Updated Economic Forecast analyzes potential tariff effects

The America’s Credit Unions Forecast Group met Monday to update the economic outlook. At that time, financial markets were still dealing with the aftermath of President Donald Trump’s announcement of tariffs that far exceeded expectations.

The forecast group noted the extreme amount of uncertainty plaguing this quarter’s forecast. Wednesday Trump announced a 90-day pause on the “reciprocal tariffs” with most countries, while increasing the retaliatory tariff on China.

The group assumed the policies in place when it met—most notably the reciprocal tariffs and the additional 50% China tariff—would prevail over the forecast horizon through 2026.

While the subsequent pause is likely to restore stability to financial markets, it leaves in place several significant concerns, including: a broad increase in tariffs generally and high tariffs on key trading partners, an uncertain environment that will constrain hiring and investment, and slowing economic momentum.

“A sharp rise in share growth is among the few bright spots in our updated outlook. Unfortunately, that reflects households’ shift from spending to precautionary saving and spells bad news for consumer demand. While first-quarter data is not yet in, we hear that credit unions were already seeing strong share growth to start the year, consistent with a rising personal savings rate among households overall,” said America’s Credit Unions Deputy Chief Economist and Head of Emerging Issues Curt Long. “The likelihood of recession is high with the reciprocal tariffs (as we assumed) or without, but we don’t expect it to be particularly severe.  But it will likely curtail spending and prompt members to redirect savings to federally insured accounts.”

The second-quarter baseline economic forecast—made prior to the pause—has a lower expectation for real GDP growth and higher unemployment and inflation.

The credit union forecast also changed, with: 

• The outlook for 2025 share growth increased from 6.5% to 8.0%, with a slight lowering for 2026 to 7.0%;
• The 2025 loan growth estimate declined from 5.0% to 3.5%, with a modest rebound to 5.0% in 2026 anticipated;
• An increased 2025 forecast for delinquencies by 15 basis points to 1.10%, rising to 1.20% in 2026; and
• A reduced outlook for return on average assets (ROA) from 75 basis points to 50 basis points in 2025, with ROA expected to climb to 60 basis points in 2026.