The nonpartisan Congressional Budget Office on Friday said President Donald Trump’s tariff policy, proposed immigration crackdowns and recent tax and spending legislation will worsen unemployment, inflation and economic growth this year before conditions stabilize in subsequent years.
The CBO’s updated projections, which revise the outlook the agency released in January, show real gross domestic product falling to 1.4% this year from 2.5% in 2024, a downward revision from the 1.9% growth the agency had projected in January. The office attributed the downgrade largely to a slowdown in consumer spending resulting from new tariffs and a drop in immigration.
The CBO projected the unemployment rate will rise to 4.5% in 2025, up from the 4.3% the agency anticipated in January, before easing to 4.2% in 2026 and leveling at 4.4% in 2027 and 2028. The office said inflation is now expected to average 3.1% for the remainder of 2025, up from the 2.2% it forecast in January, then fall to 2.4% in 2026 and settle at about 2.0% in 2027 and 2028.
In its analysis, the CBO said tariffs raise prices for consumer goods and services, eroding household purchasing power, and increase costs for businesses that use imported inputs. The agency also pointed to the administration’s immigration proposals, which the CBO estimated would lead to roughly 320,000 removals over the next decade and, combined with lower fertility, reduce the U.S. population by about 4.5 million people by 2035 compared with the January projection.
The updated outlook projects a rebound in growth beyond the near term: GDP growth is expected to climb to 2.2% in 2026, above the January forecast of 1.8%, before moderating to 1.8% in 2027 and 2028. The CBO’s projections are intended to set expectations for lawmakers and the executive branch and are not predictions of recessions; the agency’s estimates generally move back toward long-term averages over time.
A White House spokesman, Kush Desai, told The Associated Press that forecasters had been proven wrong during Trump’s first term, when the administration’s policies produced "historic job, wage, and economic growth," and said the same approach of "tax cuts, tariffs, deregulation, and energy abundance" would deliver results in a second term.
The CBO report underscores how policy choices this year are already reshaping the near-term trajectory of the economy, the agency said, noting that some of the measures it evaluated have effects that occur quickly while others will influence growth and the budget over a longer horizon. Associated Press writer Josh Boak contributed reporting.