Economists, market observers and consumers are still trying to understand the implications of President Donald Trump’s announcement on Wednesday Reconciliation of new tariffs.
Plan, part of Trump’s initiative “Make American Wealthy Again”, contains the basic 10% tariffs on all US trade partners, as well as as many as 50% on the states with which they now have a trade deficit. For example, imports from China, South Korea and Japan are facing 34%, 25% and 24% tariffs. Products from the European Union will come with 20% billing.
The reaction of the investor was fast. S&P 500 – The Broad Stock Broad Stock Broad 12% below its maximum in February.
The main concern of the market observer: economic unrest. If other countries respond to Trump’s Trump trips, raising their own duties, the escalating conflict could develop into a trade war, which economists say could slow global economic growth.
And since the tariffs are collected from imported companies, economic experts say that companies based in the United States used by foreign goods are likely to transfer at least some tariff costs according to customers-Potez that could again capture inflation.
Here’s what economists and experts on the market say they expect.
Expect inflation but not necessarily a recession
If the tariffs remain at the recently announced levels, the average rate on all imports to the US would climb to 18.8%, compared to 2.5% in 2024, According to estimates from the Tax Foundation.
But just because US companies face higher import costs does not mean that it will transfer consumers in proportion to costs.
Consumers are unlikely to feel the entire number of increases, especially since companies are aware that their customers are already feeling financially stretched, Jeffrey Roach, the main economist for LPL Financial, recently said CNBC make it.
“IN weakening economy Generally, consumers will be very sensitive to pricing changes, “he said.” I think corporations will say, “We will eat some of this,” and we may not be able to go together as much as we can think. “
However, expect some prices to grow – at least in the short term.
“Larger tariffs are likely to cause 3% to 5% more inflation in the next year and a half than they would now have without them,” says Bill Adams, a major economist for Comeric Bank. With inflation Currently sits with 2.8% compared to the yearThis could mean an increase of 2 percent points this year (at 4.8%), followed by an increase in 1 point next year, at the low end, he says.
While heating inflation can emphasize the economy, Adams and other economists believe that there is still room for growth, even to some winds.
“The recession looks more likely over the next 12 months than she has watched the beginning of the year, but we still think that the economy is most likely to expand in 2025, and especially 2026, because the administration is likely to use tax revenue from tariffs to a partially wider tax reduction that will take effect next year,” says Adams.
Expect a short -term market earthquake
Old Truism on Wall Street says that markets hate nothing more than uncertainty. And although investors received their response to the tariffs that the administration would ask, there are big questions about how these tariffs develop over time, including possible larger tariffs from other countries.
While the dust is settled, “the markets will be kind of nervous,” says Scott Helfstein, head of the investment strategy in Global X. “Maybe it’s a little lower, maybe a little higher from here, but mostly aside as we absorb news from yesterday.”
Among the issues, investors will continue to look for answers to: will the tariffs remain in place at current levels? Some market experts don’t think so.
“We would expect the tariffs to be reduced from the levels the president announced,” Mark Haefele wrote in a recent note, CEO of investment in UBS Global Wealth Management. “The president himself called for negotiations, and the Minister of the Treasury (Scott) said in an interview with Bloomberg that the announced tariffs were” high end of number “and that the countries could take steps to overthrow the tariffs.”
However, do not expect to be significantly reduced. Asked if Trump could turn the course or maybe a negotiating tactic, US secretary of the Howard Lutnick store was firm in his denial. “I don’t think there is no chance,” Said in an interview with CNN. “This is the remodeling of the global store, is it?
Some trade partners may not kindly accept these tactics, and some have already responded to their own tariff measures. China and the EU, for example, have Already announced plans for economic countermeasures.
Overall, the economy has embarked on a tariff announcement, showing some signs of fundamental forces, including a resistant labor market and encouraging corporate earningsSays Helfstein.
Even if things were earthquake in the short term, topics that were expected to increase growth in the market in the long run – like AI gains and automation – they remain intact, he adds. Investors may just have to wait while companies sort through business strategies associated with tariff.
“Those trends will continue – just maybe a slightly different way.”
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