From tariff hikes and trade tensions to rapid advances in artificial intelligence, the 2025 economic landscape delivered a mix of challenges and opportunities. As we enter a new year, Bryant University’s Senior Lecturer and Program Coordinator of Economics Allison Kaminaga, Ph.D., and Lecturer of Economics Liam Rice ’17 unpack what the national and international economic scene could look like over the next 12 months:
Economic growth
In the United States, economic growth is anticipated to remain positive, stable, and relatively modest in 2026, notes Kaminaga. The Organisation for Economic Co-operation and Development (OECD) is forecasting real GDP growth of 1.5 percent in the U.S., while J.P. Morgan is forecasting 1.8 percent growth.
Looking at the global economy, economic growth is expected to be slightly above 3 percent, according to the International Monetary Fund (IMF) and Morgan Stanley.
“As is typically the case, large, advanced economies including the U.S. are expected to grow at a slower pace than developing countries,” Kaminaga says.
In the new year, consumer sentiment and the labor market are economic indicators to closely monitor. Kaminaga notes that consumer spending accounts for nearly 70 percent of the nation’s GDP. Additionally, the Bureau of Labor Statistics’ December jobs report showed the unemployment rate increasing to 4.6 percent, which — while historically still relatively low — is the highest level in four years.
Consumer spending
As U.S. inflation decreases from recent highs, Rice shares that consumers should experience modest real income gains in 2026, which would support growing consumer spending; however, he cautions that uncertainty in U.S. monetary policy could push inflation higher later in the year.
“We continue to see large gains in wealth for higher-income consumers as the AI investment boom lifts this group’s finances. We also continue to see strong spending from this cohort, which has buoyed consumer spending as lower-income consumers curtail their spending,” Rice says, noting that if there’s an AI bubble collapse in 2026, the impact to high-income consumer spending could negatively impact consumption to a higher magnitude than normal due to this wealth concentration.
Additionally, with geopolitical risk, trade tensions, and climate-related disruptions in the background, households may show a higher precautionary saving motive than in the pre-COVID-19 era.
Inflation and recession outlook
Kaminaga shares that it is unlikely that the U.S. will hit the Federal Reserve’s 2 percent inflation target this year.
“We may see an uptick in inflation in the beginning of 2026 due to trade and immigration policy; however, inflation should decline by the end of the year,” Kaminaga says. “According to the most recent summary of economic projections, the Fed is predicting 2.4 percent core Personal Consumption Expenditures (PCE) inflation by the end of 2026, down from its current level of 2.8 percent.”
As for the likelihood of a recession, Rice explains that not every downturn in economic activity is a recession, and it’s quite difficult for the U.S. to enter one. In the 21st century, the nation has only had three recessions: 2001 (dot-com bubble), 2007 (Great Financial Crisis), and 2020 (COVID-19 pandemic).
Instead, for this calendar year, he anticipates one of the following to occur: a baseline of slow but positive growth; a mild global or advanced-economy recession triggered by trade escalation, financial stress, or geopolitical shock; or a modest reacceleration if inflation continues to fall, central banks ease earlier, and investment — especially in AI-related capital — remains strong.
International trade relationships
One concern heading into 2026, notes Rice, is that trade is no longer the global growth engine it was in previous decades.
The World Bank’s Global Economic Prospects emphasizes that global growth is slowing largely because of a substantial rise in trade barriers and policy uncertainty, which has depressed trade volume growth. Additionally, the OECD’s 2025 outlook warns that despite better-than-expected growth this year, rising tariffs and trade disputes are likely to cool trade growth and weigh on GDP through 2027.
“The net effect on 2026 performance will depend on how far trade tensions escalate. Under a benign scenario, tariffs and restrictions stabilize, trade growth slows but does not collapse, and global GDP grows in the approximately 3 percent range as per IMF/OECD baselines,” Rice says, adding that this scenario depends on three key trade components: trade demand suppression, supply-side reconfiguration, and international services trade.
Emerging markets
In 2026, it is anticipated that emerging and developing economies will continue to grow faster than advanced economies but at a slower pace than in previous decades. Rice notes that two potentially major concerns for emerging markets — which, historically, are also their greatest growth strengths — are debt capacity and trade exporting.
“Increasing debt conditions risk slowing down growth. Many Emerging Market and Developing Economies (EMDEs) entered the mid-2020s with higher debt ratios and higher interest rates than in the previous decade. Refinancing risks and debt restructuring will remain a drag on investment,” Rice says.
He adds that there are downside risks to export economies. For instance, as the global trade economy transitions from the U.S. trade war initiation, many countries are seeking to increase their own trade barriers and “friendshore” their key trade relationships. Emerging economies that rely on export-led economies will be damaged by this change.
“For investors and policymakers, the key is to recognize heterogeneity: structural reforms, institutional quality, and exposure to trade and climate shocks will create large differences in performance across countries. Not all EMDEs are created equally going into 2026,” Rice says.