US economy’s decline is real: SBI flags GDP, trade, and investment slump in stark new report

A new State Bank of India (SBI) Research report has warned that the recent boom in the US economy may have been an anomaly, fueled by unsustainable post-pandemic policy measures. 

The report, titled “US Economy Heading Towards (Un)exceptionalism?”, lays out a series of worrying trends that point to a long-term decline in US growth potential, investment, and productivity — signaling a possible end to the so-called American economic exceptionalism.

According to SBI, the post-Covid surge in the US economy was likely an outlier, driven more by policy extravagance than structural strength. Long-term data indicate a steady decline in GDP growth, falling exports, and weakening consumption patterns. “The jump in the US economy post-COVID may have been an outlier as a result of policy extravaganza,” the report notes, adding that underlying indicators such as total factor productivity (TFP) growth and value addition are on a downward trajectory.

Further raising alarms, net savings to GDP in the US has dropped to its lowest level since 2011, while the debt-to-GDP ratio continues its secular upward climb. The study also points out that high wages, while positive for workers, are holding back new investments. Employer costs averaged $31.47 per hour in December 2024, and sectors like manufacturing are struggling to attract the investment required for long-term growth.

The report warns that without deep structural adjustments—including revitalizing private sector participation and productivity—the US economy may not reclaim its potential growth path anytime soon. Even if adjustments take place, SBI cautions that these will involve “short-term costs” and are riddled with “ifs and buts.”

Adding to the storm clouds, Donald Trump’s 25% tariff on steel and aluminum imports, effective from March 13, 2025, could further strain US economic prospects. Although India runs a trade deficit with the US in these commodities, SBI sees a potential silver lining: India could capitalize on shifting trade flows.

Moreover, US markets appear to have lost steam. After massive gains post-pandemic, including a staggering $52.9 trillion market cap for the S&P 500 as of February 2025, markets are now in retreat. The report says, “Markets, including the US, are appearing to have run out of breath, trimming all intermittent gains as investors increasingly question earnings guidance against persistent volatility.” Even giants like the “Magnificent Seven” stocks, often seen as bulletproof, are starting to show cracks under the strain of economic uncertainty and geopolitical risks.

The Atlanta Fed’s GDP Now model reflects this deceleration, slashing its Q1 2025 growth estimate to -2.4% from +2.9% projected earlier, a sharp swing that has fueled recession fears. “US economic growth is sliding in the last one year,” SBI writes, citing GDP growth dropping from 3.2% in Q4 2023 to 2.5% in Q4 2024.

On a broader note, the SBI report highlights that India stands to gain from the turbulence. As the US and other developed economies face slowdowns, India’s diversified export base, active pursuit of free trade agreements, and robust domestic consumption could help it attract capital and market share. The report emphasizes that India has signed 13 FTAs in the last five years, including with major partners like the UAE and Australia, and is actively negotiating new deals with the UK, Canada, and the EU.

SBI notes that reciprocal tariffs from the US are unlikely to dent India significantly, estimating only a 3–3.5% decline in exports, which could be offset by ramping up goals across manufacturing and services sectors.

In sum, the SBI report signals a world tilting away from US dominance, with rising debt, slowing growth, and trade battles casting a long shadow over America’s economic future — and India potentially stepping into the vacuum as a rising global trade player.