Why we raise our US forecast

US economy remains strong in the second half of the year ...

The US economy has been growing at a surprisingly strong rate for some time now – despite President Trump's tariff capers. While the growth of almost 4% in the second quarter of 2025 could still be dismissed as a counter-movement to the weak first quarter, shortly before Christmas, growth of 4.3% was even reported for the third quarter. Although relatively little data is available for the fourth quarter due to the government shutdown, it once again points to strong growth. This strong performance in the second half of the year surprised even us, even though we had pointed out from the outset that tariffs would only dampen growth but were unlikely to trigger a slump. We see three main reasons for the robust growth.

.. because tariffs are having less of an impact ...

Firstly, tariffs have had less of an impact on the economy than expected, at least so far. Companies imported a lot of goods before the tariffs came into force, so they did not have to raise their prices immediately and were able to spread the adjustment over time. Even more important was probably the fact that the tariffs actually paid were significantly lower than expected. Estimates based on the import structure of 2024 and the higher tariff rates had arrived at a new average rate of approximately 17% (Yale Budget Lab) or even 24% (Gopinath/Neiman 2025). However, if the tariffs paid are compared to the imports recorded – which better reflects the actual burden – the average rate is only just over 10%.

Many companies were granted exemptions and transitional rules for imports that are difficult to replace with US products. In addition, a larger proportion of imports from Mexico and Canada (around 27% of total imports) are now imported duty-free. This would have been possible earlier under the USMCA free trade agreement. However, this would have required documentation that the goods met certain requirements, in particular that a certain proportion of the value added was generated in the USMCA zone. Given the low tariff rates valid until the end of 2024, this bureaucratic effort was often not worthwhile. However, this changed with the high tariffs announced by Trump for non-USMCA-compatible imports from Canada and Mexico. Meanwhile, 80-90% of imports from these two countries are USMCA-compliant, twice as many as before 2025.

Compared to the average tariff rate of 2.3% that prevailed before Trump, the increase to a good 10% is still significant, but not as dramatic as feared. In relation to economic output, customs revenues rose from around 0.3% of gross domestic product (GDP) in 2023 and 2024 to 1.1% of GDP in the second half of 2025. Since these tariffs have so far been borne almost entirely by the Americans and not by the supplier countries, this provides an estimate of the braking effect of the tariff increases. This amounted to around 0.8% of GDP. And this is too little to plunge the US economy into crisis. After all, it has recently grown at a nominal rate of over 5% per year.

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