Tariff Turmoil Roils Wall Street: Economists Weigh In
Background:
President Trump has imposed tariffs on Canada, Mexico, and China, sparking concerns about economic growth and the performance of technology stocks.
Market Impact:
Analysts agree that the tariffs will likely cause economic hardship. Some predict a recession in Mexico, higher inflation in the US, and slower US economic growth.
Analyst Insights:
Morgan Stanley:
- Tariffs could lead to a 0.7% to 1.1% decline in US growth.
- Treasury duration may benefit from weaker growth expectations.
- US equities could face pressure, while services may outperform consumer goods.
EvercoreISI:
- US growth may suffer due to reduced exports, investment, and employment.
- Inflation could increase by 40 basis points, while growth could slow by 40 basis points in the second half of the year.
Neo Wang, EvercoreISI China Strategist:
- Trump's tariff announcement coincides with Chinese New Year celebrations, potentially damaging Sino-US relations.
- China may aim to gain leverage in TikTok negotiations or force Beijing to the negotiating table.
Bill Peterson, JP Morgan:
- Alcoa, GrafTech International, and Cleveland Cliffs could face financial risks due to their exposure to Canada or Mexico.
- GrafTech could restart its US production if domestic graphite electrode prices rise.
Michael Hirson, 22V Research:
- China may impose symbolic tariff increases on US imports in the near term.
- Beijing may also consider informal retaliation, such as redirecting commodity purchases away from the US.
- US-China cooperation on fentanyl could be a bargaining chip in negotiations.
- It is likely that Trump will impose additional tariffs on China beyond the initial 10%.