An engineer works at a cargo port storage yard. Tariffs imposed by President Donald Trump have generated uncertainty about the economy for many businesses and consumers, according to economic forecasters. (Photo by Vithun Khamsong/Getty Images)

Over a buffet lunch Wednesday, a roomful of bankers got a mixed picture of the national economy in the short term. For Wisconsin, the longer term outlook appears more certain, although there may be little comfort from that.

Speaking at an economic forecast luncheon hosted by the Wisconsin Bankers Association and the news outlet WisBusiness, part of WisPolitcs.com, Dale Knapp, director of research at Forward Analytics, reviewed the persistent demographic slump that has put Wisconsin on a troubling trajectory for the coming decades.

That trajectory has been evident already for some 20 years, Knapp said, and it centers on the population bulge from baby boomers — people born between 1946 and 1964. That generation was 65% more numerous than the group born in the previous 19-year period, he said. And the subsequent generations have been about 20% smaller in number or even less.

The baby boom produced an explosion of demand for everything from toys to homes to schools and universities, Knapp observed. Now the last of that generation is passing into retirement, and with smaller populations in the generations that follow there are “worker shortages all across the state,” Knapp said.

Between 2020 and 2040, the working age population, ages 18 to 64, is projected to fall by 15% on average in all but six Wisconsin counties, Knapp said. Automation may pick up the slack in some industries, including manufacturing and possibly fast food service, he suggested.

Immigration is another remedy, Knapp said — but also “a challenge given what’s going on in the White House now.”

“We need to fix the border problem to a degree,” Knapp said. “If you do that, then maybe you can get the two parties in Washington together and say, ‘OK, we need to fix legal immigration by expanding it.'”

Knapp’s other proffered solution is to invest funds to offer families $16,000 to move to Wisconsin from out of state. With 3,000 families a year, the money could be repaid with the added income and sales tax revenues, “and we could fund it forever,” he said.

National economic uncertainty

Outlining the current state of the nation’s pocketbook and its near-term forecast, economist Andrea Sorensen of US Bank in Minneapolis said that the economy “is actually doing probably better than most people think.”

That’s despite the uncertainty that has ballooned since President Donald Trump took office in January, she said. That uncertainty also looms over the horizon, however.

The nation’s Gross Domestic Product (GDP) — the broadest measure of the overall economy — has been growing by more than 2% over the last couple of years through the end of 2024.

Data issued Wednesday morning showed GDP shrank 0.3% in the first quarter. Sorensen said that was for an unusual reason, however.

U.S. businesses stocked up on goods from overseas to get ahead of the tariffs Trump imposed after taking office, she said. She attributed the slight first-quarter dip to those imports, because their value is subtracted from GDP.

The GDP estimate released Wednesday is the first of three that will be produced for the quarter, and Sorensen said her economic team believes the next two estimates will be better.

She views other indicators as relatively favorable.

The national labor market remains strong. Month-to-month employment growth has cooled some since the hiring spikes that followed the economic crash from the COVID-19 pandemic.  Still, “we still consider it to be quite healthy,” she said.

“People who have jobs have money to spend,” Sorensen said. “So as long as the labor market is holding up, we think the economy could be OK.”

Consumer spending also remains strong, she said, even though surveys show dramatic declines in both consumer and business confidence.

“We know it means people are not happy and they don’t have high hopes,” Sorensen said. “But if we’re talking recession, that sort of depressed sentiment needs to translate into actual economic activity. And so far, it hasn’t. And we’re not actually sure if it will.”

Tariffs are a wild card

The Trump administration’s tariff policies, however, remain a major wild card.

A broad 10% tax on imports that took effect April 5 remains in place with a few exceptions. Tariffs of up to 50% on about 60 countries are on a 90-day pause. An active tariff remains on goods from China — initially 125% and more recently raised to 145%.

Overall that’s netted out to a U.S. effective tariff rate — the net tariff on all imports from other countries — between 25% and 30%. That’s 10 times the effective tariff rate of 2.5% a year ago.

“This hasn’t happened in over 100 years,” Sorensen said. “The economy is just structurally very different, and we can try to make forecasts and comparisons —  and we do all day every day —  but we don’t know. There is just so much unknown what this will do.”

For that reason, economic uncertainty is “sky high,” she continued. “I don’t think anyone really knows what’s going on.”

Businesses “are kind of paralyzed,” Sorensen said. “How can you make a business investment decision if you have no idea what tariffs are going to be tomorrow, next week, next year?”

Some larger employers have already begun announcing plans to reshore work in the U.S. But Sorensen said in response to one audience member’s question that isn’t an option for many smaller employers.

A company that sources products overseas might gain a temporary advantage by returning production to the U.S., she said.

“They can’t risk making the wrong choice,” however, Sorensen said. “What we’re hearing is they don’t trust that that tariff will remain in place. So, they can’t make the investment decisions to bring production back to the U.S. because they might want to undo it again as soon as policy changes.”

In addition, “our supply chains are so intertwined that everything has some input that’s imported,” she said.

Tariffs will also squeeze low- and middle-income households, where spending takes a larger share of their earnings — “households that were already struggling,” Sorensen said.

Migration presents another pressure point. Policies to reduce immigration and deport immigrants will hurt some states and some sectors of the economy more than others, she said.

Yet an additional unknown is how the escalating trade conflicts with the rest of the world will affect services — where the U.S. has a trade surplus.

“President Trump has never mentioned that, because he probably doesn’t want us to know that, right? It makes trade look a little more fair, but that’s not the story he wants,” Sorensen said.

So far, other countries haven’t targeted U.S. services in retaliation for the tariffs it has imposed.

Nevertheless, “if countries really want to get us economically, they would go after services,” Sorensen said.

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An engineer works at a cargo port storage yard. Tariffs imposed by President Donald Trump have generated uncertainty about the economy for many businesses and consumers, according to economic forecasters. (Photo by Vithun Khamsong/Getty Images)

Over a buffet lunch Wednesday, a roomful of bankers got a mixed picture of the national economy in the short term. For Wisconsin, the longer term outlook appears more certain, although there may be little comfort from that.

Speaking at an economic forecast luncheon hosted by the Wisconsin Bankers Association and the news outlet WisBusiness, part of WisPolitcs.com, Dale Knapp, director of research at Forward Analytics, reviewed the persistent demographic slump that has put Wisconsin on a troubling trajectory for the coming decades.

That trajectory has been evident already for some 20 years, Knapp said, and it centers on the population bulge from baby boomers — people born between 1946 and 1964. That generation was 65% more numerous than the group born in the previous 19-year period, he said. And the subsequent generations have been about 20% smaller in number or even less.

The baby boom produced an explosion of demand for everything from toys to homes to schools and universities, Knapp observed. Now the last of that generation is passing into retirement, and with smaller populations in the generations that follow there are “worker shortages all across the state,” Knapp said.

Between 2020 and 2040, the working age population, ages 18 to 64, is projected to fall by 15% on average in all but six Wisconsin counties, Knapp said. Automation may pick up the slack in some industries, including manufacturing and possibly fast food service, he suggested.

Immigration is another remedy, Knapp said — but also “a challenge given what’s going on in the White House now.”

“We need to fix the border problem to a degree,” Knapp said. “If you do that, then maybe you can get the two parties in Washington together and say, ‘OK, we need to fix legal immigration by expanding it.'”

Knapp’s other proffered solution is to invest funds to offer families $16,000 to move to Wisconsin from out of state. With 3,000 families a year, the money could be repaid with the added income and sales tax revenues, “and we could fund it forever,” he said.

National economic uncertainty

Outlining the current state of the nation’s pocketbook and its near-term forecast, economist Andrea Sorensen of US Bank in Minneapolis said that the economy “is actually doing probably better than most people think.”

That’s despite the uncertainty that has ballooned since President Donald Trump took office in January, she said. That uncertainty also looms over the horizon, however.

The nation’s Gross Domestic Product (GDP) — the broadest measure of the overall economy — has been growing by more than 2% over the last couple of years through the end of 2024.

Data issued Wednesday morning showed GDP shrank 0.3% in the first quarter. Sorensen said that was for an unusual reason, however.

U.S. businesses stocked up on goods from overseas to get ahead of the tariffs Trump imposed after taking office, she said. She attributed the slight first-quarter dip to those imports, because their value is subtracted from GDP.

The GDP estimate released Wednesday is the first of three that will be produced for the quarter, and Sorensen said her economic team believes the next two estimates will be better.

She views other indicators as relatively favorable.

The national labor market remains strong. Month-to-month employment growth has cooled some since the hiring spikes that followed the economic crash from the COVID-19 pandemic.  Still, “we still consider it to be quite healthy,” she said.

“People who have jobs have money to spend,” Sorensen said. “So as long as the labor market is holding up, we think the economy could be OK.”

Consumer spending also remains strong, she said, even though surveys show dramatic declines in both consumer and business confidence.

“We know it means people are not happy and they don’t have high hopes,” Sorensen said. “But if we’re talking recession, that sort of depressed sentiment needs to translate into actual economic activity. And so far, it hasn’t. And we’re not actually sure if it will.”

Tariffs are a wild card

The Trump administration’s tariff policies, however, remain a major wild card.

A broad 10% tax on imports that took effect April 5 remains in place with a few exceptions. Tariffs of up to 50% on about 60 countries are on a 90-day pause. An active tariff remains on goods from China — initially 125% and more recently raised to 145%.

Overall that’s netted out to a U.S. effective tariff rate — the net tariff on all imports from other countries — between 25% and 30%. That’s 10 times the effective tariff rate of 2.5% a year ago.

“This hasn’t happened in over 100 years,” Sorensen said. “The economy is just structurally very different, and we can try to make forecasts and comparisons —  and we do all day every day —  but we don’t know. There is just so much unknown what this will do.”

For that reason, economic uncertainty is “sky high,” she continued. “I don’t think anyone really knows what’s going on.”

Businesses “are kind of paralyzed,” Sorensen said. “How can you make a business investment decision if you have no idea what tariffs are going to be tomorrow, next week, next year?”

Some larger employers have already begun announcing plans to reshore work in the U.S. But Sorensen said in response to one audience member’s question that isn’t an option for many smaller employers.

A company that sources products overseas might gain a temporary advantage by returning production to the U.S., she said.

“They can’t risk making the wrong choice,” however, Sorensen said. “What we’re hearing is they don’t trust that that tariff will remain in place. So, they can’t make the investment decisions to bring production back to the U.S. because they might want to undo it again as soon as policy changes.”

In addition, “our supply chains are so intertwined that everything has some input that’s imported,” she said.

Tariffs will also squeeze low- and middle-income households, where spending takes a larger share of their earnings — “households that were already struggling,” Sorensen said.

Migration presents another pressure point. Policies to reduce immigration and deport immigrants will hurt some states and some sectors of the economy more than others, she said.

Yet an additional unknown is how the escalating trade conflicts with the rest of the world will affect services — where the U.S. has a trade surplus.

“President Trump has never mentioned that, because he probably doesn’t want us to know that, right? It makes trade look a little more fair, but that’s not the story he wants,” Sorensen said.

So far, other countries haven’t targeted U.S. services in retaliation for the tariffs it has imposed.

Nevertheless, “if countries really want to get us economically, they would go after services,” Sorensen said.

GET THE MORNING HEADLINES.

SUBSCRIBE