Economists, market observers and consumers are still trying to understand the effects of President Donald Trump's announcement on Wednesday on the recovery of new tariffs.
The plan, part of Trump's initiatives “Make America WEALTHY AGAIN”, contains a basic tariff of 10% for all US trading partners and duties of up to 50% for nations with which the United States has a trade deficit. Imports from China, South Korea and Japan are, for example, 34%, 25% and 24% tariffs. Products from the European Union are delivered with a delivery of 20%.
The reaction of investors was quick. The S&P 500 – a representative for the broad US stock market – ended by 4.8% on Thursday and is now more than 12% below its high in February.
Market -Wächter -Chef -Sorge: Economic turbulence. If other countries react to Trump's tariff walks by increasing their own duties, an escalating conflict could develop into a trade war that the economists say that global economic growth could be slowed down.
And because tariffs are collected by import companies, business experts say that companies based in the United States that use foreign goods will probably be handed over at least some of the customs costs to customers-a step that could develop inflation again.
Economists and market experts say the following.
Expect inflation, but not necessarily a recession
If the tariffs remain at the recently announced level, the average interest rate for all US imports would increase from 2.5% to 18.8% in 2024.
But only because US companies are faced with higher costs for imports does not mean that they pass on to the consumers appropriate costs.
It is unlikely that consumers will feel the entire main burden of the increases, especially since companies are aware that their customers are already financially stretched, Jeffrey Roach, chief economist at LPL Financial, said CNBC recently Make IT.
“In a weakening economy in general, consumers will be very sensitive to price changes,” he said. “I think companies will say: 'We'll eat some of it' and maybe not pass on as much as they might think.”
However, expect some prices to rise – at least at short notice.
“Higher tariffs will probably cause 3 to 5% more inflation in the next year and a half than the United States would have without it,” says Bill Adams, chief economist from Comerica Bank. Since inflation is currently 2.8% compared to the previous year, this could mean an increase in points by 2 percent this year (to 4.8%), followed by an increase of 1 point in the lower end next year, he says.
And while the restoration of inflation could emphasize the economy, Adam and other economists believe that there are still room for growth in some headwinds.
“A recession in the next 12 months looks more likely than at the beginning of the year, but we still believe that the economy will most likely expand in 2025 and in particular in 2026, since it probably looks that the administration will use tax revenues of tariffs to finance broader tax cuts that will come into force next year,” says Adams.
Expect short -term market protection
An old Wall Street Binwisism says that the markets hate nothing but uncertainty. And although investors received their answer to the administration tariffs, there are big questions about how these tariffs could develop over time, including possible higher tariffs from other countries.
While the dust settles, the markets will somehow be nervous, “says Scott Helfstein, head of the investment strategy at Global X.
Under the questions, investors will continue to search for answers: Will the tariffs exist at the current level? Some market experts don't believe.
“We would expect the levels announced by the President to be reduced to the tariffs,” Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, wrote recently in a note. “The President himself invited negotiations and finance minister [Scott] Bessent said in a Bloomberg interview that the announced tariffs were the “upper end of the number” and that the countries could take steps to reduce tariffs. “
However, do not expect you to shrink significantly. When asked whether Trump could reverse the course or whether this might be a negotiation tactic, the US trade minister Howard Lutnick was determined in his rejection. “I don't think there is a chance,” he said in a CNN interview. “This is the reorder of global trade, isn't it?”
Some trading partners may not take these tactics friendly, and others have already answered their own tariff measures. For example, China and the EU have already announced plans for economic countermeasures.
Overall, however, the economy went into the tariff termination after showing some signs of fundamental strength, including a resilient labor market and the promoting company income, says Helfstein.
Even if things are shaky at short notice, topics that increase the growth of the market – such as AI and automation – in the long run, add intact. Investors may only have to wait while companies sort business strategies related to tariffs.
“These trends continue – only in a slightly different way.”
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