After a turbulent 2025 that rocked global trade and financial markets, 2026 will be the period when the U.S. economy emerges from the impact of President Donald Trump’s tariffs.
Not so fast.
Just weeks into the new year, tariffs are back on the agenda. On Saturday, Trump announced Eight NATO allies to be slapped with 10% tariffs Next month, this will rise to 25% in June until “an agreement is reached to purchase Greenland outright.”
New tax measures remain in place despite not all target countries being EU members Trade deal reached in July Imposing 15% tariffs on most EU products and forcing hundreds of billions of dollars of investment in the US
On Monday, Trump said countries doing business with Iran would be subject to 25% trade tariffs with the United States, threatening to undermine a fragile tariff ceasefire with China, Iran’s top importer of oil.
Now, the United States faces the prospect of a new round of retaliation and escalation. On Saturday, French President Emmanuel Macron hinted at what comes next.
“Tariff threats are unacceptable and have no place in this situation. If these threats are confirmed, Europeans will respond in a unified and coordinated way,” he Posted on X. “We will ensure that European sovereignty is upheld.”
Things shouldn’t be like this. Wall Street, corporate America and consumers are looking to an economic boost from tax cuts in one of Trump’s beauty bills, as well as greater calm on trade.
On Friday, analysts Bank of America It highlighted an unusually optimistic forecast for GDP growth in 2026, which is forecast to be 2.8%, well above the consensus forecast of 2.1%.
“The key drivers are looser fiscal and monetary policy and our expectations for more growth-friendly trade policy,” Bank of America said in a note.
At the same time, the Fed also expects inflation to continue to slow this year as policymakers view tariffs as a one-time shock to prices rather than sustained upward pressure.
If inflation remains stubbornly above the Fed’s 2% target, a series of new import taxes could put that expectation at risk and jeopardize future rate cuts.
Federal Reserve Latest beige book survey Economic and business conditions across the country are also filled with hope that tariff anxiety is finally easing:
- “Overall, the outlook has improved and is more optimistic but less cautious than in the last report, in part due to reduced tariff uncertainty.”
- “Retail and travel are cautiously optimistic about the outlook for 2026 based on recent stabilization in consumer spending, further clarity on tariffs and the hosting of the 2026 World Cup in Boston.”
- “Businesses report that tariff-related uncertainty has subsided somewhat due to a combination of stable tariff policy and their own adjustments, such as frozen food manufacturers completing new production facilities.”
Trump’s new tariffs are a stark departure from late last year, when the administration eliminated some tariffs on food imports and delayed tax increases on furniture as voters demanded greater affordability and relief from rising prices.
Sectors of the economy affected by trade have already been hit hard by tariffs. For example, manufacturers have cut 70,000 jobs since Trump unveiled his “Emancipation Day” mandate in April 2025.
The Institute for Supply Management’s manufacturing index has been in negative territory for 10 consecutive months, meaning activity has been contracting.
There may be some relief in the future. The Supreme Court will soon rule on Trump’s ability to impose tariffs under the International Emergency Economic Powers Act.
An unfavorable decision for the government could limit his trade powers. But depending on the nuances of the ruling, Trump may retain some wiggle room. He also vowed to use other laws to impose new tariffs if he loses in court.
This is not surprising given that Trump built his re-election campaign on tariffs and has for years called himself the “Tariff King,” “Tariff Man,” and “Mr. Tariff.”
Given his instinct to quickly initiate tariffs in every situation, Wall Street may need a new strategy.
“Most economic models do not quantify the geopolitical and relationship damage caused by imposing destabilizing tariffs on allies,” said Erica York, vice president of tax policy at the Tax Foundation. say on X. “The real costs of Trump’s tariff policies go far beyond raising taxes and slowing GDP growth.”
This story was originally published on wealth network