Title: Trump Administration Likely to Impose Fresh Tariffs on China Imports, Goldman Sachs Strategists Say
In a recent note, Goldman Sachs strategists have indicated that fresh tariffs on imports from China are highly probable in a potential second term for President Trump. The authority to impose these tariffs is seen as clear, with significant public support backing such actions.
The proposed tariff increases include a 10% universal baseline tariff on all imports, a 60% tariff specifically on imports from China, and potential tariffs on autos from Mexico and the EU. While some of these proposals may face challenges, such as the need for congressional approval, the strategists believe that executive action could still achieve similar goals.
The implementation of these tariffs could have a major impact on global growth, inflation, and policy. If a widespread trade war were to ensue, the effects could be significant. The strategists estimate that a scenario involving a 10 percentage point across-the-board tariff on all imports and a nearly 20 percentage point increase on goods from China could lead to a 1% increase in price levels and a 0.5% reduction in GDP in the U.S.
Globally, the inflationary impact would be smaller outside the U.S., with different regions experiencing varying degrees of effects. Countries with high exposure to USD-denominated trade could see import prices and inflation rise, but slower growth would help mitigate these effects.
Overall, the strategists estimate a 0.5% increase in global prices, with varying impacts across different economies. The growth slowdown would likely be more pronounced outside the U.S., leading to a global GDP decline of -0.9%.
In response to these potential tariffs, the Federal Reserve may keep policy on hold in the U.S. while non-U.S. central banks could ease policy by over 100 basis points. The effects of tariffs limited to China would be smaller but still detrimental to global GDP.
In conclusion, the proposed tariffs by the Trump administration could have far-reaching consequences on the global economy, with potential impacts on inflation, growth, and monetary policy. It is important for individuals to stay informed about these developments and consider how they may affect their personal finances and investments.