Our working assumption is that the 90-day pause on the Trump administration’s reciprocal tariffs will be made permanent, with tariffs remaining at 10% for most countries apart from China. Providing Congress soon recycles the tariff revenue into the economy, a recession should be avoided, but GDP growth is likely to be weaker than in recent years. We expect growth of 1.7% this year and close to 1.5% in 2026 and 2027. With the economy slowing rather than collapsing, we are sticking to our view that resurgent inflation will keep the Fed on the sidelines this year, ahead of 50bp of cuts in 2026.
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