Trump's Tariffs: Market Reactions and Analyst Insights

Background:

President Trump has imposed tariffs on Canada, Mexico, and China, citing concerns over fentanyl and illegal immigration. The tariffs will take effect on February 4th.

Market Reactions:

The news of the tariffs has rattled Wall Street, with economists and strategists expressing concerns over the potential economic impact.

Analyst Insights:

Morgan Stanley Public Policy Research Team:

* Expect meaningful consequences from implemented tariffs, including a potential recession in Mexico.
* Predict higher inflation (0.3%-0.6%) and lower growth (-0.7% to -1.1%) in the US.
* See a similar or larger growth drag compared to the impact of tariffs on Asia and China in 2018-19.

EvercoreISI Economics Team:

* Anticipate reduced US growth due to decreased exports, investment, and employment.
* Estimate a 40 basis point increase in inflation and a 40 basis point drag on growth in the second half of the year.

EvercoreISI China Strategist Neo Wang:

* Believes the timing of the tariff announcement has offended both the Chinese government and people.
* Suggests the tariffs may be aimed at gaining an upper hand in negotiations on TikTok or forcing China to the negotiating table.

JP Morgan Metals & Mining Analyst Bill Peterson:

* Highlights potential risks to Alcoa (AA), GrafTech International (EAF), and Cleveland Cliffs (CLF) due to their exposure to Canadian and Mexican markets.

22V Research Strategist Michael Hirson:

* Expects symbolic tariff increases from China on US imports in the near term and limited informal retaliation.
* Believes Beijing will likely take actions to address US concerns over fentanyl.
* Maintains a base case of additional tariffs on China imports beyond the initial 10%.

Conclusion:

Analyst insights suggest that President Trump's tariffs could have a significant impact on the global economy, including potential recessionary risks, higher inflation, and lower growth. Investors and businesses should closely monitor the situation and consider the potential implications for their portfolios and operations.