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.
Although the U.S. economy remains robust, Trump’s policies could introduce a mix of favorable and unfavorable shocks, Citi said in its note this week.
The U.S. economy, already the best performing among major developed markets, was supported by strong consumer resilience and a robust business sector.
However, Citi notes that Trump’s agenda, including potential tariff hikes, extended tax cuts, deregulation and immigration curbs, could create new uncertainties.
“Our expectations for Trump’s policies add up to a complicated mix of favorable and unfavorable supply shocks and demand shocks,” Citi said.
Pricing policies would be a key concern. Citi’s baseline assumes a 5% increase in the U.S. effective tariff rate, including a 10% to 15% increase in Chinese imports.
However, Trump has floated the possibility of more serious measures, such as a 60% tariff on China or at all. Although such measures could harm the U.S. economy and stock markets, Citi believes such threats could 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 targeted tariffs, but warns that broader measures could pressure corporate margins.
They note that international markets, particularly in Europe and China, could face sharper hits. U.S. yields, which have risen on concerns about deficits and inflation, could climb higher.
Uncertainty is expected to define Trump’s presidency. “Trump appears to thrive in a world of ambiguity,” Citi noted, adding that agile investors focused on economic fundamentals are best positioned to navigate 2025.
As global tensions rise, from tariff battles to geopolitical pressures, Citi advises remaining vigilant of Trump’s unpredictable moves and their far-reaching implications.
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