Investing.com – As Donald Trump begins his second term as president, Citi analysts have outlined a complex and uncertain outlook for the U.S. economy and global markets in 2025.
While the U.S. economy remains strong, Trump's policies could introduce a mix of favorable and adverse shocks, Citi said in its note this week.
The U.S. economy, already the best-performing among major developed markets, has been buoyed by strong consumer resilience and a strong corporate sector.
However, Citi notes that Trump's agenda, which includes potential tariff increases, expanded tax cuts, deregulation and immigration restrictions, could create new uncertainties.
“Our expectations about Trump's policies add up to a complicated mix of favorable and adverse supply and demand shocks,” Citi said.
Tariff policies are said to be a key concern. Citi's baseline assumes a 5% increase in the US effective tariff rate, including a 10-15% increase in Chinese imports.
However, Trump has raised the possibility of harsher measures, such as a 60% tariff on China or blanket tariffs. While such measures could harm the U.S. economy and stock markets, Citi believes these threats can serve as leverage in negotiations.
For financial markets, the impacts will vary, depending on the bank. Citi sees limited effects on U.S. stocks under the targeted tariffs, but warns that broader measures could pressure corporate margins.
They note that international markets, particularly in Europe and China, could face bigger hits. US yields, which have risen on concerns about deficits and inflation, could rise further.
Uncertainty is expected to define Trump's presidency. “Trump appears to thrive in a world of ambiguity,” Citi said, adding that agile investors focused on economic fundamentals are best positioned to navigate through 2025.
As global tensions rise, from tariff battles to geopolitical pressures, Citi advises staying alert to Trump's unpredictable actions and their far-reaching implications.
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