(Yahoo! Finance) - The US economy is on solid footing right now.
Economists at Bank of America expect it to stay that way through next year.
In a research note released to reporters on Monday, BofA's economics team led by Claudio Irigoyen projected the US economy will grow at an annualized rate of 2.4% in 2025, higher than current forecasts for 2% growth, according to the latest Bloomberg consensus estimates.
This comes despite uncertainties surrounding the economic policies of President-elect Donald Trump, including campaign promises of tariffs on imported goods, tax cuts for corporations, and curbs on immigration, which economists have viewed as inflationary.
Those proposals could also hinder economic growth and pressure an already bloated federal deficit, further complicating the Federal Reserve's path forward for interest rates.
Higher rates, coupled with a hawkish tariff policy, would strengthen the US dollar and create spillover effects to global financial conditions, representing "a major shock, not only for the US economy but the rest of the world," according to BofA.
But there's one important caveat: The US is best prepared to weather any economic storm that follows Trump's agenda.
"We like to say that the US imports a lot of stuff, but it doesn't import recessions," Aditya Bhave, senior US economist at Bank of America, told Yahoo Finance in a separate press briefing on Monday. "It only exports recessions."
Bhave added any shifts in US trade policy "would pose greater risks to the rest of the world than to the US" due to the economy's resiliency compared to other developed nations.
Recent domestic growth trends have been "remarkable," in Bhave's view, and the proof is in the data.
Consumer confidence is at its highest level in 18 months. US economic output hasn't been this strong since April 2022. Retail sales topped estimates for the month of October, the unemployment rate continues to hover at around 4%, and inflation has moderated despite its bumpy path down to 2%.
"The world right now is one in which the US economy has consistently outperformed [for] almost two years," Bhave said. "Europe is struggling, China is struggling, so the US is going into any potential disruption to trade policy on much more solid footing than Europe and China are. I think that fact wouldn't be lost on the incoming administration either."
Tariffs, in particular, have been one of the most talked-about promises of Trump's campaign. The president-elect has pledged to impose blanket tariffs of at least 10% on all trading partners, including a 60% tariff on Chinese imports.
Should countries retaliate with their own duties, a resulting "tit-for-tat" trade war could keep inflation elevated over the long term.
BofA does not anticipate that scenario playing out, however, noting its "baseline scenario is for tariffs on China and elsewhere," and that it expects the levies "to be less" than what's been promised.
The firm is "moderately optimistic a full blown trade war can be avoided."
Overall, "tariffs can be very disruptive in terms of capital expenditures [and] obviously exports," Bhave said.
But given the US imports more goods and services from those countries than it exports, "just by definition, the tariffs pose a much greater threat to those regions than to the US," Bhave added.
By Alexandra Canal - Senior Reporter
