The Conference Board: Tariffs to Weigh on Consumption and Economic Growth in the Second Half of the Year
The Conference Board released a report on Monday stating that U.S. economic growth will slow in the second half of 2025, mainly due to tariffs raising goods prices and weakening consumer confidence. Although the likelihood of a recession is low, GDP growth is expected to decline noticeably from 2024 levels, with an estimated growth of 1.6% this year. The Yale Budget Lab calculates that tariffs will increase the average American household's annual spending by $2,800 and push up the unemployment rate by 0.5 percentage points.
Key Points
- U.S. economic growth could slow in the second half of 2025 as tariffs push up goods prices and dampen consumer sentiment, the Conference Board said Monday.
- Citing data from the components of its Leading Economic Index, the group noted that an increase in unemployment claims, pessimistic consumer expectations, and weak manufacturing new orders last month offset the boost from a strong rally in the S&P 500.
- While a recession is unlikely, "GDP growth in 2025 is expected to slow noticeably compared with 2024," Justyna Zabinska-La Monica, senior manager of business cycle indicators at the Conference Board, said in a statement. She expects GDP to grow 1.6% this year, "with the impact of tariffs becoming more apparent in the second half of the year as price increases slow consumer spending."
In-Depth Analysis
After President Trump announced 30% tariffs on imports from Mexico and the European Union this month, consumers face an average effective tariff rate of 20.6% — the highest since 1910 — which will lead to a short-term price increase of 2.1%, according to estimates from the Yale Budget Lab.
The price increases resulting from the planned tariffs, along with those announced this spring, will cost the average American household about $2,800 this year, the Yale Budget Lab said in research published July 14.
The Yale Budget Lab also said tariffs could push the unemployment rate up by 0.5 percentage points by the end of the year and reduce GDP by 0.5 percentage points over the long term.
Economists in the public and private sectors remain divided over whether import tariffs will trigger a brief, one-time price increase or a sustained wave of inflation sweeping through the entire economy.
While most economists have been surprised by the resilience of the U.S. economy, they expect GDP growth to slow over the remainder of 2025 and into 2026.
"The economy has clearly slowed, with GDP growth likely averaging around 1.5% in the first half of the year, compared with 3% over the previous three years," Pantheon Macroeconomics said in a note to clients Thursday. The firm also noted that after modest growth in the first quarter, the economy could grow at a 2.4% annualized pace in the second quarter, according to data from the Atlanta Fed on Friday.
The Conference Board said its Coincident Economic Index, which measures current economic conditions, rose 0.8% in the first half of 2025, below the 1% gain in the second half of 2024. However, all four components of the index improved last month, including employed persons, industrial production, manufacturing and trade sales, and personal income less transfer payments.
Looking ahead, New York Fed President John Williams said Wednesday: "Based on what the current data reflect, I expect uncertainty and tariffs to restrain spending, and reduced immigration to slow labor force growth. Therefore, I expect real GDP growth of about 1% this year."