Jan Hatzius on Immigration, Tariffs, and the U.S. Economy: Here’s Why He’s Still Optimistic
Ever wonder why some economists stay bullish even when everyone else is predicting doom and gloom? Jan Hatzius, Goldman Sachs’ chief economist, just gave us a pretty good hint. He believes the U.S. economy is set for stronger growth than most people expect—and his optimism hinges on immigration and budget policies not turning out as extreme as promised.
Immigration: “A Little Below” Pre-Pandemic Levels
At a recent Atlantic Council event, Hatzius revealed that, despite all the talk of strict immigration rules under the Trump administration, he doesn’t see a dramatic decline in new arrivals. While he expects immigration to slow slightly compared to pre-pandemic levels, he doesn’t believe there will be a sharp collapse.
This matters for the economy because more workers often mean more growth. Hatzius predicts the U.S. could see 2.5% GDP growth in 2025, outpacing the 2.1% most forecasters are expecting.
Budget Cuts? Don’t Expect Anything Too Drastic
What about the federal budget? Tesla’s Elon Musk has mentioned a “Department of Government Efficiency,” and Trump has floated massive budget cuts. But Hatzius is skeptical they’ll deliver the promised $2.5 trillion in annual savings.
Yes, there might be cuts to some federal programs—things like Affordable Care Act subsidies or incentives for electric cars under the Inflation Reduction Act—but Hatzius thinks these cuts will be relatively small. The federal deficit in 2024 was about $1.8 trillion (6.4% of GDP). The incoming Treasury Secretary wants to cut that to 3%—a hefty goal that would require around $1 trillion in spending reductions. Hatzius says hitting 3% is unlikely. He expects they’ll only manage to reduce the deficit to around 6% of GDP (shaving off about $250 billion).
Tariffs: The Biggest Wild Card
One area where big changes could happen, Hatzius warns, is on trade policy. Trump is known for his tough stance on tariffs—10%-20% on all imports and up to 60% on Chinese goods were tossed around during the campaign. However, Hatzius doesn’t think we’ll see the most extreme versions of these tariffs.
That said, he does expect some significant moves. For instance, a 20% tariff on Chinese imports and targeted tariffs on European cars or Mexican-made electric vehicles are all possibilities. These would push inflation slightly higher—up from around 2.1% to 2.4%—and shave about 0.4% off GDP growth. While that may slow the economy down a bit, Hatzius doesn’t see it as devastating enough to prevent more Fed rate cuts later this year.
Keeping an Eye on the Stock Market
Why isn’t Hatzius more worried about extreme policies? Because he remembers the first Trump administration, when market reactions often forced Trump to backtrack on big proposals. Hatzius thinks we could see a similar pattern this time around—bold announcements at first, then a step back if investors panic.
Bottom Line
Despite plenty of uncertainty in Washington, Hatzius remains upbeat. He predicts moderate immigration levels, scaled-back spending cuts, and somewhat higher tariffs—but not as high as some of the campaign promises. As a result, he’s pegging U.S. growth at 2.5% in 2025, which is more optimistic than most.
If you’ve been bracing for a massive policy upheaval, Hatzius suggests you might want to stay calm—and watch how the markets respond. For now, he’s betting on the U.S. economy to keep on chugging, with only a few speed bumps along the way.
