The Week in Review: February 23, 2026
Q4 Government Shutdown Drags on GDP; Supreme Court Blocks Tariff Plan
The government shutdown proved to be a far greater drag on the economy than earlier estimates indicated. On Friday, the U.S. BEA reported that fourth-quarter Gross Domestic Product (GDP), the largest measure of economic output, grew at a 1.4% annualized pace. This compares with a 4.4% annualized pace in Q3.
The sharp contraction in government outlays shaved 1.2 percentage points off overall Q4 GDP growth. Removing the impact of federal spending, GDP would have expanded by 2.6%.
Still, the most important driver of economic growth—consumer spending— remains positive.
Consumer spending rose at an annualized rate of 2.4% in Q4 and is near the four-year average of 2.6%, according to US BEA data. In addition, business spending and investment continue to rise, partly driven by massive outlays for AI data centers.
Separately, the Supreme Court struck down key portions of the president’s global tariff initiative, ruling that his reliance on the International Emergency Economic Powers Act (IEEPA) to advance his aggressive trade agenda exceeded the statute’s authority.
Yet, according to Bloomberg, there are alternatives available to the president. The tools available generally require more time for investigation and offer less sweeping, immediate power than tariffs implemented using the IEEPA.
On Friday afternoon, the president announced his plan to impose a new 10% global tariff under Section 122 of the Trade Act of 1974. It is unclear whether any exceptions might arise, although such carve-outs seem reasonable. Tariffs enacted under this provision can stay in place for only 150 days unless Congress approves an extension.
If Congress declines to act, the administration could, at least in theory, allow the tariffs to lapse, declare a new balance-of-payments emergency, and restart the clock, per the Cato Institute.
From an economic standpoint, one aspect of the law has been clarified, but uncertainty over the next steps and their duration has introduced a new layer of unpredictability.
In summary, the decision wasn’t a big surprise, and the president had already indicated that backup plans were in place if his authority through IEEPA was limited or struck down. Stay tuned.
Market Summary
Two FOR THE ROAD
39% of all the land in the U.S. is used by farms, which is a total of 876 million acres of farmland. - Visual Capitalist, August 13, 2025
"What is obvious is rarely true… and what is true is rarely obvious." - H.L. Mencken
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Warmest Regards,
Bill Stordahl, CFP®
Managing Director
Stordahl Capital Management
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