In 2025, the United States holds a pivotal role in the global economy, commanding 40% of tech spend, 37% of the digital economy, and 26% of global GDP. Despite the economic policy uncertainty of the new administration, several factors stand out as likely influencers of future US economic growth:
- Increased spending through tariffs and tax cuts. If the new administration helps to increase consumer spending through tax cuts and the imposition of tariffs on imported goods, the Federal Reserve will need to increase interest rates to manage inflation. Higher interest rates lower inflation, strengthen the US dollar, and attract foreign capital. In this scenario, countries with more US dollar debt such as Egypt, Turkey, and Argentina would suffer.
- A leaner government. Plans to cut jobs to streamline government operations could slow economic growth and reduce spending on imports, which would impact the economic growth of net exporter countries to the US such as China, Mexico, Vietnam, and Germany.
- The importance of consumer resilience. The new administration will place a high priority on protecting incomes. In the last three years, inflation cannibalized income growth gains. Large variations of per capita personal consumption expenditure growth across states over the last three years highlight state inequality and an uneven post-pandemic economic recovery.
- Sector-specific changes. The new administration will likely decrease spending on the green economy, reduce the reliance on chip imports, and increase defense spending. European industries, particularly life sciences, automotive, and chemicals, should brace for the impact of the new US administration’s policies. Eleven percent of EU exports to the US is from road vehicles, and 18% is from medicinal and pharmaceutical products. Protectionist measures from higher import tariffs could compel European car manufacturers to augment their production within the US. Additionally, the pharmaceutical sector might face pressures to lower prices, and the banking sector could see increased competition amidst deregulatory measures in the US.
Businesses and countries will need to prepare for these various scenarios, and resilience and adaptability will be critical factors to success. European sectors must prepare for a protectionist US car industry, more pressure to lower pharmaceutical prices, and, as the US is a net exporter of financial services, more banking competition. Driven by the US, Forrester forecasts that North America will see the highest regional tech spend growth in 2025. We just published a report on the potential impact of a new US administration and policy on tech spend. Keep an eye out for Forrester’s upcoming global, US, and European tech forecasts, 2024 to 2029, that are soon to be published. Please contact your Forrester account manager or client success manager to set up a guidance session with me to learn more.
