After a turbulent 2025 that shocked global trade and financial markets, 2026 was shaping up to be a time for the U.S. economy to look past President Donald Trump\u2019s tariffs. <\/p>\n
Not so fast.<\/p>\n
Tariffs are back on the agenda again only a few weeks into the new year. On Saturday, Trump announced eight NATO allies would be hit with 10% tariffs<\/a> next month that will rise to 25% by June until a \u201cDeal is reached for the Complete and Total purchase of Greenland.\u201d<\/p>\n While not all the targeted countries are members of the European Union, the new levies come despite a trade deal reached in July<\/a> that set a 15% tariff on most EU products and obligated it to invest hundreds of billions of dollars in the U.S. <\/p>\n And on Monday, Trump said countries that do business with Iran would be hit with a 25% duty on trade with the U.S., threatening to blow up a fragile tariff cease-fire with China, which is a top importer of Iranian oil.<\/p>\n Now, the U.S. faces the prospect of a new cycle of retaliation and escalation. On Saturday, French President Emmanuel Macron hinted at what comes next.<\/p>\n \u201cTariff threats are unacceptable and have no place in this context. Europeans will respond in a united and coordinated manner should they be confirmed,\u201d he posted on X<\/a>. \u201cWe will ensure that European sovereignty is upheld.\u201d<\/p>\n It wasn\u2019t supposed to be like this. Wall Street, Corporate America, and consumers were looking ahead to an economic boost from tax cuts in Trump\u2019s One Big Beautiful Bill Act as well as more calm on the trade front.<\/p>\n On Friday, analysts at Bank of America<\/a> highlighted an exceptionally upbeat forecast for 2026 GDP growth, putting it a 2.8%\u2014well ahead of the consensus for 2.1%. <\/p>\n \u201cThe key drivers are easier fiscal and monetary policy, and our expectation of more growth-friendly trade policy,\u201d BofA said in a note.<\/p>\n Meanwhile, the Federal Reserve was also anticipating continued moderation in inflation this year as policymakers assumed that tariffs would deliver a one-time jolt to prices instead of sustained upward pressure. <\/p>\n A new flurry of import taxes could put that expectation at risk and jeopardize future rate cuts if inflation remains stubbornly above the Fed\u2019s 2% target.<\/p>\n