Risks to Watch in 2025
MIND THE CHUTES
Self-imposed setbacks
In our view, the chutes with the strongest likelihood of setting the U.S. economy back in 2025 will come from proposed policy changes.
19%
Our estimated effective tariff rate of 19%,{{wt-d92*}} compared with 3% currently, if President-elect Trump’s proposed tariffs are fully implemented
$13T
The current projected federal debt service over the next 10 years, which would likely increase significantly if all proposed tax cuts and tariffs are implemented{{wt-d93*}}
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How can the 2025 Capital Markets Forecast help you? Our team would be happy to discuss the report’s potential implications for your portfolio
In our view, three potential policies pose the biggest risks to the economy in 2025.
Just as there are ladders that the economy might climb to generate stronger growth, there also are chutes that might pull growth down. We see these policies as the steepest chutes—and thus the most significant risks to the economy:
- If tariffs rise to the levels proposed during the presidential campaign, the resulting effective tax rate would be the highest since the protectionist period a century ago. The negative impact on growth could be significant.{{wt-d79*}}
- Mass deportation of illegal immigrants would likely lead to severe labor shortages and disruptions in key industries.
- President-elect Trump has proposed keeping income tax rates relatively low for businesses and individuals, and massively cutting federal spending. While we don’t see the policies being fully implemented as proposed, they could lead to higher interest rates that would balloon the federal deficit.
Tariffs Could Hit the Economy Hard
Research suggests that proposed tariffs could reduce long-term economic growth by a substantial 0.5%–1.4%.{{wt-d80*}} We estimate the near-term effect on after-tax household income as a decline of 0.9%–2.6%, depending on income level.{{wt-d81*}}
A Much Higher Federal Deficit?
Proposed tax policies could add a cumulative $2.9 trillion over 10 years, bringing the annual deficit in 2034 to $3.3 trillion.{{wt-d89*}}
Tony Roth
Chief Investment Officer
Meet Tony Roth, Chief Investment Officer
Tony develops and delivers investment services for our wealth and institutional clients. He provides strategic direction for the firm’s asset management investment activities including asset allocation, manager research, and portfolio construction. Tony leads the firm’s Investment Committee.
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Wilmington Trust has been the wealth manager of choice for many Americans since 1903.{{wt-d48*}} Whether you’re thinking about investing now or for the future, we’d be happy to discuss how we can help.
