MAPFRE Economics projects U.S. growth will slow to 1.9% this year: here’s why

The United States fares the worst: more significant effects are expected in the U.S., with a sharper slowdown and increased price pressures that are likely to hinder the Federal Reserve’s (Fed) actions. MAPFRE Economic Research forecasts a 0.6 percentage point reduction in U.S. growth for 2025, revising it from the previously expected 2.5% to 1.9%. For 2026, GDP growth is now anticipated to be 1.8%, down from the prior forecast of 2%.

MAPFRE Economics emphasizes that its current baseline scenario is increasingly shaped by geopolitical tensions, supply-side constraints, and potential tightening of term premiums, all of which could push inflationary equilibrium further into the short- and medium-term. Consequently, central banks are likely to follow a path with fewer interest rate cuts. “This combination could reduce global growth by approximately two percentage points over the next two years,” states Economic Research in its report.

Despite this revision, Economic Research remains more optimistic about the U.S. economy than other analysts. “We believe that many of the announced measures could be replaced by agreements that reverse some of the tariffs, thereby normalizing current uncertainty levels and softening the overall impact. Additionally, as reflected in the latest first-quarter GDP figures, consumption and investment have remained more positive than initially expected,” says Eduardo García Castro, economy expert at MAPFRE Economics.

García Castro further explains that the downward revision is primarily due to a deterioration in net trade and reduced government spending. The first factor includes the atypical effect of anticipated imports driven by tariff concerns, which could reverse and normalize if negotiations are successful. The second factor is public spending, which has been partially offset by growth in the private sector, where reduced uncertainty “is likely to boost consumer and business confidence.”

MAPFRE Economics highlights that both economic activity and prices are influenced by a range of opposing effects on supply and demand, meaning a final political decision will be necessary to determine which factors will dominate. Inflation in the U.S. is projected at 3% this year, one-tenth higher than the previous forecast, with a forecast of 2.6% for 2024. In a stressed scenario, price increases for this year are expected to reach 3.4%, and for next year, 2.8%.

“While inflation has been revised upward, it remains lower than initially expected, as it reflects global inflation trends, which are not uniform. Countries implementing visible tariffs are likely to experience accelerating inflation (e.g., the U.S.), but in our scenario, other countries may return to a disinflationary path, not due to weak demand, but rather due to supply-related factors. For example, U.S. restrictions may shift efforts toward products from countries with excess capacity that now face tariffs,” the Economic Research Service notes in the report.

In its “Economic and Industry Outlook 2025” report, MAPFRE Economics considers two scenarios: the baseline, which is the most likely, and the stressed scenario, which is less probable. In its alternative forecast, MAPFRE Economics projects U.S. growth at 1.4% for this year and 0.6% for the next, compared to the previous estimates of 2.5% and 2.2%, respectively, in the last edition of the report. Despite this downward revision, MAPFRE Economic Research does not foresee a recession this year or the next, even under the stressed scenario.

“The transition from one scenario to another depends largely on the evolution of trade tensions, particularly the potential activation of retaliatory measures and counter-tariffs, which would place a heavier burden on exporters, importers, and consumers,” says García Castro. He adds that this would significantly reduce much of the expected global growth, though he believes that additional critical factors would still be required to shift from a low-growth scenario to a recessionary one.

Trump’s trade policy decisions have also impacted the U.S. dollar. Since April 2, the dollar has weakened considerably: prior to the tariff announcement, it was trading at $1.08 per euro, but by April 21, it had risen to $1.15.

The dollar has long been regarded as the global reserve currency, traditionally backed by the institutional credibility, financial depth, and commercial dominance of the United States. “For decades, this privileged position has allowed the United States to issue debt in its own currency, maintain a high degree of monetary independence, and exert significant influence over global markets. However, in today’s environment, marked by the deterioration of US public finances, geopolitical competition, and a reshaping of global value chains, there are emerging signals that point to an erosion of the dollar’s dominance,” MAPFRE Economics highlights in a recent article.

García Castro adds that recent currency movements reflect “a certain drainage of the capital outflows that have taken place in the U.S.” “These shifts can be seen more as a reminder that currencies like the euro, Swiss franc, and Japanese yen still play a significant role in global trade, but not necessarily as a genuine threat to the dollar’s position as the reserve currency. Nevertheless, these movements do highlight underlying imbalances in the U.S. that will need to be addressed moving forward,” he concludes.