Will tariffs slow the U.S. economy in 2026? – Twin Cities

The U.S. economy has largely weathered historically high tariffs so far this year, but a new study says tariffs will hit Americans in 2026.

The Paris-based Organization for Economic Cooperation and Development said it expects the U.S. economy to grow 1.8% this year, and 1.5% next year. It mostly based its prediction for slower growth on tariff effects.

The organization estimated that the overall effective U.S. tariff rate on imports rose to 19.5% at the end of August from 15.4% in mid-May, reaching its highest level since 1933. Tariffs have yet to greatly hit the U.S. consumer, the organization said, because of companies using up inventories.

Yet many economists were wrong when the Trump tariffs were announced and most predicted a recession this year. “History tells us that free markets can cope with wars, plagues and revolutions,” wrote financial columnist Matthew Lynn for The Washington Post. “It was always slightly absurd to argue that 20% levies on Vietnamese-made Halloween masks would be the end of the world.”

Question: Will tariffs slow the U.S. economy in 2026?

Economists

James Hamilton, UC San Diego

YES: The good news is that the tariffs implemented so far have been much more modest than was originally threatened. But the possibility of big new tariffs is in the news daily, and the uncertainty itself holds businesses back. Much of the impact of the tariffs already implemented won’t show up until the end of the year. And retaliatory actions by other countries, such as China’s threat to withhold supplies of rare-earth elements, could have quite serious effects.

Norm Miller, University of San Diego

YES: It is already slowing the economy, albeit more slowly than many thought. Advanced purchasing helped many wholesalers. Some foreign suppliers have actually been eating the tariff by reducing prices, and a strong dollar in early 2025 helped keep prices down, but as we enter 2026 there will be no inventory left at pre-tariff prices and the dollar is weakening. This means imports will be more expensive and this negatively affects both inflation and our average standard of living.

Caroline Freund, UC San Diego School of Global Policy and Strategy

YES: But the impact of current tariffs — unlike the harsher ones announced in April — will be limited. Retaliation has been avoided, and exemptions and trade deals are softening the blow. Imports make up only 11% of U.S. consumption, so major price effects are unlikely. The bigger drag is uncertainty: Firms are delaying investment and hiring until policies stabilize, while the Fed waits to cut rates until the inflation impact is clearer.

Kelly Cunningham, San Diego Institute for Economic Research

YES: Tariffs will have detrimental effect on economic growth imposing artificial costs on goods and services crossing borders, ultimately forcing consumers to pay higher prices. Uncertainty over the actual amount of rates to be imposed on trading partners somewhat delayed things in 2025, as well as the momentum of companies building inventories and consumers rushing to buy before tariff costs were imposed, sustained economic growth, but the negative impacts will be manifest in the coming year.

David Ely, San Diego State University

YES: U.S. firms increased their inventories of foreign-produced goods in advance of higher tariffs and initially absorbed the cost when it was unclear where trade policies would land. While firms can absorb higher tariffs in the short term, they will eventually need to raise prices to help offset their higher costs. The tariffs will probably not cause a recession, but higher prices will impact spending by consumers and businesses that rely on imported components.

Executives

Phil Blair, Manpower

YES: The tariffs will result in huge price increases that will put a huge damper on U.S. spending. Think about the threat now for 100% tariffs on merchandise from China.

Jamie Moraga, Franklin Revere

YES: The U.S. economy has shown resilience this year despite higher tariffs and policy uncertainty. Should these increased tariffs persist and the labor market cools, we could see an economic slowdown next year. Consumer spending and business investment will continue to be key indicators to watch. However, a recession in 2026 is unlikely, as continued investments in artificial intelligence and the effects of tax cuts are expected to offset some of the downward pressures on growth.