The Future of the U.S. Economy: Contradictions, Resilience, and New Directions

Author: Alberto Cossu – 30/07/2025

The Future of the U.S. Economy: Contradictions, Resilience, and New Directions

Alberto Cossu

Vision & Global Trends

The U.S. economy stands at a pivotal crossroads in 2025. After years of volatility marked by a global pandemic, geopolitical tensions, and a historic trade war, economists have been sharply divided in their forecasts. Many predicted a downturn or even a period of stagflation, while the real economy has shown surprising resilience. As the U.S. pivots toward boosting exports, reducing imports, and reshaping its industrial base, the gap between expert forecasts and current data has become a central feature of the economic debate.

Negative Forecasts: Stagflation, Recession, and Uncertainty

Throughout 2024 and into 2025, leading economists voiced concerns over several key risks:

Stagflation Warnings: Torsten Sløk, chief economist at Apollo Global Management, warned that the U.S. could face stagflation—a combination of slow growth and persistent inflation. He attributed much of this risk to the Trump administration’s tariffs, which he described as “stagflationary shocks” that simultaneously slow growth and push prices higher. Sløk forecasted GDP growth could fall to just 1.2% in 2025, with inflation hovering around 3% and unemployment rising from 4.2% to potentially 5% or higher by 2026.
Recession Risks: The probability of a recession was pegged at 25% by some analysts, particularly as GDP contracted by 0.3% in the first quarter of 2025—the first decline since 2022.
Policy Uncertainty: JPMorgan’s chief economist, Michael Feroli, described the outlook as “cloudier than normal,” with the economy facing a potential boom from tax cuts and deregulation, or a stagflationary bust if policy uncertainty and trade restrictions prevail.
Public Sentiment: Despite previous growth, only 23% of Americans viewed the economy positively in late 2024, reflecting widespread skepticism about future prospects.

The Current Situation: Contradicting the Pessimists

Despite these warnings, the U.S. economy has defied the most negative predictions in several ways:

Exports Accelerate, Imports Fall: In the wake of new trade policies and tariffs, U.S. exports have increased while imports have declined. This shift is partly the result of targeted policy measures aimed at reducing the trade deficit and encouraging domestic production.
GDP Contraction, But Not Collapse: While GDP did contract in Q1 2025, the decline was modest at 0.3%. Many analysts expected a far sharper downturn. The contraction is widely seen as a correction after a period of above-trend growth rather than the start of a prolonged recession4.
Inflation Stabilizes: Contrary to fears of runaway inflation, price increases have remained relatively stable. Most forecasts now expect inflation to end 2025 at around 3%, higher than the pre-pandemic norm but not at crisis levels.
Labor Market Holds Up: Unemployment has ticked up slightly but remains historically low, with forecasts suggesting a rise to 4.4% in 2025 and possibly 5% in 2026—still far below the peaks of previous downturns.
Business Investment and Productivity: Lower tariffs and new trade deals have unleashed business investment, especially as inflation subsides and the Federal Reserve adopts a more dovish stance, cutting rates gradually through 2025 and 20261.

Policy Shifts: Reindustrialization and Export-Led Growth

The current administration’s economic agenda is clear: move the U.S. away from an import-dependent model and toward an export-driven, manufacturing-based economy. The main pillars include:

Relaunching U.S. Production: A renewed focus on domestic manufacturing is central. Policies include incentives for reshoring supply chains, investments in critical industries, and support for technological innovation.
Trade Policy Realignment: By renegotiating trade deals and imposing targeted tariffs, the administration aims to reduce reliance on imports—especially from strategic rivals—and open new markets for American goods.
Immigration as an Economic Lever: The administration’s efforts to contain and reform immigration are intended to strengthen the labor market and wage growth. Over time, a more controlled immigration system could also benefit neighboring countries by encouraging investment and development in their economies, potentially reducing migratory pressures.

The Outlook: Scenarios and Strategic Implications

The economic outlook for the U.S. in 2025 and beyond is marked by a sharp divergence between potential boom and bust scenarios:

Scenario	Drivers	Risks/Challenges	Likelihood
Productivity Boom	Tax cuts, deregulation, AI-driven productivity gains	Policy execution, global demand, investment climate	Moderate
Stagflation	Trade restrictions, persistent tariffs, policy drift	Inflation, slow growth, rising unemployment	Moderate
Moderate Growth	Balanced policy, gradual rate cuts, stable inflation	External shocks, political instability	Most Likely

Boom Scenario: If tax cuts and deregulation succeed, and if business investment continues to rise—fueled by AI and technological advances—the U.S. could see a new wave of productivity growth and GDP expansion.
Stagflation Risk: If trade tensions escalate and policy uncertainty persists, the risk of stagflation remains. This would mean slow growth, sticky inflation, and rising unemployment—a scenario that would challenge both businesses and policymakers.
Baseline/Moderate Growth: Most mainstream forecasts, including those from RSM and Deloitte, expect the U.S. to grow at 2–2.5% in 2025, with inflation stabilizing near 2.5–3% and unemployment rising only modestly. This scenario assumes a balance between policy support and external risks.

Structural Changes and Long-Term Prospects

Several structural shifts are underway that could reshape the U.S. economy for years to come:

End of Ultra-Low Rates: The era of near-zero interest rates is over. The Fed is expected to cut rates slowly, but the new normal will be higher borrowing costs, which could support savers and reduce speculative bubbles.
Industrial Policy Returns: The U.S. is investing heavily in critical sectors—semiconductors, green energy (though this may shift under new leadership), and advanced manufacturing. This could make the economy more resilient to global shocks.
Foreign Capital Inflows: The U.S. remains a magnet for global capital, helping to finance investment and support the dollar’s role as the world’s reserve currency.
Labor Market Evolution: Immigration reform and demographic trends will shape the labor force. Tighter immigration controls may boost wages in the short term but could also create labor shortages in key sectors if not managed carefully.

Conclusion: Resilience Amid Uncertainty

The U.S. economy in 2025 presents a paradox. While many economists warned of stagflation and recession, the reality has been more nuanced. Exports are rising, imports are falling, inflation is stable, and the labor market remains robust. The administration’s focus on reindustrialization and export-led growth marks a significant shift from the past, and the containment of immigration is intended to reinforce these trends.

Yet, significant risks remain. Policy missteps, renewed trade tensions, or global shocks could still derail the recovery. The next year will be a test of whether the U.S. can successfully transition to a more balanced, resilient economic model—one that leverages its strengths in innovation, capital, and production, while managing the challenges of a rapidly changing world.

The ultimate outcome will depend on the interplay between policy choices, global conditions, and the adaptability of American businesses and workers. For now, the economy is holding up better than many feared, offering cautious optimism for the road ahead.

References