We assume that the 90-day pause on reciprocal tariffs is mostly extended, keeping tariffs at 10% for countries except China, which will face a steeper 40% levy. Tariffs will not cause a recession – provided Congress can quickly redirect the tariff revenue back into the economy – though we expect growth to slow. We forecast GDP growth of 1.9% this year and 1.5% in 2026. Price effects have been limited so far, but core CPI inflation should pick-up once retailers and wholesalers deplete their existing inventory. Fears of second-round effects from tariff-driven price increases will keep the Fed on hold this year.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services