US President Donald Trump has unleashed reciprocal tariffs on the world, which have impacted an unprecedented value of goods. A 10% baseline tariff has been slapped on all American imports, but tariffs of over 30% have also been imposed on various countries.
As per HSBC, Trump's latest announcements suggest that tariffs remain a key weapon in the US’ negotiating arsenal. While various trade partners could offer the US deals to bring these rates down, there is still a lot of uncertainty.
So, as of now the full implementation of the tariff policy poses risks globally.
Potential Impact On US Consumers
Tariffs act as taxes on imports, and while the exporters might absorb the additional expenses, these costs could also be passed on to the American consumer. The US Chamber of Commerce themselves have cautioned that the broad tariff implementation equates to a "tax increase that will raise prices for the American consumers and hurt the economy".
As per the analysis of The Tax Foundation, a nonpartisan tax policy non profit, higher tariffs imposed on China, Canada and Mexico in March itself would result in an average tax increase of $1,072 per US household.
Moreover, US businesses that rely on imported components, such as manufacturers of auto, tech and construction could also face higher production costs.
US Economy Slowdown
According to Citi, the tariffs announced so far could potentially slash S&P 500 earnings by 11%. The brokerage has also reduced its projections for US GDP growth in the first quarter and throughout 2025.
JPMorgan paints an even bleaker picture, warning that a complete rollout of these policies would deliver a severe macro economic shock to the US. The brokerage states that if the policies sustain, it would most likely push the US and the global economy into recession this year. In March, JPMorgan's Chief Economist Bruce Kasman had already pegged the likelihood of a US recession at a staggering 40%.
In fact, just days before Trump unveiled tariffs, Goldman Sachs had raised its estimate of a US recession to 35%, from an earlier estimate of 20%. The brokerage stated that the risk of Donald Trump's tariffs is greater than what many market participants assumed.
Trickle Down Effect On The World
Citi states that the level of tariffs just announced would reset the global world order of trade. HSBC currently maintains world export volume growth will slow down from 2.9% in 2024 to 1.3% in 2025-26. If US import growth does fall, it will lead to a decline in trade growth too, states the brokerage.
Uncertainty Looms Large
Leading brokerages are not cutting key growth estimates just yet. They are awaiting reciprocal tariffs that will kick in on April 9.
The main reason is that there's never been this big a disruption to global trade in history. HSBC states that there is scope for temporary reprieves, more carve-outs, measured retaliation and deal-making, which could soften the actual blow to world trade.
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