Economic / Market Update for April 2026 with Marta Rodriguez of JP Morgan Asset Management and our advisor, Jessica Ballin

Tariff Turmoil Ahead

The U.S. economy enters April 2026 amid fresh upheaval from trade policy shifts. The Supreme Court's decision to invalidate reciprocal tariffs imposed under the International Emergency Economic Powers Act has immediate implications for importers and manufacturers. These tariffs, aimed at addressing trade deficits and the fentanyl crisis, had collected over $175 billion by late 2025. Their removal could lower costs for goods from key partners, but President Trump's announcement of a 15% global tariff in response introduces new uncertainty. Exporters in sectors like agriculture and technology may face retaliation, echoing past disputes that shaved 0.2% off GDP growth.

Growth forecasts remain cautiously optimistic, with real GDP expected to average 2.2% for the year. This builds on a resilient 2025, where consumer spending held firm despite higher borrowing costs. Fiscal measures from the One Big Beautiful Bill Act, including accelerated depreciation for investments, are set to subsidize AI-related capital spending. However, public debt climbing to 120% of GDP by 2036 raises long-term concerns. Refinancing needs in a higher-rate environment could crowd out private borrowing, while commodity price swings—driven by geopolitical tensions—add volatility to input costs.

Inflation, at 2.4% in January 2026, continues to moderate from 2025 peaks but faces upward pressure from delayed tariff effects and energy market disruptions. Core import prices may rise if exemptions lapse, affecting industries reliant on foreign components. The Federal Reserve's projected funds rate of 3.4% by year-end signals limited easing, with only one or two cuts anticipated. This cautious stance reflects divisions within the FOMC over balancing growth and price stability.

Labor dynamics reveal underlying tensions. Despite unemployment at 4.4% in December 2025, payroll additions have slowed dramatically, signaling a shift toward productivity gains from automation rather than hiring. AI integration promises efficiency but risks displacing roles in software and finance, potentially widening income gaps. Emerging markets' outperformance, with India at 6.4% growth, contrasts with U.S. figures, highlighting diversification pressures. Geopolitical risks, including multipolarity without multilateralism, could amplify these divides if conflicts escalate.

Non-obvious trade-offs emerge in policy responses. Protectionism aims to bolster domestic manufacturing but may hinder innovation by raising barriers to global talent and tech. Fiscal stimulus supports near-term demand yet exacerbates debt burdens, with CBO projections showing a $1.9 trillion deficit in fiscal 2026. Stakeholders like exporters and consumers benefit from lower tariffs short-term, but small businesses face higher compliance costs from rerouted supply chains. Surprising data, such as manufacturing job additions after 14 months of decline, suggest pockets of resilience amid broader caution.