Prices are rising, growth is slowing, and the Federal Reserve is stuck. Here’s what the data actually says about where the U.S. economy stands heading into the second half of 2026.
Depending on who you ask, the U.S. economy is either resilient proof that the administration’s economic strategy is working, or a system quietly absorbing shocks that will fully show up in consumer prices before the year is out. The honest answer involves elements of both — and understanding the real picture matters for anyone trying to make sense of what is coming next.
What is not in dispute is that tariffs have changed the economic equation. The Trump administration’s sweeping expansion of import duties, which began in 2025, has made this the most significant shift in U.S. trade policy in a generation. What remains actively debated is how much of that cost has already landed, and how much is still working its way through the supply chain toward the consumer.
The numbers from the first half of 2026 offer a clearer view than the political debate suggests — if you know where to look.
The numbers behind the headlines
Start with growth. Real GDP growth in 2026 is running at 2.1%, reflecting the U.S. economy’s resilience despite elevated interest rates, with unemployment at 4.1%. That sounds solid until you look at the trend. The fourth quarter of 2025 GDP was revised down to a 0.7% annual growth rate by the Bureau of Economic Analysis, and the economy entered 2026 on uncertain footing. The rebound into 2026 was partly mechanical — stronger data at the end of 2025 puts upward pressure on the 2026 growth rate — rather than purely the result of new momentum. StatisticsoftheworldHowland Capital
On inflation, the picture is more complicated. Over the year through March 2026, the headline PCE price index was 3.5%, a full 1.1 percentage points above the 2.4% pace over the year through March 2025, with fluctuations in energy prices serving as a major contributor to the pickup. The Federal Reserve’s target is 2%. That gap matters because it is the primary reason the Fed has been unable to cut interest rates, which in turn keeps borrowing costs elevated for consumers and businesses. With inflation moving higher throughout the first half of this year, the expectation is that the Fed will hold rates steady until December. U.S. Department of the TreasuryDeloitte Insights
The tariff effect on household finances is no longer theoretical. The Trump tariffs represent the largest U.S. tax increase as a percent of GDP since 1993 and amount to an average tax increase per U.S. household of $1,500 in 2026. That figure comes from the Tax Foundation’s General Equilibrium Model and includes both the direct price effects and the indirect economic drag from reduced growth. It is a meaningful hit to purchasing power, particularly for middle and lower-income households who spend a higher share of their income on goods — the category most directly affected by import duties. Tax Foundation
Who is absorbing the tariff costs — and for how long
One of the most consequential and underreported dynamics of the current tariff environment is where in the supply chain the costs are actually sitting. Core goods prices rose only about a percentage point cumulatively in 2025, while import prices including tariff-related costs were up nearly 10%, meaning U.S. businesses have been absorbing almost all of the tariff burden — possibly because large stockpiles of pre-tariff inventory allowed them to delay passing cash costs on to their earnings reports. Morningstar
That buffer will not last. Once those inventories are worked through, businesses face a choice between absorbing ongoing tariff costs in their margins or passing them to consumers. Analysts broadly expect the latter to dominate heading into the second half of the year. Forecasts show durables prices rising a cumulative 4.5% over 2025 to 2027, and nondurables rising 5.6% — less than the runup in goods prices over 2021 to 2023, but still a major inflationary impulse. Morningstar
The best evidence to date suggests that pass-through to consumers now exceeds 50 percent, which represents a meaningful burden on households even though it has been slower and less complete than the near-100 percent pass-through observed under the tariffs enacted during the first Trump administration. That 50 percent figure will likely rise as inventory buffers shrink. The consequence for household spending is direct: real consumer spending is projected to slow to 2.1% in 2026, down from 2.7% in 2025. Stanford Institute for Economic Policy ResearchDeloitte Insights
The federal debt question that nobody wants to talk about
Behind the tariff debate lies a larger fiscal concern that transcends any single policy. The Congressional Budget Office projects that deficits from 2026 to 2035 will total $23.1 trillion — $1.4 trillion more than CBO projected in January 2025. The 2025 reconciliation act increased projected deficits by $4.7 trillion, while higher tariffs reduced deficits by an estimated $3.0 trillion, leaving a net increase that will compound through rising debt-service costs. Congressional Budget Office
That math is important context for anyone trying to assess whether the tariff revenue is worth the economic cost. The tariffs generate real revenue — an estimated $98 billion in additional federal tax revenues in 2026, or 0.31 percent of GDP — but that figure needs to be weighed against the GDP drag, the household income loss, and the broader fiscal trajectory. On a dynamic basis incorporating the negative effects of tariffs on the economy, the Section 232 and temporary Section 122 tariffs will raise $697 billion from 2026 through 2035, about $259 billion less than the conventional static estimate. Tax FoundationTax Foundation
The economy is not in crisis. Business investment is rising, payroll growth has rebounded, and the labor market remains historically tight by most historical comparisons. But the combination of elevated inflation, frozen interest rates, a weakening consumer, and a federal balance sheet under structural pressure creates a set of headwinds that will not resolve themselves quickly. The second half of 2026 will likely be when many of these deferred pressures become visible to the average household — not as abstract economic indicators, but as higher prices in the checkout lane.
Sources: deloitte.com | taxfoundation.org | treasury.gov | cbo.gov | morningstar.com | statisticsoftheworld.com | siepr.stanford.edu
Autor: Diego Rodríguez Velázquez
