There's One Thing Trump Could Do To Turbocharge The Global Economy And Crush Inflation

Key Takeaways President Donald Trump could boost global economic growth by 0.5 percentage points if he negotiated away his "Liberation Day" tariffs by striking free trade deals with other countries, an analysis found. There's no indication that tariffs will suddenly be removed, but the paper highlighted the extreme impact they've had on the global economy. U.S. consumers would see lower inflation in the coming years if the tariffs went away, the analysis found. President Donald Trump could invigorate the global economy and stamp out inflation quickly. All it would take would be scrapping his signature economic policy. That's according to an analysis this week by Daniel Harenberg, lead economist at Oxford Economics, who found that a reversal of the tariffs Trump imposed this year would drive the global economy to grow at a rate of 3% in 2026 and 3.4% in 2027, compared to 2.7% and 2.9% if there's no change. That's a boost of 0.5 percentage points per year, all while reducing inflation for U.S. consumers. Trump has shown no sign that he would remove or negotiate away his beloved tariffs, but Harenberg's analysis highlighted the potential impacts if 2026 delivered yet another surprise on par with 2025's trade policy shock. Trump's tariff policies were an economic shock in 2025. It's possible that he could do something equally unexpected could happen next year.Andrew Caballero-Reynolds / AFP via Getty Images In this scenario, Trump could strike deals with other countries to remove tariffs ahead of the 2026 elections. "In our extreme upside scenario, President Trump pushes for a series of bilateral trade deals to create a positive news-flow ahead of upcoming mid-term elections," Harenberg wrote. "One year after " liberation day ," the U.S. administration starts lowering U.S. tariffs back to the levels at end-2024." What This Means For Your Finances Tariffs are likely to remain in place for now. But inflation could ease and growth could get a meaningful boost if Trump or a future administration reverses these policies. Liberation from " Liberation Day " would not only reinvigorate global trade, but would help household budgets for U.S. consumers. The analysis found it would push down the Consumer Price Index by 0.4 percentage points annually through 2029. While a sudden reversal of tariffs is a long shot, it does seem more plausible that import tax levels will dwindle over a longer period of time. Drawing on analysis from the Yale Budget Lab, Harenberg noted that in the long run, U.S. tariff rates have historically tended to trend lower, and that this trend could reassert itself in the coming years. In other words, Trump's tariffs may prove to be a temporary blip if U.S. trade policy gets back on its former course. "After the recent rise, the U.S. effective tariff rate should fall, but it will take at least ten years to return to pre-liberation day levels," he wrote. Do you have a news tip for Investopedia reporters? Please email us at [email protected]

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