Tariffs and uncertainty cloud 2025 US equipment finance outlook

The US economy faces a weaker growth trajectory in 2025 as escalating trade tensions, volatile market sentiment, and heightened uncertainty cloud the business investment landscape, according to the Q2 update of the 2025 Equipment Leasing & Finance US Economic Outlook.

Released by the Equipment Leasing & Finance Foundation (ELFF), the report sharply revises down its forecast for equipment and software investment growth from 4.7% to 2.8%, while projecting US GDP growth of just 1.2%, a substantial drop from the earlier 2.7% forecast.

“Extraordinarily high economic uncertainty related to US trade policy has sent shockwaves through the economy, prompting large swings in financial markets and a sharp reduction in equipment finance industry confidence,” said Leigh Lytle, President of the Foundation and CEO of the Equipment Leasing and Finance Association (ELFA).

“If the administration ultimately moves forward with the “reciprocal” tariff rates announced in early April, they will weigh heavily on the economy’s growth prospects this year. On the other hand, if bilateral or multilateral deals are struck with key trading partners and these additional tariffs are avoided, the business climate would quickly improve.”

Highlights from the 2025 Outlook include:

Tariffs and trade uncertainty weigh on growth: The report cites the proposed tariff regime as the single largest risk to growth this year. While labour markets remain resilient and manufacturing indicators show surprising strength, the broader economic picture is one of caution and hesitation. Consumer and business sentiment has declined sharply, with inflation expectations rising in tandem, stoking fears of a potential policy misstep.

Investment outlook softens: After a sluggish fourth quarter in 2024, equipment and software investment rebounded early this year, in part due to businesses accelerating purchases ahead of expected tariff hikes. But that momentum is unlikely to last. Heightened trade uncertainty and growing fears over slower growth are expected to put a brake on investment activity in the coming months.

Manufacturing sector offers a silver lining: Despite broader concerns, the manufacturing sector has shown signs of resilience. Measures such as industrial production, capacity utilisation, and new orders of core capital goods have all strengthened—especially in sectors like primary metals, electronics, and computers. Analysts caution, however, that much of this strength may be short-term, driven by pre-tariff ordering rather than sustained demand.

Sector-specific investment trends

The Foundation-Keybridge US Equipment & Software Investment Momentum Monitor,which is released in conjunction with the Economic Outlook, now tracks seven key verticals indicating mixed signals across equipment and software investment categories:

Technology and medical equipment: Expected to see improved investment growth.
Energy and agriculture equipment: Forecast to improve modestly, though performance will remain subdued.
Industrial equipment: May slow further, though recent movement is somewhat encouraging.
Construction and transportation: Likely to see continued contraction.

Currently, four of the seven sectors tracked are considered “weak but accelerating,” while three are “weak and decelerating.”

Industry confidence dips amid policy flux

The equipment finance industry is feeling the impact of economic crosscurrents. While higher prices due to tariffs may prompt more businesses to consider financing solutions, overall industry sentiment has declined sharply, as measured by both the ELFA Capex Finance Index and ELFF’s Monthly Confidence Index.