Key highlights:

• The major tariff increases announced by President Trump this week will weigh on the US economy. Growth is likely to be weak and there is a risk the economy will contract.
• Policy uncertainty is likely to remain high for a while. There are likely to be some further tariff announcements and whether, and by how much, broader fiscal policy at some point reverses the large fiscal drag currently underway (e.g. through tax cuts) will be important and is a major forecast uncertainty.
• While inflation will be elevated, and the Fed will want to lean against the risk of inflation expectations de-anchoring, we expect rising unemployment will see the Fed reduce rates starting around mid-year – we expect 125bp of rate cuts over H2 2025 and into 2026.

Find out more in NAB’s US Economic Update (4 April 2025)