Trade actions are capturing a great deal of media attention, and justifiably so. However, the actual tariffs are still relatively new. The Section 232 tariffs on steel and aluminum are only a month old, and the first round of Section 301 tariffs targeting China have only just gone into force. The economic effects of those actions (and resulting retaliations against them) are not yet manifest in economic data.

The challenge of forecasting the shock of tariffs is the lack of a counterfactual case. We expect the U.S. economy to continue growing, but not quite at the rate it could achieve without these impairments to free trade. Our outlook for 2018 is positive, with 3% real growth expected this year. We expect a reduction in growth to follow in 2019 as the costs of trade actions become clearer, and as short-term incentives from the Tax Cuts and Jobs Act expire.

Key Economic Indicators