The Congressional Budget Office said Monday it expects the economy to grow at a slightly slower rate the rest of the year and sees higher uncertainty from President Trump’s tariffs.
In its economic outlook report, CBO projects gross domestic product growth to total 3.1 percent in 2018, a slightly worse rate than the 3.3 percent it previously expected. The budget office sees GDP falling off a bit from the hot 4.1 percent annual rate reached in the second quarter.
CBO says it is slightly reducing its economic forecast because recent positive trends will likely slow some, or possibly reverse, including the past quarter’s strong consumer spending and surge in agricultural exports.
[Also read: Layoffs from Trump’s tariffs may overtake job gains from tax cuts]
Trump’s tariffs also present a challenge. Last month, the CBO estimated the impact of U.S. tariffs and retaliation by other countries to be small. At that time, goods that were affected by tariffs accounted for less than 1.5 percent of U.S. trade.
“However, trade policy has already changed since early July and may continue to evolve, so the effects of new tariffs may become more substantial and have a larger effect on the economy than CBO accounted for in its current projections,” Keith Hall, CBO’s director, said Monday.
The Trump administration’s trade war with China has escalated in recent weeks, with Beijing last week saying it would impose retaliatory 25 percent tariffs on $16 billion worth of U.S. imports, after the Trump administration issued similar tariffs.
The new U.S. tariffs on $16 billion worth of Chinese goods are set to take effect on Aug. 23 and are meant to punish China for what the Trump administration says is unfair trade practices, including China’s failure to respect U.S. intellectual property rights and its policy of forced technology transfer.
Last month, the administration hit China with tariffs on $34 billion worth of imports for that reason.
The White House is weighing tariffs on another $200 billion worth of Chinese goods and has said those could be 25 percent tariffs instead of the 10 percent tariff initially under consideration.
Trump has also imposed sweeping steel and aluminum tariffs, penalizing allies including Canada, Mexico, and the European Union.
