Markets Weighed Down by Trade War Concerns
A full-blown trade war between the US and its trading partners could trigger "stagflationary shock" in the US economy, warns Apollo Global Management's chief economist Torsten Sløk. Stagflation is characterized by sluggish growth and rising inflation.
President Trump has imposed tariffs on imported steel from all countries and raised existing tariffs on Chinese goods. China responded with reciprocal tariffs on US products. Despite a 30-day tariff pause with Canada and Mexico, economists predict potential significant economic impacts.
The Tax Foundation estimates tariffs could reduce US GDP by 0.4% and increase household taxes by $800 in 2025. EY chief economist Greg Daco forecasts a 1.5% GDP contraction in 2025 and a 2.1% decline in 2026, driven by reduced consumer spending and business investment.
Goldman Sachs' chief US equity strategist David Kostin highlights that every 5-point increase in US tariffs could lower S&P 500 earnings per share by 1-2%. Sløk notes the market's resilience amid trade war concerns, attributing it to the tariffs' partial implementation.
"We should wait maybe 30 days to … figure out if this actually becomes law or if this actually is something that will be implemented or not," Sløk said in an interview on Yahoo Finance's Opening Bid podcast.