The impact on real GDP from Trump’s tariffs will depend crucially on whether (and how quickly) the customs duties raised are recycled back into the economy as new tax cuts. We assume most, if not all, of the revenue is returned to households in the upcoming budget reconciliation. Failure to do so would represent a significant fiscal tightening that could tip the economy into recession.
The latest edition of this quarterly report assesses the profound implications for the US economy of Donald Trump's tariffs roll-out. It addresses key economic and policy issues, including:
- How our assumptions for tariff levels mean US growth will slow sharply, though a recession will be avoided;
- How an environment of lower growth and higher inflation has shifted the Federal Reserve's calculus;
- The risks to economic growth if the revenues from higher tariffs aren't recycled into tax cuts.
Download a complimentary copy of this report now to understand how the US economy will fare in this pivotal moment.
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Report authors
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Paul Ashworth
Chief North America Economist
Paul Ashworth is our Chief North America Economist, with overall responsibility for our coverage of the US and Canada.
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Stephen Brown
Deputy Chief North America Economist
Stephen Brown is our Deputy Chief North America Economist has been with Capital Economics since 2014. He has worked from both our London and Toronto offices, covering the economies of Europe, Canada and the US. In 2021, Stephen was named the most accurate forecaster of the Canadian economy by Refinitiv, FocusEconomics and Consensus Economics. He holds a degree in Economics from the University of Bath and an MSc in Economic History from the London School of Economics.
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