Overview
Morgan Stanley has framed the dominant uncertainty for the U.S. economy in 2026 as whether cross-border trade flows will continue to inject volatility into quarterly GDP estimates or whether the disruption seen after "Liberation Day" has already run its course. In a client note on Friday, analyst Michael Gapen set out the bank's central question: "key question for the US economy in 2026 is whether trade flows will be a driver of volatility in real GDP estimates, or whether the shock to trade volumes following 'Liberation Day' has run its course."
How trade shaped 2025
Morgan Stanley says trade swings dominated 2025. Gapen noted the quarter-by-quarter impacts of net trade on real GDP growth: it subtracted 4.7pp in 1Q 25, added 4.8pp in 2Q, and contributed another 1.6pp in 3Q. The bank's tracking estimate suggests net trade added 0.1pp in 4Q, a figure provided ahead of the BEA's first estimate of 4Q 25 US GDP.
Implications for GDP signals
Gapen argued that persistent volatility in trade would leave GDP as a "noisy signal," complicating interpretation of the underlying growth trend. He added the bank's view that the bulk of that volatility is behind us: "Our view is the volatility is largely behind us and GDP should send a clearer signal in 2026."
Which import categories matter
Morgan Stanley highlighted several import categories that warrant close attention. Computer imports were cited as "remain[ing] robust on account of AI spending," while pharmaceuticals experienced a surge in early 2025 driven by fears of tariffs that ultimately did not materialize. The bank also pointed to nonmonetary gold flows as another factor that distorted headline import figures; those gold movements are not included in GDP.
Excluding these special factors, Morgan Stanley concluded that the retracement from frontloading is over and that import volumes "may indeed be slowing" amid protectionist pressures. On that basis the bank said trade should be a "smaller determinant of growth in real GDP in 2026 than in 2025."
Conclusion
Morgan Stanley's assessment places trade dynamics at the center of near-term macro uncertainty. If the bank is correct that the exceptional swings of 2025 have largely passed, GDP estimates next year may present a cleaner picture of domestic demand and broader economic momentum. If volatility returns, however, quarterly growth readings could remain difficult to interpret.