The US economy is positioned for accelerated growth in 2026, propelled by multiple tailwinds including President Trump’s tax legislation, diminishing trade policy uncertainties, sustained artificial intelligence investments, and the Federal Reserve’s recent interest rate reductions. This follows a volatile 2025 characterized by initial contraction and subsequent recovery.
Economists identify enhanced consumer spending as the primary growth catalyst, fueled by increased tax refunds and reduced paycheck withholdings resulting from the ‘One Big Beautiful Bill’ legislation. KPMG Chief Economist Diane Swonk projects these fiscal measures alone could contribute至少 half a percentage point to first-quarter GDP expansion.
The corporate sector stands to benefit significantly from expanded tax credits and full expensing provisions for business investments. While AI infrastructure spending dominated 2025 capital expenditures, technology giants including Amazon and Alphabet have signaled continued substantial investments in this domain.
Trade policy impacts reached their zenith during the first half of 2025, with average import levies surging from below 3% in 2024 to approximately 17% according to Yale Budget Lab data. As these pressures gradually recede, economists anticipate improved wage growth relative to inflation, further strengthening household financial positions.
Nevertheless, substantial risks persist. Labor market softening remains evident through reduced monthly job gains and an elevated November unemployment rate of 4.6%—though data collection disruptions during the six-week federal government shutdown may have distorted this figure. Inflation, while moderating in the third quarter, continues to exceed target levels, creating policy dilemmas for the Federal Reserve.
The central bank faces additional uncertainty with Chair Jerome Powell’s term concluding in May 2026. Market expectations universally anticipate the incoming chair, selected by President Trump, will advocate for additional rate reductions.
Consumer sentiment reflects these mixed conditions, with Conference Board data indicating labor market perceptions have deteriorated to early-2021 levels. This cautious outlook might lead households to prioritize saving rather than spending their tax cut windfalls.
Goldman Sachs economist David Mericle notes: ‘While we project unemployment stabilizing at 4.5% alongside strengthened final demand, further labor market softening represents our forecast’s primary downside risk. AI’s productivity benefits might paradoxically constrain hiring momentum despite economic expansion.’