Major Shifts in U.S. Economic Policy in 2025

In 2025, the United States experienced significant changes in its economic policy. These changes include a major shift in trade policy, alterations in immigration policy, a rejection of climate change initiatives, and an increase in public debt. These shifts are projected to have lasting impacts, requiring global adjustment.

1. Trade Policy Shift

• The U.S. disrupted the longstanding free-trade regime, establishing a base tariff level of 10%, with variations based on bilateral relationships.
• Strategic sectors like steel and aluminum faced even higher tariffs, raising the weighted average tariff from below 3% to around 19%.
• Major nations reached one-sided agreements with the U.S.: 
  • European Union: Faced a 15% tariff, with commitments to buy $750 billion in U.S. energy products, invest $600 billion in the U.S., and purchase military equipment.
  • Japan: Subjected to a 15% tariff, with a $550 billion U.S. investment commitment.
  • United Kingdom: Benefited from a special 10% tariff rate.
  • China: Agreed to a 47% tariff for one year, lifted restrictions on rare earth exports, and increased soybean purchases.
  • Switzerland: Initially faced a 39% tariff, later negotiated down to 15% in exchange for a $200 billion investment.
• India's refusal to rush into a trade deal stands out as a brave decision.

2. Immigration Policy Changes

• The U.S. administration implemented stricter immigration controls, including deportations, paused asylum applications, and attempted to limit birthright citizenship.
• Kevin Hassett highlighted the need for skill-based immigration, contrasting the U.S.'s 12% skill-based immigrant intake with Canada's 63% and Australia's 68%.
• Despite acknowledging the importance of H1B visas, the National Security Strategy emphasized ending mass migration, citing resource strain and security risks.

3. Climate Change and Green Energy Rejection

• President Trump withdrew the U.S. from the Paris Agreement, dismissing climate change and renewable energy initiatives as ineffective.
• The administration reduced subsidies for renewable energy, promoting fossil fuels and increased oil drilling activities.
• This stance is likely to raise climate change costs globally and could lead to decreased international cooperation.

4. Rise in Public Debt

• Public debt in advanced economies continued to rise, with U.S. government debt projected to increase from 122% of GDP in 2024 to 143% by 2030.
• Trump's economic policies, including tax cuts and increased defense spending, contributed to this rise.
• Economic advisors argue faster growth and tariff revenues will eventually reduce debt levels.

Economic Outcomes

• Despite these shifts, the U.S. and global economies remained stable.
• The IMF projected a 3.2% growth in the world economy for 2025, with the U.S. growing at 2%.
• U.S. inflation was recorded at 2.8%, and equity markets experienced a 13% increase.
• This stability has led to reevaluations of earlier economic predictions.

The full effects of these policy shifts remain uncertain, with the potential for significant global adjustments in the coming years.