Economic Growth Under Threat: Trump’s Tariff Plans Spark Concern
Tariffs: A Recipe for Inflation and Slowed Growth
Morgan Stanley’s chief global economist, Seth Carpenter, has sounded the alarm on Donald Trump’s proposed tariffs, warning that they could significantly dent U.S. economic growth heading into 2026. The president-elect’s plans to impose a blanket tariff of 10% to 20% on all imports, along with extra tariffs ranging from 60% to 100% on goods imported from China, have sparked concerns among economists.
A “Big Negative Shock” to the Economy
Carpenter cautioned that if these tariffs are implemented all at once, they could result in a severe economic shock. Even if they are spread out over 2025, as Morgan Stanley predicts, they will still lead to higher inflation and slower growth. “Tariffs push up inflation, and they are a drag on growth for the U.S., not just for the countries that the tariffs are put on,” Carpenter emphasized.
Sectors to Feel the Pinch
Mark Malek, CIO at Siebert, warned that several sectors, including automobile, consumer electronics, machinery, construction, and retail, would be hit hard by the proposed tariffs. The auto industry, in particular, would be severely impacted by the 60% tariff on Chinese goods, while companies like Tesla, Microsoft, and Apple would face increased costs due to the universal 10% tariff on consumer electronics’ imports.
Consumers to Bear the Brunt
These higher costs would likely be passed on to consumers, Malek added. With inflation already creeping up, this could lead to a significant increase in prices for everyday goods. The U.S. consumer price index has climbed 2.6% in October compared to a year ago, and sweeping tariffs could push it even higher.
Interest Rate Cuts in Jeopardy
Ben Emons, chief investment officer and founder of FedWatch Advisors, warned that markets could price out interest rate cuts entirely for 2025 if the tariffs are enacted. This could further restrain growth and make it even harder for the economy to recover.
A Cloud of Uncertainty
The uncertainty surrounding Trump’s tariff plans has created a cloud of uncertainty over the U.S. economy. As the world waits to see how these tariffs will be implemented, one thing is clear: they have the potential to significantly impact economic growth and inflation.
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