The year 2025 was incredibly eventful: a new pope was elected, the AI industry expanded substantially, conflicts escalated in the Middle East and between Russia and Ukraine, and significant medical advancements were made worldwide. Aside from these many developments, it was a busy year for the U.S. economy with uncertainties for the markets due to the effect of President Donald Trump’s tariffs and other economic shifters like the lack of job growth. Despite this, Reuters notes that America’s GDP grew 2.7%, a slight decrease from the previous years, with 2024 increasing 2.8% and 2.9% in 2023 according to the World Bank. As we headed into the New Year, economists looked closely at a number of economic indicators to determine what’s ahead, including interest rates, the bond market, and foreign policy.
While it is nearly impossible to predict the exact growth of the U.S., many economists have made predictions based on consumer spending, interest rates, tariffs, and more. The World Bank predicts global GDP to be 2.6%, which is slightly lower than last year. They go on to forecast the U.S GDP to be 2.2%. The OECD expects the U.S. economy to grow only 1.7%, largely shaped by the impact of tariffs on U.S. consumers.
Tariffs are government taxes on imports, often imposed to encourage consumers to purchase goods produced in their own country to boost its economy. In 2025, BBC reported that Trump imposed tariffs on more than 90 countries including Canada, Mexico, and China. Tariffs are placed on goods and services produced in a country, but companies often raise prices to ensure profit, offsetting the cost tariffs to consumers. This disruption can discourage consumers from purchasing more since prices increase, potentially harming the country’s GDP as consumer spending decreases. Trump’s tariffs are starting to be applicable, since the tariffs placed in 2025 did not affect goods that were already in production at the time, so economists are looking at how they will impact future consumer spending. Greeley’s AP Macro teacher Ms. McKie explained how she thinks the tariffs will impact the economy and U.S. consumers, stating, “It’s really unclear, because he has not had a consistent tariff policy yet. Tariffs have not had a huge impact, largely because companies pre-ordered before tariffs hit. So our prices weren’t raised… we kind of have to wait and see.”
Another major indicator of the U.S.’s economy are the markets, namely the stock market and the bond market. Stocks represent partial ownership of a company and are bought or sold on the stock market; bonds are loans to a company or government and are traded on either the primary market, for new issues or the secondary market for trading existing bonds. The unpredictability of U.S. stocks in 2025 paired with the uncertainty regarding Trump’s tariffs caused a perilous situation in which the U.S. almost entered a bear market economy, which Investopedia explains as when prices fall 20% or more due to widespread pessimism and lower confidence. Despite this, markets ended the year positively with an increase in the S&P by 17% and Nasdaq by 21%. CNN notes that while U.S. stocks did well in 2025 international markets performed substantially greater due to AI booms in Asia, increased spending and optimism in Europe, and also a weaker U.S dollar. The U.S dollar index fell 9.4% in 2025, making other currencies stronger. 2026 could potentially be an unstable year for the U.S. dollar according to President Trump’s statements regarding Greenland. Trump has repeatedly mentioned that he wants to acquire Greenland, an autonomous territory within the Kingdom of Denmark (DIIS), for national security purposes; this desire has been negatively received by not only Denmark but the European Union as well.
CBS explains that in January, a Danish pension fund sold $100 million in U.S. treasuries due to poor government finances, and more could follow depending on Trump’s relations with Greenland. The selling of U.S. bonds is harmful for the economy for a number of reasons, it shows risk associated with a country and increases interest rates. When bonds are sold, investors are less likely to purchase them and this lack of willingness forces governments to pay higher interest rates to incentivize loan borrowers, driving up the cost of borrowing money. The bond market is crucial, so when Treasury yields are rising, the impact on the government and consumers is substantial. Ms. McKie also shared her thoughts on how foreign policy will impact the U.S economy, explaining “Even though Trump appears to be somewhat walking back his threats to take over Greenland, Europe is not going to forget. They are no longer going to see America as a dependable partner, and they’ll look to invest their money elsewhere. They will likely buy treasury bonds from other central banks instead of ours, which will drive up our interest rates, which will prevent us from borrowing money to finance our debt, preventing us from financing the government.”Investopedia details that Trump has pulled back on some of his policies in the past due to the bond market’s reaction; many economists are looking closely at what he is going to do next, especially since the World Economic Forum just concluded in Davos.
One way economists determine how the economy will do is the actions of the Fed. The Federal Reserve has a dual mandate of maximum employment and keeping prices stable. They also determine interest rates—the money charged on loans—so they play a key role in the U.S. economy by influencing spending. The independence of the Fed is crucial, so they set monetary policy based on long-term economic stability rather than short term gains for political goals. BBC reports that in August of 2025 Trump said he was removing Federal Reserve governor Lisa Cook, accusing her of mortgage fraud. This case went to the Supreme Court over whether Trump had the jurisdiction to remove her from her job. Early in 2026 Trump launched a criminal investigation into the Federal Reserve Chairman Jerome Powell over whether Powell made false statements regarding the Fed’s billion dollar building renovation. On January 11, 2026, Jerome Powell gave an exceedingly rare statement regarding the criminal investigation which was significant since the Fed rarely releases unplanned statements, as the markets pick apart everything they say. The Federal Reserve transcribed and recorded the statement in which Powell claimed, “The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.” It is important to note that Trump appointed Jerome Powell, and the Senate confirmed him, according to Congress. President Trump has criticized the Fed for not lowering interest rates, and while presidents hoping to lower rates is not uncommon, his public attack on the Fed through the investigation of Powell and the case with Lisa Cook is unusual for a president, notesNPR. Additionally, while lowering interest rates in theory sounds beneficial, it can lead to inflation as consumer spending increases when interest rates are lower, so it is essential that the Fed makes decisions regarding statistics and the health of the economy rather than a President’s desires. Ms. McKie also stated how Trump’s actions towards the Fed will impact the economy and markets, saying, “ The Feds’ independence is crucial to domestic and international faith in the American dollar and the economy.” While no official decisions have been reached, the fact that Trump confronted the Fed to begin with is something economists are looking closely at, and worldwide people are waiting to see what happens with Chairman Powell despite his term being over in May.
Despite the uncertainty regarding Trump’s actions most notably regarding tariffs, Greenland and his attack on the Fed, the U.S. market is known to be incredibly resilient and there is potential for the economy to perform well. Additionally the Trump Administration has set a projection of 5% GDP growth in 2026 according to Barron’s, and while this optimism is not reflected in the prediction of other organizations like the OECD, if employment increases, the markets remain steady, and President Trump restores trust in the U.S. as an economy and government, the U.S. could potentially reach that goal. In fact, according to Yahoo Finance, Bank of America suggested that unemployment might have been overstated towards the end of 2025, suggesting improvements in the unemployment rate. Though many hope for the economy to outperform itself and the GDP to grow, realistically it will be difficult since many of President Trump’s actions have displaced trust with foreign countries resulting in challenges for the U.S. economy. It is also important to consider that GDP and the markets only represent a portion of a country’s health and leave out factors such as the wealth gap and overall happiness. It is incredibly difficult to predict exactly what will happen with the U.S. economy so many are watching closely to see what happens with tariffs, Trump’s interest in acquiring Greenland, the investigation of the Fed, and more.
