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Investing.com - Sweeping U.S. tariffs have been implemented at a faster rate than previously expected, potentially pushing up prices and weighing on the broader economy, according to analysts at Danske Bank (CSE:DANSKE).
In a note to clients, the brokerage downgraded its forecast for growth in the world’s largest economy to 1.6% from 2.3% this year -- although an outright recession is not anticipated to occur. In 2026, the U.S. is now tipped to expand by 1.3%, down from a prior estimate of 1.9%.
The majority of negative impact from the tariffs is estimated to arrive in the third and fourth quarters of 2025, with growth gradually recovering from the first quarter of next year onwards.
U.S. President Donald Trump has slapped punishing levies on a host of countries, as he looks to address perceived trade imbalances, reshore lost manufacturing jobs, and bolster government revenues.
Although many of Trump’s elevated so-called "reciprocal" tariffs have been temporarily delayed while White House officials attempt to forge bespoke trade deals with dozens of individual nations, a baseline 10% tariff and levies on items like steel and aluminum remain in effect.
Meanwhile, even after a recent agreement to lower and pause tit-for-tat tariffs on China, the U.S. effective tariff rate now stands at around 15% -- the highest level since the Second World War.
Echoing long-held speculation among many economists that Trump’s aggressive tariff agenda will fuel inflationary pressures and dent economic activity, the Danske analysts flagged prices will be boosted in the second half of 2025.
"In our base scenario, the tariffs will remain close to the current levels in the foreseeable future," the Danske analysts said.
However, lower oil prices are anticipated to help moderate this uptick, with Banske now projecting 2025 inflation in the U.S. of 2.8%, compared to previous outlook of 3.0%. Core inflation, stripping out volatile items like food and fuel, is seen at 3.0% in 2025, matching Dankske’s earlier predictions.