Economic Growth Projections Slashed Amid Trump’s Tariff Turmoil

Photo of Chuck Schumer
Reuters
By Yuval Rosenberg and Michael Rainey

Happy Monday! College basketball's March Madness is upon us just as the political world's March madness might quiet down just a bit, with the House and Senate both out this week for the first of two congressional spring breaks. Here's what's happening.

Schumer Faces Backlash After Vote to Avoid Shutdown

Democrats are still dealing with the fallout of last week's votes on a bill to fund the government through September. Senate Minority Leader Chuck Schumer has faced a bitter backlash, including progressive protests and calls for his resignation, after he led a group of Democratic senators who helped pass the Republican plan. Schumer on Monday postponed a scheduled tour to promote his new book about antisemitism in America, with a spokesperson citing "security concerns."

Schumer reportedly met with House Minority Leader Hakeem Jeffries on Sunday after the funding vote exposed a rift between them. At a news conference last week, Jeffries had pointedly refused multiple chances to say he still has confidence in Schumer's leadership, and House Democrats have publicly lambasted Schumer for breaking with them on strategy.

In an interview with MSNBC before their meeting, Jeffries downplayed any tension with Schumer, though he acknowledged that he differed with his Senate counterpart on the funding bill.

"Look, Chuck and I disagreed as it relates to the approach and outcome relative to what we viewed as a reckless Republican spending bill and the effort to try to jam these cuts down the throats of the American people - cuts to health care, cuts to veterans' benefits and cuts to nutritional assistance to children and families throughout America - while potentially handing a blank check to Donald Trump and Elon Musk to continue their extreme Project 2025 agenda," Jeffries said. "At the same period of time, Chuck and I agree on the overwhelming majority of issues moving forward, including our effort to oppose the largest potential Medicaid cut in American history. And we're all going to have to come together."

Quote of the Day

"The Democrats are still running their 2017 resistance playbook. They are no match for the team they're facing today."

− Sen. John Barrasso, the Republican majority whip from Wyoming, quoted by Punchbowl News on Monday.

Democrats are still licking their wounds following a clear loss last week in the battle over a spending bill that will prevent a government shutdown for the rest of the fiscal year but also do nothing to slow the Trump administration's all-out assault on federal agencies. One factor in that loss is the degree to which Republicans in Congress are now unified and loyal to Trump, which wasn't always the case during Trump's first term in office. Issues that divided the GOP during the heyday of the tea party - including the need to pass short-term spending bills and to raise the debt ceiling limit - are no longer preventing conservatives from working together to achieve their larger goal of slashing taxes, spending and the federal government.

Economic Growth Projections Slashed Amid Trump's Tariff Turmoil

President Donald Trump's effort to raise tariffs on trading partners around the world will reduce global trade and raise inflation if the levies stay in place, according to a new report from the Organization for Economic Co-operation and Development.

In the wake of Trump's decision to impose 25% tariffs on imports from Mexico and Canada, as well as a 25% tariff on all steel and aluminum imports and a 20% tariff on imports from China, the OECD cut its growth estimate for Canada down to 0.7% in 2025 - a reduction of 1.3 percentage points from the OECD's outlook in December. Mexico is expected to fall into recession in 2025 because of the tariffs, with the economy shrinking by 0.6%.

The projected U.S. growth rate has also taken a hit, with the estimate falling to 2.2% for 2025, down two-tenths of a point, and 1.6% for 2026, down five-tenths of a point. Global growth will be lower, as well, with the estimate now reduced to 3.1%, down from 3.3% previously.

At the same time, inflation will be higher as prices adjust upward in response to the tariffs. The OECD raised its 2025 inflation estimates to 2.8% for the U.S. (up 0.7 points), 3.1% for Canada (up 1.1 points) and 4.4% for Mexico (up 1.1 points). The average inflation rate for the Group of 20 nations is estimated to be 3.8% in 2025, up 0.3 from the previous projection.

Things can always get worse: The OECD analysis assumes no further tariff increases occur, but there is a chance that countries could ratchet tariffs higher around the world in an all-out trade war. If a global trade war does develop, then growth rates will be lower and inflation will higher than the current estimates suggest.

"The high level of geopolitical and policy uncertainty at present brings with it substantial risks to the baseline projections," the report says. "Developments in global trade policy are difficult to predict, but a proliferation in barriers to international trade and broader fragmentation of the global economy, including through moves to reciprocate existing perceived trade barriers, could add considerably to the adverse impact of the tariff changes incorporated in the baseline projections and weaken business investment by more than anticipated."

Number of the Day: 5.2 Million

As many as 5.2 million U.S. adults living in states that expanded Medicaid under the Affordable Care Act could lose coverage next year if House Republicans introduce new work requirements for the program, according to a new analysis by the Urban Institute. The researchers say that if broader work requirements are applied to Medicaid, coverage losses would be even greater. The analysis also suggests that most of the coverage losses would not be due to lack of work or failure to meet the requirements but by lack of information, understanding and awareness of the policy or confusion about the associated bureaucracy and other factors. More than nine in 10 adults who would be subject to the work requirements are either working or qualify for exemptions.

"Work requirements are a blunt tool that creates costly administrative red tape and separates eligible people from health coverage they rightfully qualify for," said Katherine Hempstead, senior policy adviser at the Robert Wood Johnson Foundation, which supported the study.

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