US Economic Outlook: Q1 2026
What are the long-term impacts of tariff rates on GDP and trade as we measure US economic growth forecast in 2026?
Tariffs are a critical factor shaping the US economic landscape. In the near term, they contribute to rising consumer prices and inflation, likely peaking in 2026 as businesses continue to pass costs onto consumers. The longer-term impact includes a slowing GDP rate until 2027 when the tariff effects taper off and economic policies encourage normal growth rates. GDP growth is projected to slow over the next two years, bottoming at an annual average of 1.7% in 2027. This marks a decline from the 2.4% average growth seen between 2020-2025 and the recent peak of 2.8% over 2022-2024. A sharper decline in net immigration, as reflected in updated population forecasts, is a key factor weighing on near-term GDP growth.
Artificial intelligence is also not yet delivering a major productivity boost, but it is propelling the economy's demand side through investment and stock market wealth. These changes are continually monitored as our analysts understand further how it shapes prices, business profitability, and tech-related investments. High interest rates continue to suppress economic activity, with private fixed investment—excluding AI-driven tech—contracting in 2025. The Federal Reserve is expected to hold rates steady in 2026, waiting for the inflationary effects of rising oil prices to subside.
The Morningstar Q1 Economic Outlook delivers updated forecasts on key topics, including:
- Tariffs
- Inflation
- Interest rates
- GDP
- Consumer spending
- Labor market
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