The U.S. economy is in a “really good spot” as the first month of 2025 comes to an end, but uncertainty looms on two big fronts that may have untold impact.

That’s the opinion of a Regions chief market strategist, who told the members of the Birmingham Business Alliance Thursday night that inflation may end up being harder to vanquish as the year unfolds.

Brandon Thurber, of Regions’ multi-asset solutions and asset management, gave a largely upbeat assessment of the nation’s economic health, but said the Trump Administration’s policies on tariffs and immigration is driving uncertainty – a “policy fog” – in forecasting the year.

“We view at it as a year of handoffs, tradeoffs and offsets,” he said. “On one side of the equation, there’s potentially negative impacts from policy shifts on immigration and trade. On the other, what we see that we like is potentially deregulatory actions out of Washington to impact certain industries in a very positive way.”

Thurber’s comments came one day before the White House announced that levies on goods from the U.S.’s three largest trading partners will go into effect Saturday.

According to The New York Times, goods from Mexico and Canada will be subject to 25% tariffs, while those from China will be hit by a 10% tariff.

The three nations comprise a third of the goods and services imported to or bought from the United States. For Alabama, the three countries are the second, third and fourth largest markets for goods produced in the state – $3.9 billion for Canada in 2023, $3.8 billion for China, and $3.2 billion for Mexico.

All three of their governments have vowed to answer with tariffs of their own on U.S. exports.

Thurber predicted that tariffs would have downward pressure on growth and upward pressure on inflation.

Prior to the tariff announcement, Thurber said analysts anticipate 2.2% growth for the U.S. economy in 2025, and 2% in 2026, based on current conditions. The economy grew at 2.9% and 2.8% over the last two years, respectively.

“That’s a pretty sizeable downshift,” he said, but he added that 2% is more sustainable historically.

At the same time, the labor market has been a key driver for the economy, with labor growing 1.5% and unemployment steady at 4%.

“The U.S. economy is two-thirds consumption-driven,” he said. “With stock prices up 25% in back-to-back years, and asset prices generally rising, combined with 8 million jobs open, U.S. consumers are still a pretty good spot from a confidence perspective.”

Inflation has trailed off substantially over the last 12 to 18 months, but Thurber said it should remain “fairly sticky” at about 2.5% over the next few years.

However, immigration policy could have a bigger effect on the economy than tariffs, he said. Trump signed several executive orders immediately upon taking office, some dealing with rounding up undocumented migrants and promising mass deportations.

Labor force increases have been a primary driver of economic growth, Thurber said. If the U.S. shifts to outmigration, “that’s going to be a pretty significant reversal.”

“It’s going to force corporations across the board to effectively pay up for labor to bring it in,” he said. “Assuming they can even find people who want to take those jobs at a higher wage. So we think there’s a bit of a gap that is going to exist at least in the very near term that’s going to be interesting to see how it all shakes out.”

The recent DeepSeek A.I. model, which rocked tech stocks, may force U.S. companies to sink more capital into artificial intelligence research, and probably speed faster development of A.I. being brought to the market.

Deregulation and pro-business policies could lead to mergers and acquisitions, initial public offerings, and a reversal of anemic capital market activity.

“When you look at stocks and bonds, neither of those markets are telling us anything other than the U.S. economy is in a pretty fantastic spot,” he said.