The Economic Ride of 2026 (So Far)
Kevin M. Bahr CBEI Chief Analyst; Emeritus Professor of Business Sentry School of Business and Economics
It’s been quite a ride in 2026 – economically, militarily, and politically. Hang on - the ride has just begun. This report focuses on the economic ups and downs thus far in 2026 with economics, U.S. military operations, and politics all intertwined. U.S. military operations and politics have significant impacts on the economy. As a result, this report will discuss the performance of a wide variety of economic variables, including: 1) tariffs and trade, 2) the labor market, 3) oil prices, 4) inflation, 5) economic growth, 6) the financial markets, and 7) U.S. debt and deficits. The topics are not listed in any particular order of importance; they are all important. Tariffs and Trade The current tariff saga began in 2025 and continued into 2026. A tariff is basically a tax paid by a U.S. business to the U.S. government for importing goods from a foreign country. The business importing the goods pays the tariff, not the foreign country sending the goods to the United States. In 2025, U.S. imports and exports of goods totaled approximately $3.4 trillion and $2.2 trillion, respectively. With the U.S. population at nearly 350 million, import product demand was nearly $10,000 per U.S. resident. Prior to 2025, global tariff rates were relatively low since early this century. A brief spike in the U.S. rate occurred in 2019 due to Trump Administration initiated tariffs, but trade wars rescinded in 2020 and tariff rates declined. The era of relatively low tariffs changed in 2025, when the United States increased tariff rates on imports from trading partners primarily based on U.S. trade deficits. The stream of 2025 tariffs began in February when President Trump signed an executive order targeting Canada, Mexico, and China, America’s top three trading partners. On April 2, the Trump Administration announced a minimum 10% global tariff rate, with country specific tariff rates ranging from 10% to approximately 50%. Although the Trump Administration referred to the new tariffs as “reciprocal”, the rates were not based on the tariff rates charged on U.S. imports by a given country. Rather, the “reciprocal” tariff rates were based on a mathematical formula related to the 2024 U.S. merchandise trade deficit with a given country. The greater the merchandise trade deficit with a given country relative to imports from that country, the greater the “reciprocal” tariff rate. The reciprocal tariff rates, announced last year by the U.S. on April 2, were just the beginning of a roller coaster ride of tariff rate revisions. A week later on April 9, the Trump administration announced a 90-day pause from the “reciprocal” tariffs, although the global tariff rate of 10% remained in effect. August 1 became the deadline (later extended to August 7) for countries to negotiate trade deals with the U.S., or face the return of the “reciprocal” tariffs. The 25% tariff rate (with certain product exceptions) for Canada and Mexico was paused on products covered by the USMCA (the 2020 U.S. trade agreement with Canada and Mexico). With an August 7 deadline of U.S. tariffs reverting to the April 2 “reciprocal” rates unless trade deals were reached, multiple trade deals were finalized by the deadline. Reciprocal rates were “adjusted” to reflect trade deals. The Trump Administration imposed tariffs based on the International Emergency Economic Powers Act (IEEPA), Section 232 of the Trade Expansion Act of 1962, and Section 301 of the Trade Act of 1974. The IEEPA gives the president the authority to regulate economic transactions following a declaration of a national emergency. The Trump Administration became the first presidential administration to invoke tariffs based on the IEEPA. The “reciprocal tariffs” were based on the IEEPA, as were the “fentanyl” tariffs on Canada, China, and Mexico. A minimum baseline (reciprocal) tariff rate of 10% was imposed on all countries. Section 232 of the Trade Expansion Act of 1962 allows the U.S. government to impose tariffs on imports that threaten national security. Section 301 of the Trade Act of 1974 allows the U.S. government to place tariffs on goods from countries that are deemed to be
Central Wisconsin Report - Spring 2026
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