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Economists, market observers and consumers are still trying to understand the impact of President Donald Trump’s announcement on Wednesday Brand new tariffs.
The plan is part of Trump’s “Make America Rich Again” initiative, with a benchmark tariff of 10% for all U.S. trading partners and up to 50% for countries experiencing a trade deficit. For example, imports from China, South Korea and Japan face tariffs of 34%, 25%, and 24%, respectively. Products from the EU will be taxed at 20%.
Investors react quickly. The S&P 500 – the agent for the broad U.S. stock market – ended Thursday’s meeting down 4.8% and now sits above Below 12% of February’s high.
The main concern of market observers: economic turmoil. If other countries respond to Trump’s tariff rate hikes by raising their responsibilities, the escalating conflict could turn into a trade war, economists say Probably slows global economic growth.
And, due to tariffs collected from import companies, economic experts say U.S. companies using foreign goods may transfer at least some tariff charges to customers, a move that could restart inflation.
This is what economists and market experts say is expectation.
Expect inflation, but not necessarily recession
If tariffs remain at recently announced levels, the average rate of all U.S. imports will climb to 18.8%, from 2.5% in 2024, up from 2.5% in 2024, up from 2.5% in 2024. According to the tax foundation’s estimate.
But just because U.S. businesses face higher import costs, it doesn’t mean they will make the cost of consumers proportionate.
Consumers are unlikely to feel the brunt of all growth, especially because businesses realize that their customers have felt the economic extension, Jeffrey Roach, chief economist at LPL Financial, Telled CNBC recently.
“exist Economic weakening Overall, consumers will be very sensitive to price movements. I think the company will say, ‘We’re going to eat some of these,’, maybe it can’t be passed on as they thought. ”
However, it is expected to rise at least in the short term.
“Tariffs in the U.S. next year may be 3% to 5% higher than those in the U.S., which has no higher prices.” Inflation, Bill Adams, chief economist at the Bank of Comerica said. Currently 2.8% year-on-yearHe said that could mean a 2 percentage point rise this year (to 4.8%) and then a point up next year.
While heating inflation may stress the economy, Adams and other economists believe there is still room for growth even with some headwinds.
“In the next 12 months, a recession seems to be more likely than it was in the beginning of the year, but we still think the economy is likely to be in 2025, especially in 2026, as it seems that the government may use the tax revenue from tariffs to partially fund the broader tax breaks that will take effect next year,” Adams said.
Expected short-term market sway
An old Wall Street truism said the market was nothing more than uncertainty. Even if investors get answers to the tariffs that the government will install, major issues regarding the potential development of these tariffs over time, including higher tariffs that may come from other countries.
Scott Helfstein, head of investment strategy at Global X, said that despite the dust settled, “the market will be a little shaking.” “It may be lower from here, maybe slightly higher from here, but to a large extent, we absorbed yesterday’s news.”
In the question, investors will still look for the answer: Will tariffs remain at the current level? Some market experts don’t think so.
“We expect tariffs to be lowered from the level announced by the president,” Mark Haefele, chief investment officer at UBS Global Wealth Management, wrote in a recent note. “The president himself invited the negotiations, and the Treasury Secretary (Scott) said in an interview with Bloomberg that the announced tariffs are “the high-end of the numbers” and that countries can take steps to reduce the tariffs.”
But don’t expect them to shrink significantly. When asked whether Trump could reverse the path or whether it could be a negotiation strategy, U.S. Commerce Secretary Howard Lutnick firmly denied him. “I don’t think there is a chance,” He said in an interview with CNN. “This is a reordering for global trade, right? What’s going to happen.”
Some trading partners may not have a friendly impact on these strategies, while others have responded to their tariff measures. China and the EU have Economic countermeasures plan has been announced.
Overall, however, the economy is entering tariff announcements, showing some signs of basic strength, including Flexible job market And encourage Company revenueHelfstein said.
He added that even if there is a wavering in the short term, topics that are expected to drive market growth, such as growth in AI and automation, are still intact in the long run. Investors may just have to wait for the company to develop business strategies related to tariffs.
“These trends will continue – perhaps in a slightly different path.”
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