West LA Times

As President-elect Donald Trump prepares to return to the White House in January 2025, the UCLA Anderson Forecast has released its latest analysis of the U.S. and California economies. The report focuses on several economic policies proposed during Trump's 2024 campaign, including tariffs, deportations, tax cuts, and deregulation.

The forecast highlights uncertainties surrounding the implementation of these policies, which pose challenges for accurate predictions. Economists at UCLA Anderson have attempted to minimize speculation by considering only publicly discussed policies that are most likely to be enacted.

Key assumptions in the forecast include imposing a 25% tariff on all goods from Mexico and Canada, raising tariffs on China by 10 percentage points, deporting up to one million undocumented immigrants annually, and making permanent the Tax Cuts and Jobs Act of 2017. However, the actual outcome may differ significantly from these assumptions.

According to the forecast, these policies are expected to impact living costs. Tariffs will likely raise prices for many goods and services. Deportation could lead to labor shortages in sectors such as agriculture, nondurable goods manufacturing, construction, and leisure and hospitality services. Additional tax cuts might further boost consumption demand and consequently increase prices in an economy already constrained by labor shortages.

UCLA Anderson Forecast economists anticipate that tariffs will mostly result in higher prices for consumers. This is expected to temporarily raise inflation above 3% in 2025 and increase consumer prices by 0.9%. By 2026, inflation is projected to remain above 2%, with headline inflation surpassing core inflation — which excludes food and energy prices.

Despite global challenges, the national economy is expected to perform better than its international counterparts; however, GDP growth is anticipated to fall below a seasonally adjusted annual rate of 2%.

The forecast also considers how tariffs, immigration policy changes, regulatory adjustments, and tax policy might affect California's economy. Economists predict that California's growth will align closely with national trends in both 2025 and 2026.