From Tax-Cuts To Tariff-Stability: US Economy Poised For Solid Growth In 2026

Following President Donald Trumps unveiling of his sweeping global tariffs plan, the consensus on Wall Street was that the United States would potentially face a downturn or, at the very least, a stagflation-type scenario: anemic growth, high inflation, and elevated unemployment.

Those economic forecasts had appeared to be materializing after the economy contracted by 0.6 percent in the first quarter. However, in the following months, GDP growth rebounded to 3.8 percent in the second quarter and 4.3 percent during the July–September period.

If the Atlanta Federal Reserves widely watched GDPNow Model fourth-quarter estimate of 3 percent is accurate, full-year growth will be 2.8 percent—higher than the 2.1 percent Blue Chip consensus.

While surveys continue to highlight consumers frustrations with stubbornly high prices, the data show inflation has steadied, easing to 2.7 percent in November.

In the first year of the president‘s second term, consumer prices have risen by approximately 2 percent, compared with an increase of about 6 percent during President Joe Biden’s first year.

Trumps tariff pursuits have also helped the White House achieve its goal of narrowing the trade deficit.

In September, the U.S. trade gap unexpectedly shrank to $52.8 billion, the lowest level since June 2020. This was driven by a sizable increase in exports and a minuscule rise in imports.

The president has attributed these improvements to his administrations trade pursuits.

“Tariffs are creating great wealth, and unprecedented national security for the USA,” Trump wrote in a Dec. 27 Truth Social post. “Trade deficit has been cut by 60%, actually unheard of. 4.3% GDP, and going way up. No inflation! We are respected as a country again.”

Employment conditions, meanwhile, have continued to cool off from the red-hot post-COVID-19 pandemic era levels.

The unemployment rate rose to 4.6 percent in November—the highest reading since September 2021. Although this remains historically low, market watchers fear that economic uncertainty could adversely affect payrolls, prolonging the recent trend of a “low fire, low hire” environment.

Although a multitude of headwinds gripped the U.S. economy throughout 2025—the government shutdown, “K-shaped” trends that saw stronger growth enjoyed by the wealthy, and tariffs—the nation shrugged them off.

Looking ahead, economic observers are optimistic about 2026, although with some reservations.

Boom Town

The worlds largest economy could face boom times as a series of tailwinds support the U.S. marketplace.

Goldman Sachs projects next years growth will be 2.6 percent.

BNP Paribas and the St. Louis Federal Reserves December 2025 Blue Chip Economic Indicators suggest the consensus 2026 GDP growth rate will be 1.9 percent.

Mark Malek, CIO at Siebert Financial, said in a note emailed to The Epoch Times. “Fiscal stimulus is about to kick in from the One Big Beautiful Bill Act, continued AI CAPEX, smaller trade deficits, and the Fed.”

White House officials are betting big that fiscal stimulus from the One Big Beautiful Bill Act will be a victory for Main Street and Wall Street, contributing to growth prospects.

The Federal Reserves less restrictive monetary policy stance could be another boon for the economic landscape.

Officials lowered interest rates three times in 2025, and the Fed is expected to cut rates at least once more in 2026. While the market has already priced in lower interest rates, they could begin to work their way through the economy as next year progresses.

At the same time, the central banks policy path in the second half remains uncertain as the president is expected to replace Chair Jerome Powell when his term expires in May.

Christian Hoffman, head of fixed income at Thornburg Investment Management, said in a note emailed to The Epoch Times.

The continued buildout of artificial intelligence (AI), rising U.S. stock forecasts, and strong household balance sheets could be additional contributors to gross domestic product.

But while there is reason for optimism, there could still be risks ahead, says Rick Pederson, economist and chief strategy officer at Bow River Capital.

Pederson said in a note emailed to The Epoch Times.