The Tariffs Kicked In. The Sky Didn't Fall. Were the Economists Wrong?

New York Times

2 days ago

Way back in April, when President Trump unveiled his plans for steep tariffs against the United States' trading partners, some Democrats were publicly gleeful about what they thought was the beginning of a Trump recession. Some of his supporters were privately worried about the same thing.
That sure seems like a long time ago now. Nearly four months later, with the economy still largely intact, the poles are reversed: Mr. Trump's camp is publicly gleeful, while some Democrats are secretly disappointed. Financial markets have been on the same roller coaster.
So were the models wrong? Was the concern misplaced? Should the economists who sounded the alarm — the same people who got so many high-profile predictions wrong in recent years — be sitting down to eat another course of humble pie? Well, it's not that simple.
Just as the models predicted, growth has indeed slowed, and inflation has risen. If you look at the first half of the year as a whole, there is more than a hint of stagflation, that dreaded combination of slow growth and inflation. In fact, this chart shows that reality has fallen short of the predictions that economists made late last year, when Mr. Trump inherited an economy that was on track for continued solid growth and diminishing inflation.
The economy slowed and inflation rose more than predicted
Annual growth rates for 2025
November forecast
Actual
Growth in G.D.P.
2.1%
1.2%
Growth in inflation
2.2%
3.0%
1%
0%
3%
2%
Source: U.S. Bureau of Economic Analysis.
Note: Inflation measure
excludes food and energy prices. Data estimates are based on the first half of 2025.
The economy slowed and inflation rose more than predicted
Annual growth rates for 2025
November forecast
Actual
2.1%
Growth in G.D.P.
1.2%
2.2%
Growth in inflation
3.0%
0%
1%
2%
3%
Source: U.S. Bureau of Economic Analysis.
Note: Inflation measure excludes food and energy prices
Data estimates are based on the first half of 2025.
Not all of the slower growth and higher inflation is the result of tariffs. Many factors are at play, including substantial reductions in immigration. But the latest forecasts from the Yale Budget Lab (where I have an advisory role), like many other such analyses, see a 0.5-percentage-point reduction in growth this year and a gross domestic product that is persistently 0.4 percent lower than it would have been without the tariffs.
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