Two powerful forces shaped the economy in 2025: tariffs and artificial intelligence (AI). Tariffs touched virtually every country and rewrote the rules of global trade, while AI began transforming how nearly every business operates. Together, they set the stage for the U.S. economic outlook 2026 and where growth, opportunity, and risk may emerge in the years ahead.
Tariffs and Global Trade in 2026
Tariffs have experienced a roller coaster starting high, settling low. We have not seen inflation as a result of tariffs. What we have seen is negotiations on the rules of trade. Foreign countries are being forced to open their markets for more trading. Ford trucks can now be sold in Japan – which up until now sold only vehicles made in Japan. This development is good for US companies as well as foreign countries. The economy is doing better globally.
At the time of writing this, there hasn’t been a decision by the Supreme Court on the validity of an Executive Order to impose tariffs. General consensus among economists is that tariffs will get struck down. The administration has made it clear that tariffs will be imposed by one means or another. The stock market seems to have accepted that.
AI, Innovation, and the Future of Work
AI appears to be the next industrial revolution, reshaping how work gets done across the economy. It is already creating major efficiencies in areas like hospitals, trucking, and utilities, and it will continue to touch virtually every industry.
The race is on to stay on the cutting edge of this technology. AI requires massive amounts of data and significant energy consumption, and several major companies are competing to build the most powerful models. A key concern is whether the United States can maintain its lead over China in AI innovation.
Regulating AI is proving challenging. Most observers agree that clear guidelines are needed, but Congress, in its dysfunction, has not produced a cohesive framework, leaving states to design their own rules. AI companies are urging lawmakers to pass comprehensive federal legislation because they do not want to juggle 50 different, and sometimes conflicting, sets of requirements.
Will AI take jobs? Yes and no. It will make many workers more productive, but some roles will be replaced or reshaped as tasks are automated. This is part of the ongoing evolution of the workplace, and there may be temporary disruption as people retrain and learn new skills.
Growth, Affordability, and a Bifurcated Economy
As we look at the U.S. economic outlook 2026, the economy has shown solid growth, especially in the fourth quarter, but it has not fully translated into improved affordability for many households. As oil prices come down, we see relief at the gas pump, but it takes longer for those lower prices to filter through to oil‑based products like plastics.
We are seeing a bifurcated economy. On one side, many investors are benefiting from a rising stock market; on the other, families are feeling stretched by the cost of housing, cars, and everyday expenses. As recent tax law changes take effect, the hope is that tax breaks on tips, overtime, and other income will start to show up in more paychecks.
The U.S. is also positioned for a potential economic boom, supported by several key factors:
- Better Tax Environment – maintaining current tax guidelines that were set to expire, allowing direct expensing for new manufacturing facilities, and extending 100% depreciation for equipment purchases.
- Deregulation – the current administration is working aggressively to make it easier to do business; for every new regulation implemented, agencies are instructed to remove ten, and this focus on fewer regulations is also shaping tariff negotiations.
- Less Wasteful Government Spending – audits have identified numerous areas of duplication and improper payments, including payments made to deceased individuals, and there is now more willingness to trim this waste and operate in a leaner, more efficient way.
- Interest Rate Cuts – expectations are for an additional two to three rate cuts over the next year, which would lower borrowing costs for both businesses and consumers.
- Lower Inflation – while some prices, such as housing, remain stubbornly high, others like gasoline and certain food items (for example, eggs) have declined, and the overall inflation rate is trending lower.
- AI Driven Productivity – artificial intelligence is helping many companies operate more efficiently, and those productivity gains can improve profitability and support further growth.
What This Economic Outlook Means for Investors
While many trends point to continued strength in the economy, meaningful risks remain, and the year ahead could still feel like a roller coaster for investors. Periods of volatility are a normal part of market cycles, but they can be unsettling when you are relying on your portfolio for income.
In a U.S. economic outlook 2026 that combines strength with uncertainty, dividends can help smooth the ride by providing a steadier cash flow, even when markets are choppy. Staying focused on quality, income-producing investments and a long-term plan may matter more than ever in an environment where both opportunity and uncertainty are on the rise.
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Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Boise Retirement Coach and Cambridge are not affiliated.