The 2025 Spring Economic Scorecard The Year of the Tariff
Kevin M. Bahr CBEI Chief Analyst; Emeritus Professor of Business Sentry School of Business and Economics
The United States entered 2025 with the largest and strongest economy in the world. In 2024, moderate economic growth continued, with more Americans working than ever before. Job gains were recorded in every month with December the 48th consecutive month of job growth. The labor market was balanced with unemployment hovering around 4.0% and real wages increasing. The U.S. stock market hit several record highs and was a global leader in providing returns to shareholders while interest rates finally fell. Certainly, all was not perfect and challenges remained. Inflation, although down significantly from its peak in 2022, remained above desired levels. The housing market continued to be a challenge for home buyers, with low inventory driving up home prices and relatively high financing costs making home ownership unaffordable for many. However, solid economic growth was poised to continue in 2025 absent an economic shock. Unfortunately, there was an economic shock – tariffs. In 2025, tariffs have arguably been the greatest single factor impacting the economy. U.S. implemented tariffs have impacted international relations and trade, business decisions, consumer buying behavior, the bond market, and tanked the stock market. It has increased the challenges for Federal Reserve policy, with the ultimate impact on inflation yet-to-be determined. Inflation remained at higher than desired levels in early 2025, with newly implemented tariffs bracing Americans for the potential of stagflation. This report begins with an overview of tariffs, trade, and manufacturing, followed by an economic update which includes economic growth, inflation, the labor market, interest rates, and financial market performance. Tariffs, Trade and Manufacturing Tariffs and Trade A tariff is basically a tax paid by a business to the U.S. government for importing goods from a foreign country. Tariffs are paid by the business importing the goods, not the foreign country sending the goods to the United States. Tariffs are a regressive tax, hitting lower and middle-income Americans to a greater degree than wealthier Americans, as lower and middle-income Americans spend a greater share on goods and buy relatively lower cost, imported goods to a greater degree. Tariffs represent an increase in the government regulation of international trade and impact financial markets. In 2024, U.S. imports and exports totaled approximately $3.3 trillion and $2.1 trillion, respectively. With the U.S. population at approximately 340 million, import product demand was nearly $10,000 per U.S. resident in 2024. In fiscal year 2023, tariffs raised approximately $80 billion, only about 2 percent of the $4.44 trillion in total Federal tax revenue. Individual income taxes, corporate taxes, and payroll taxes provided 49, 36, and 10 percent of total Federal tax revenue, respectively. Thus far, 2025 has been the year of the tariff. The parade of U.S. implemented tariffs began in February when President Trump signed an executive order targeting Canada, Mexico, and China. Beginning in March, a 25% tariff tax was implemented on American businesses importing goods from Canada and Mexico. Tariffs were already in place on imports from China, but a new 10% tariff was implemented in February which doubled to 20% in March. Canada, Mexico, and China immediately responded with retaliatory tariffs on goods imported from the United States. On April 2, the Trump Administration announced a minimum 10% global tariff rate, with country specific tariff rates ranging from 10% to approximately 50%. Although the Trump Administration referred to the new tariffs as “reciprocal”, the rates were not based on the tariff rates charged on U.S. imports by a given country. Rather, the “reciprocal” tariff rates were based on a mathematical formula: (trade balance/imports)/2. For example, the
Central Wisconsin Report - Spring 2025
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