in areas with higher economic multiplier effects (i.e. manufacturing, construction, infrastructure). While this approach could stimulate growth in the short term, it may also lead to higher inflation and interest rates. The sustainability of U.S. debt is also a growing concern, with the Congressional Budget Office projecting the debt-to-GDP ratio to reach 107% by 2029 if spending patterns continue at current rates.
 
The Trump administration's Treasury Secretary appointee, Scott Bessent, has proposed a "3-3-3" plan, targeting a 3% annual GDP growth rate, trimming the budget deficit to 3% (from the current 6.4% or $1.8 trillion), and increasing daily U.S. oil production by 3 million barrels to help tame inflation. This is an ambitious plan and underscores the administration's focus on economic growth and fiscal management.

Tariffs and potential trade wars

 
Trade policy under the Trump administration poses one of the most significant uncertainties for global growth projections in 2025. Campaign promises of substantial blanket tariff increases, particularly on Chinese imports, have raised concerns about a potential trade war. While the full implementation of these tariffs seems unlikely, even modest increases could impact global supply chains and economic growth. It's worth noting that during Trump's first term, some estimates showed increased tariffs only raising macro inflation by 0.2 percentage points, suggesting the possibility of a marginal impact. In addition, in his first term, the USTR granted roughly 11,534 exclusions to tariffs.

Industry projections


Several industries are poised for expansion in 2025. Artificial Intelligence and Technology sectors are expected to see increased investment, driving growth and productivity gains across various sectors. The Life Sciences industry is likely to benefit from continued innovation and investment in healthcare and biotechnology. Data Centers are projected to see ongoing construction and expansion, driven by increasing demand for cloud computing and data storage. The Renewable Energy sector is anticipated to grow, particularly in clean energy projects and infrastructure. Financial Services, including banks, private equity, and private credit firms, may benefit from improved conditions and opportunities for increased risk-taking. And certain segments of the nonresidential construction sector, particularly manufacturing and industrial facilities, are expected to experience strong growth.
 
Conversely, some industries may face challenges in 2025. Traditional Manufacturing sectors relying heavily on foreign trade could be impacted by potential trade tensions and tariff increases. The Real Estate sector, particularly commercial office spaces, may continue to struggle with changing work patterns post-pandemic, although some segments are expected to remain robust. Industries dependent on government contracts could be affected by potential shifts in government spending priorities under the Department of Government Efficiency (DOGE).

The global economy

 
Several global risks could also impact the economic outlook for 2025. Ongoing geopolitical tensions, including conflicts in Ukraine and the Middle East, as well as potential escalations with Iran or China, could disrupt global markets and supply chains. The implementation of aggressive trade policies by the U.S. could lead to retaliatory measures from trading partners, potentially slowing global growth. Rising global debt levels, particularly in advanced economies, also pose risks to financial stability. While AI and other technologies offer growth opportunities, they also present risks of job displacement as they mature, and utilization of those technologies becomes more widespread.
 
The U.S. dollar is expected to remain strong in 2025, supported by relatively higher interest rates and robust economic growth. This strength could have mixed implications for the global economy. While it may help control inflation in the U.S., it can create challenges for emerging market economies with dollar-denominated debt. The potential for more restrictive trade policies and a stronger dollar could lead to tighter financial conditions globally, particularly in emerging markets, potentially resulting in capital outflows and increased currency market volatility.

Conclusion

In conclusion, the economic outlook for 2025 presents a complex picture of growth opportunities and potential risks. While the U.S. economy is expected to maintain its growth trajectory, supported by technological advancements and productivity gains, it also faces challenges from potential policy shifts and global uncertainties. The trajectory of U.S. debt accumulation and the risks to global financial markets were unsustainable, regardless of which party won the election. Significant fiscal changes will be required regardless, and the impacts of those measures will affect any party in power. The new administration's policies, particularly in trade and fiscal matters, will play a crucial role in shaping both domestic and international economic landscapes in the years ahead. Industries aligned with technological innovation and financial services are likely to see expansion, while those vulnerable to trade tensions or shifting government priorities may face headwinds.

About the Authors

Dr. Christopher Kuehl and Keith Prather are founders and managing directors of Armada Corporate Intelligence. Dr. Kuehl holds a Ph.D in Political Economics and Master’s Degrees in Soviet Studies and East Asian Studies. He works with a wide variety of corporate clients around the world and is the economist for several national and international organizations. Mr. Prather has been providing corporations with market intelligence and analysis covering domestic and global economics, geopolitics, raw material and supply chain developments, environmental impacts and other factors that affect the corporate operating environment for more than 22 years.
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