The Economic Impact of Tariffs: Forecast for 2026

Sat Jan 31 2026 17:26:58 GMT+0200 (Eastern European Standard Time)

As President Trump's second term unfolds, tariffs are set to reshape the global economy further into 2026, with implications for international trade and economic growth.

Tariffs introduced during Trump's administration continue to influence the global economy, with the IMF forecasting a slowdown in growth to 3.1% in 2026. While the tariffs have not devastated global trade as feared, uncertainties remain, and key trade discussions between the U.S. and China are anticipated in 2026. Economists express concerns about efficiency losses and the long-term impact on businesses. Despite challenges, some resilience is noted in the U.S. economy, driven by consumer spending and low interest rates.

President Trump's favourite word is tariffs. He reminded the world of that in his pre-Christmas address to the nation.

With the world still unwrapping the tariffs gift from the first year of his second term in office, he said they were bringing jobs, higher wages, and economic growth to the US.

That is hotly contested. What is less debatable is that they've refashioned the global economy, and will continue to do so into 2026.

The International Monetary Fund (IMF) says that although the tariff shock is smaller than originally announced, it is a key reason why it now expects the rate of global economic growth to slow to 3.1% in 2026. A year ago, it predicted a 3.3% expansion this year.

For the head of the IMF, Kristalina Georgieva, things are better than we feared, worse than it needs to be. Speaking on a podcast recently she explained that growth had fallen from a pre-Covid average of 3.7%.

Other forecasts for 2026 are even more pessimistic than that of the IMF.

Yet the impact of the tariffs on the global economy was not as bad as it could have been, notes Maurice Obstfeld of the Peterson Institute for International Economics, who is also a former chief economist at the IMF. He says this is the case because countries didn't retaliate strongly against the US.

However, after five rounds of trade talks, the world's two biggest economies still have more tariffs and other trade restrictions in place against each other than when Trump took office for the second time.

Despite the resilience seen so far, these frictions and uncertainties take their toll over time, according to Obstfeld. Some of the damage of tariffs has been mitigated by lower interest rates, a fall in the value of the dollar, businesses finding clever ways around them, and, crucially, the many exemptions they contain.

This may help explain why the UN trade agency UNCTAD is forecasting that the value of global trade grew 7% last year to reach more than $35tn (£26tn).

However, Obstfeld's insight into the complexity of U.S. tariffs acknowledges that the exemptions introduce uncertainty on how to navigate them.

Moving into 2026, the world economy will be looking to upcoming U.S.-China trade discussions set for April. As both countries grapple with each other’s trading practices, the outcomes of these dialogues could have significant implications for global economic conditions and the future of international trade.