Seth Carpenter, Morgan Stanley’s chief global economist, forecasts a slump in U.S. economic growth by 2026 due to the substantial tariffs planned by Donald Trump.
As one of the key pledges during the presidential rally, Trump’s proposal on blanket tariff hike could range from 10% to 20% on all imports, with additional tariffs between 60% and 100% on goods originating from China.
Carpenter outlined the potential severe economic impact should these tariffs be imposed. Maintaining the investment firm’s outlook that the pledge would likely take effect by 2025, he warned that such measures would escalate inflation and curb U.S. growth, not just the growth of nations subjected to the tariffs.
In an exacerbation of these issues, Siebert’s CIO, Mark Malek, indicated that the approval of such tariffs, particularly those intensified by the existing ones from the Biden administration, could stir inflation across numerous sectors such as automobile, consumer electronics, machinery, construction, and retail.
Major companies like Tesla, Microsoft, and Apple might face larger expenses as a result of a universal 10% tariff on consumer electronics imports. These extra costs will most probably be transferred to the end consumer.
Meanwhile, despite a recent marginal 2.6% rise in the U.S. consumer price index, general inflation has been decreasing in the U.S., stimulating the Federal Reserve to reduce rates.
However, the prospect of across-the-board tariffs could change market expectations and see interest rate cuts in 2025 completely discounted, according to Ben Emons, founder and CIO of FedWatch Advisors. He also stated that tariffs may stifle growth.
