The economy is in good shape heading into 2025. Inflation is coming down, growth is brisk, and the job market has remained surprisingly resilient.

WASHINGTON

Now economists are focused on the next big question: How long can this last?

The answer, they say, hinges on just how quickly and dramatically President-elect Donald Trump implements a raft of new policies. Many looming uncertainties, especially related to tariffs and immigration, could disrupt the economy in unpredictable ways.

“There are definitely some storms coming our way,” said Mark Zandi, chief economist at Moody’s Analytics. “I suspect the luster on the economy is going to come off in 2025.”

Although economists are not forecasting a recession next year, they say the coming weeks will be instrumental in determining the course ahead. They are keeping a close eye on Trump’s transition into the White House and monitoring the job market, inflation and consumer spending habits for clues on how things might change.

Trump’s plans to impose sweeping tariffs will probably be one of the biggest threats to the economy, experts say.

The president-elect has vowed to penalize the country’s largest trading partners by levying tariffs — an extra 10 percent on Chinese goods and 25 percent on imports from Mexico and Canada — that economists say could quickly raise prices. The necessities that could soon be getting costlier range from big-ticket items such as cars and appliances to everyday basics such as groceries and gas. During his campaign, Trump also discussed sweeping tariffs on all imports, not just from those countries, which would affect even more goods if implemented.

“Tariffs make things more expensive,” Alex Durante, an economist at the Tax Foundation, a right-leaning think tank, told The Washington Post. “They shrink the economy, and they make people poorer.”

New tariffs could cost the average household nearly $3,000 next year, amounting to about 3 percent of their after-tax income, according to estimates from the Tax Policy Center, a nonpartisan think tank.

Members of Trump’s transition team have pushed back against the idea that tariffs could spark widespread inflation. But economists say they’re bracing for an across-the-board hit that could dent economic growth, raise prices and spur job losses.

New tariffs, combined with retaliatory measures by other governments, could shave off 1.7 percent from U.S. gross domestic product and result in 1.4 million fewer American jobs, according to estimates from the Tax Foundation.

A recent surge in immigration has helped power economic growth and boost the job market. But economists say Trump’s plans to deport millions of undocumented migrants and curb immigration more broadly could hobble the labor market.

“We’ve had a lot of immigration under the Biden administration that provided rapid growth in the labor force and made it easier for the Fed to reduce inflation,” said Douglas Holtz-Eakin, president of the American Action Forum, a conservative think tank. “But if Trump slows things down, we will not have workers to adequately fill jobs, and we’ll be looking at a very tight labor market again.”

A slowdown in immigration would disproportionately hurt labor-intensive sectors such as construction, hospitality and agriculture, which would probably drive up the costs of housing, food and services such as roofing and painting, economists say. As a result of mass deportations, the construction industry alone could lose 1.5 million workers, or about 14 percent of its labor force, estimates from the American Immigration Council show.

“We just don’t know what’s going to happen,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. “But if you go to the extreme of what Trump is proposing on immigration and mass deportations, it will unarguably put downward pressure on growth and upward pressure on inflation.”

The sweeping tax cuts Trump signed into law in his first term are set to expire at the end of 2025. Those will “almost certainly” be extended, according to Howard Gleckman, a senior fellow at the Tax Policy Center.

What is less clear, though, is what other tax policies might be in store. During his campaign, Trump promised a bevy of additional cuts to families and corporations, including eliminating taxes on tips, overtime pay and Social Security benefits. Those measures could fuel short-term economic growth and boost incomes for households and businesses.

The gains, though, would be concentrated at the top: The wealthiest Americans would see the largest gains, with families making over $450,000 reaping nearly half the benefits if existing tax cuts are extended, according to an analysis by the Tax Policy Center.

Still, experts say they’re not expecting an immediate tax overhaul. Given that Trump is also focused on bringing down the federal deficit, it seems unlikely that one of the first things he’d do in office is take on additional debt, said Sonders, of Charles Schwab. The Congressional Budget Office estimates that extending current tax policies would add $4.6 trillion to the country’s shortfall. And Republicans on Capitol Hill say they may try to pass border enforcement legislation before they turn to taxes.

The Federal Reserve has made strides in bringing down inflation with aggressive interest rate hikes. But lately, progress has stalled, and economists say it could unravel even further next year if Trump moves forward on some of his more draconian tariff and immigration plans.

Deutsche Bank estimates that one measure of inflation — now at 2.8 percent — could rise to as much as 3.9 percent next year if the new tariffs are enacted, up from original estimates of about 2.5 percent.

Federal Reserve Board Chair Jerome H. Powell has said policymakers are parsing out how “tariffs can affect inflation in the economy, and how to think about that.” The central bank this month cut interest rates for a third straight time but said additional reductions will depend on how things play out next year.

Inflation, at 2.4 percent using the Fed’s preferred measure, is down from its peak of 7.2 percent in June 2022, but it’s still above the central bank’s 2 percent goal.

During his last term, Trump routinely boasted about the stock market’s performance, which reached new highs under his watch. But economists say a repeat performance may be tough to pull off.

Stocks have continued their ascent under President Joe Biden, with all three major indexes — the S&P 500, Dow Jones Industrial Average and Nasdaq composite index — hitting all-time highs in recent weeks. That has boosted the portfolios of the country’s wealthiest, allowing them to keep spending in a way that’s powering the economy.

But the market’s heyday may soon be coming to an end: Stocks tumbled after the Federal Reserve suggested in mid-December that it is rethinking how often it will cut interest rates next year. And economists warn that any additional curveballs, including government policies that hamper growth, could quickly reverse recent gains.

“Markets are very richly valued — even overvalued, bordering on frothy,” said Zandi, of Moody’s. “They’re vulnerable to anything that doesn’t stick exactly to the script, and tariffs and deportations are certainly off-script.”