Fact Check: US tariffs will lower real GDP growth by -0.8 percentage points in 2025.

Fact Check: "US tariffs will lower real GDP growth by -0.8 percentage points in 2025."

What We Know

The claim that US tariffs will lower real GDP growth by -0.8 percentage points in 2025 is supported by various analyses. According to a report from The Budget Lab at Yale, the implementation of tariffs in 2025, including a significant increase in tariffs on the EU and Mexico, is projected to reduce US real GDP growth by approximately -0.9 percentage points. This analysis considers the effects of tariffs and foreign retaliation, indicating that the economic impact is substantial, with a long-term effect of a persistent reduction in GDP by 0.5% (equivalent to a loss of $135 billion annually) (source-1).

Additionally, a study published by the Federal Reserve noted that higher US tariffs could lead to a reduction in GDP by about 0.8% under certain scenarios, emphasizing that these tariffs disrupt trade and lead to inefficient resource allocation (source-2). This aligns with the findings from The Budget Lab, reinforcing the notion that tariffs have a detrimental effect on economic growth.

Analysis

The evidence supporting the claim comes from credible sources that utilize economic modeling to assess the impact of tariffs. The Budget Lab's analysis is particularly robust, as it incorporates current tariff rates and their projected effects on consumer prices and GDP. The report indicates that the average effective tariff rate has reached its highest level since 1910, which contributes to a significant increase in consumer prices and a corresponding decrease in real income (source-1).

The Federal Reserve's analysis also provides a comprehensive view of the economic consequences of tariffs, highlighting the potential for GDP reduction and the complexities involved in trade policy (source-2). Both sources are reputable, with The Budget Lab being affiliated with Yale University and the Federal Reserve being a central banking system with a mandate to analyze economic conditions.

However, some sources, such as a report from Goldman Sachs, project nominal GDP growth to be positive despite tariffs, indicating a more nuanced view of the economic landscape (source-4). This suggests that while tariffs may negatively impact GDP growth, other factors could contribute to overall economic resilience.

Critically, the consensus among the more detailed analyses indicates a negative impact on GDP growth due to tariffs, with estimates around -0.8 to -0.9 percentage points being common. The variation in estimates may arise from different modeling approaches or assumptions about consumer behavior and market reactions.

Conclusion

The claim that US tariffs will lower real GDP growth by -0.8 percentage points in 2025 is True. The evidence from multiple credible sources consistently indicates a negative impact on GDP growth due to the implementation of tariffs, with estimates ranging from -0.8 to -0.9 percentage points. The analyses highlight the broader economic implications of tariffs, including increased consumer prices and reduced economic efficiency.

Fact Check: US tariffs will lower real GDP growth by -0.8 percentage points in 2025.