US Inflation Forecast 2025 & Next 5 Years
As President Trump readies for his Presidential inauguration in one week, is there a problem lurking that could undermine his agenda for reviving America?
Americans are enjoying a strong economy, great jobs market, and many are looking forward to the next 5 years as a golden era for US business unfolds. The outlook for 2025 is great and probably doesn’t need extra measures.
Trump’s promise of deregulation, lower taxes, and a pro-US agenda boosted by US energy an AI-technology domination, and continuous high US corporate earnings expectations invite a wave of inflation. We’re at the peak of a record-breaking bull market, which was partly fueled by out of control government money printing. A withdrawal of that does reduce inflation, but will it be enough? Likely not.
President Trump’s latest obsession however, actually threatens to raise inflation. He doesn’t seem to the full impact of extra 25% tariffs. He believes Canada won’t retaliate, or won’t stop giving the US a 20% break on the massive imports of heavy crude and cheap electricity that US companies are desperately dependent upon. That’s what US manufacturers use heavy crude to make plastic products. If Canada decides to revote that subsidy, and put an extra 25% tariff on imported US goods, the outcome will hurt the US.
Unseen Headwinds and the Threat of a Crash.
Just like the California wildfires and the incoming Santa Ana winds, bad events during a bubbled-up, unprepared economy could result in a big market correction or even a stock market crash (a 10% drop in a few days). The California fires launch from bushes that weren’t cleared away, and then during the fire, a failure of the water supply generates a catastrophe. President Trump then doesn’t see the Santa Ana winds and bushes of resentment he’s creating.
Stock market crashes happen, as Ernest Hemingway’s insightful description of bankruptcy depicts, “gradually and then suddenly.” It’s a tale of two worlds, with the superrich and the superpoor continuing in opposite directions.
As Goldman Sachs suggests, today’s markets are priced for perfection with growth projections already baked in. The stock market can’t take big mistakes.
Headwinds are suddenly forming that could slow economic growth and push inflation back up to unbearable levels. The stock market knows it, and we’ve already seen the Santa Claus year-end rally fizzling out. That’s not an insignificant event for investors. It might hint at bigger market disappointments ahead. And recently the S&P 500 and Russell 2000 indexes are falling as shown below.

The point about extreme actions are that they may set off counter-reactions in consumer spending, political turbulence, trade wars, new alliances and battles with the US FED, and even set off a period of uncontrollable inflation, like a California wildfire.
So while President Trump rightfully crucifies the Woke Democrat California and Los Angeles governments, and Canadian Woke government leaders, he may be creating his own deadly fires of 2025 with disregarded inflationary policies put in effect.

Rising Inflation Worries Are Real
With the incoming Trump 2.0 administration policies, many experts project inflation is on the rise. Consensus is, according to a Yahoo Finance report that inflation will be 2.5% for 2025. “We expect a gradual deceleration from where we are, but to levels that are still uncomfortably high for the Fed,” Deutsche Bank chief economist Matthew Luzzetti told Yahoo Finance in an interview.
The FED appears to be saying that 2025 cuts are out of the question. They want to see how powerful Trump’s policies are before they commit to anything. That’s wise. The forecasts for 2025 inflation are likely way too low, although by 2028 inflation will likely cool as economic forces normalize.
Some of the usual sources likely aren’t going to deflate.
“Inflation is primarily going to be driven by the services side of the economy,” Luzzetti said, calling out core services like healthcare, insurance, and even airfares. “Shelter inflation is also still high, and although it’ll come down over the next year, it’s likely that it could remain somewhat elevated.” — Yahoo Finance report.
The fact oil prices are rising raises concerns that President Trump can’t control many factors. He’s promised 50% lower oil prices. How is achievable without Canadian oil? With strong economic prosperity, the low supply of housing surely translates to higher home prices and rent prices. Transportation and agriculture costs must go up. Lower taxes won’t stop that.
It’s just common sense that when supply is constrained and demand grows, inflation must be the outcome. I don’t believe President Trump is concerned that inflation is the tariff he’ll have to pay to implement his agenda.
The FED and housing market lenders see it coming too, as mortgage rates have risen.
Rising Mortgage Rates and Inflation Put the Housing Market at Risk

The FED and many stock market experts and economists believe inflation is relatively under control and just need adjustments. But there’s more talk of potential rising rates. Rising interest rates would be very harmful to the housing market sector, where homeowners wait desperately for lower rates so they can refinance their pandemic-period mortgages. Rising rates would bring crisis right across the country and given bubbled-up home prices, it always portends a housing market crash somewhere.
Given the US is the economic center of the world, you’d have to believe the global economic trend would be unhealthy too. A global recession strengthened by US sanctions on a multitude of countries is worrisome. It’s possible Europe might break from the US to protect its own inflation crisis. A suddenly receding global economy pressured by trade sanctions might be too much to bear.
These are just a few of the reasons economists and stock market experts forecast volatility in the equity markets. And with higher rates and expectations of lasting inflation, investors begin to see the bond and treasury markets as much more attractive. Bond yields are 5%.
US Tariffs Painting Dark Clouds
While President Trump aims for a completely pro-US trade policy, the outcomes of it could send a backlash that could crash the US economy. The US still needs the world and picking fights with every nation simultaneously encourages them to react as their economies implode.
China is crashing as the world is putting up trade barriers to China product dumping. The US repatriation of manufacturing is wonderful, yet it’s not ready to supply its own manufacturing in 2025 nor over 5 years. Experts say such adjustments may take a decade.
So President Trump is trying to do too much too soon. The pressure on economies and markets might be too severe for such sudden drastic actions.
Bills have to be passed through the US house of Representatives, and Republicans have a thin majority. Republican lawmakers in many US states will likely vote against them. It would only take a few no votes to quash President Trump’s sudden measures. Trump’s isolationist direction has to worry many governors. If this goes too far, the US becomes a lonely isolated nation, with not much international influence. This is an opportunity for Iran, Russia and China.
Why Would US Inflation Get Out of Control?
The reasons are readily apparent:
- Anti-regulation policy: reopens markets such as housing, oil production, finance, and lowers fees and reduces time to business execution
- Rising US dollar moves back up to record levels near 115
- Rising employment and wages (although economists say employment isn’t currently an inflationary factor)
- Increased consumer confidence and spending increases demand and dries up supply
- Increased US business spending in anticipation of the Trump economic/cultural miracle
- Supply chain destruction (new supply chains need time to be developed)
- High tariffs make imports more expensive putting upward pressure on domestic goods
- Continued high cost of money puts small business under pressure
President Trump has been very vocal and threatening, even vengeful as he re-enters the White House, and if this continues, the US economy will likely struggle to manage the outfall. He may be too narrow-minded to recognize incoming artillery.
He’s not a strategist. He’s a tactical fighter.
Wise investors, especially hedge funds will likely be trying to find ways to hedge a Trump-wave generated higher-for-longer interest rate recession.
Perhaps as President Trump gets some of his new policies enacted, he might be persuaded to show restraint, and this threat might dissipate. At this time however, he seems obsessed with the need for tariffs. That obsession over one tactic might indicate he feels his alternative tactics might be too weak. It’s over-reliance on one tactic and it represents a political weakness.
See more on US economic forecasts, stock market predictions, and forecasts of the housing market.