Morgan Stanley’s Mike Wilson lays out his strategic forecast on potential trade policy changes on Liberation Day, while asserting that Trump’s tariffs are likely a stepping stone for negotiation.
He anticipates in his baseline scenarios that tariffs on Chinese imports will increase while tariffs on specific products from European countries and non-China Asian nations will also rise, with a reduction in trade tension expected with Mexico and Canada.
Wilson describes the announcement as a preliminary stage for more negotiations rather than a decisive resolution. He predicts that, under favorable conditions without clear improvement in earnings revisions broadness, the S&P 500 might cap at 5,900. Should earnings revisions gain momentum, which the firm is not seeing, the index could potentially reach 6,100. On the other hand, a disappointing announcement could see the index retreat to around 5,500.
According to White House trade adviser Peter Navarro, tariffs are expected to generate approximately $600 billion annually and accumulate $6 trillion over ten years, with automotive tariffs contributing an additional $100 billion per year. However, some economists believe these figures to be grossly overestimated.
Mark Zandi, Chief Economist at Moody’s, suggests the realistic annual revenue would fall between $100 billion and $200 billion, stating that anything in the range of $600 billion to $700 billion is far from plausible.
