If the tariff policies of US President Donald Trump do not resolve trade issues quickly, the negative effects can snowball and become hard to reverse, according to Jamie Dimon, chief executive officer of JPMorgan Chase & Co.
There are many uncertainties surrounding the new tariff policy, including the potential retaliatory actions by other countries, the impact on investor and business confidence, capital flows, corporate profits and the possible effect on the US dollar, Dimon said in a letter to shareholders on Monday.
"The quicker this issue is resolved, the better because some of the negative effects increase cumulatively over time and would be hard to reverse. In the short run, I see this as one large additional straw on the camel's back," JPMorgan chairperson said.
The US implemented a minimum 10% tariff on the import of all goods last week, and additional levies on major trading partners are set to kick in from Wednesday to take the effective tariff rate to near 25%. The measures have invited retaliation from China and the European Union.
Dimon said the recent tariffs would likely increase inflation in the US and were causing many to consider a greater probability of a recession. He said that despite the recent correction on Wall Street, stock prices remained relatively high. The benchmark S&P 500 is poised to be down by around 18.2% from its recent peak, pushing it closer to the bear territory.
"I am hoping that after negotiations, the long-term effect will have some positive benefits for the United States. My most serious concern is how this will affect America's long-term economic alliances," Dimon wrote.
Analysts have warned that the US economy could face the double whammy of inflation and recession that could have a ripple effect globally.
"Whether or not the menu of tariffs causes a recession remains in question, but it will slow down growth," the JPMorgan CEO said.
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