The average tariff rate will decline following the Supreme Court’s IEEPA ruling, but not by enough to materially change the near-term outlook for the economy. That hinges on AI-related investment and the resulting productivity gains, which we expect to support solid GDP growth of close to 2.5% in both 2026 and 2027. Strong productivity growth also suggests that core PCE inflation is on a path back toward 2% by 2027. With the unemployment rate unlikely to rise much further, we expect the Fed to deliver just one interest rate cut this year, taking the fed funds target range to between 3.25%–3.50%.