UCLA - University of California - Los Angeles
12/11/2024 | Press release | Distributed by Public on 12/11/2024 11:57
UCLA Anderson Forecast: Uncertainties underlie economy ahead of new administration, policies
As President-elect Donald Trump returns to the White House in January 2025 with plans to implement several economic policies he promised during the 2024 campaign, including tariffs, deportations and tax cuts, the UCLA Anderson Forecast today released its latest analysis of the U.S. and California economies.
How these policies, such as new or increased tariffs on the United States'largest trading partners, mass deportations, tax cuts, and deregulation will be implemented is uncertain, creating forecast challenges. In its winter 2024 quarterly forecast, UCLA Anderson Forecast economists aim to minimize speculation by considering only policies that have been publicly discussed - and are likeliest to occur.
These policies include imposing 25% tariffs on all goods from Mexico and Canada, raising tariffs on China by 10 percentage points, deporting up to 1 million undocumented immigrants annually, and making permanent the Tax Cuts and Jobs Act of 2017. While these are the assumptions in the forecast, reality could be much different.
While the details are uncertain, the policies are expected to impact the cost of living, according to the forecast. Tariffs will raise price levels on many goods and services. Deportation will create labor shortages in agriculture, nondurable goods manufacturing, construction, and leisure and hospitality services. Additional tax cuts may further increase consumption demand and, therefore, prices in a labor-constrained economy.
UCLA Anderson Forecast economists expect tariffs will be passed on, for the most part, in the form of higher prices, temporarily raising inflation in 2025 to just above 3% and increasing consumer prices by 0.9%. In 2026, inflation is forecast to be well above 2%, with headline inflation going higher than core inflation - which excludes food and energy prices.
The national economy is forecast to outshine global peers, though GDP growth is expected to fall below 2% on a seasonally adjusted annual rate.
Tariffs, immigration policy, regulatory policy and tax policy also figure heavily in the forecast for California's economy, which the economists expect to grow at about the same rate as the nation's in 2025 and 2026.