JPMorgan Issues New 2026 US Economy Prediction Amid Tariff Hikes and Fed Rate Cut Speculation

JPMorgan's Latest Economic Outlook

JPMorgan released a new prediction for the US economy in 2026, discussed on Fox Business' 'Mornings with Maria' on January 4, 2026. Panelists analyzed how pro-business policies, including tariff increases, could shape growth and jobs.[2]

The forecast comes amid discussions on doubling tariffs on cabinets and vanities to 50%, with 30% on poster furniture starting immediately. Experts highlighted the shift from the Biden inflation era of nearly 10% to current policy impacts.[2]

Tariff Policies Spark Debate

New tariffs are set to double on certain imports like cabinets and vanities to 50%, effective right away. Additional 30% duties apply to poster furniture, framed as pro-business measures.[2]

Panelists questioned how these changes affect the job market post-high inflation. They emphasized preparing workers for AI-driven roles amid $10 trillion in needed investments.[2]

Fed and Dollar Volatility in Focus

Separate analysis predicts a volatile 2026 for the US dollar due to Federal Reserve actions and government spending via the 'One Big Beautiful Bill' Act. The dollar may drop from 99.00 to around 94.00 in the first half as the Fed cuts rates early.[1]

Economists foresee a 'V-shaped' year: weakness early on from high interest rates, followed by a rebound from stimulus. Rate cuts could come in January and April to protect jobs.[1]

Inflation and Stagflation Risks

'Liberation Day' tariffs, including a 10% import tax, may push inflation up by 1-1.5% from the expected 2.4%. This could lead to stagflation, forcing the Fed to keep rates higher and strengthening the dollar later.[1]

• US growth to outperform globally but in two phases: slow start, strong second half.
• Tariffs reverse falling inflation trends.
• Higher rates attract foreign investment.

Key Policy Conflicts

The Fed aims to stabilize amid aggressive government spending. A temporary 'soft patch' early in 2026 allows rate cuts, weakening the dollar briefly.[1]

Pro-business tariffs aim to boost domestic jobs but risk higher prices. JPMorgan's view ties into broader Wall Street reactions on inflation, rates, and small business impacts.[2]

AI and Investment Needs

Discussions stressed retraining for AI jobs to support $10 trillion investments. This aligns with forecasts of uneven growth favoring the US over Europe.[1][2]

1. Early 2026: Economic slowdown prompts Fed action.
2. Mid-year: Stimulus and tariffs drive rebound and inflation.
3. Late 2026: Dollar strengthens on higher rates.