Trump's Trade Agenda: How High Will Tariffs Rise?
Trump's trade policies, including the potential imposition of tariffs on imported goods, have been a subject of intense speculation among investors. While Trump has threatened tariffs as high as 60% on Chinese imports, analysts believe it's unlikely that he will go that far during his second term.
Goldman Sachs analysts anticipate that the White House will prioritize avoiding economic risks and political backlash associated with broad tariffs. Despite Trump's threats, they predict that actual tariffs will be significantly lower, potentially below 60%, with agreements with trade partners mitigating tariffs on imports from other countries.
Bank of America acknowledges that tariffs may be slightly higher during Trump's second term, but companies have learned from the initial trade war and are diversifying their sourcing away from China. This reduces the potential impact of new tariffs.
The Peterson Institute for International Economics estimates that Trump's universal tariff plan could cost the average American family over $2,600 annually in increased costs and lost income. A full-blown trade war could lead to a recession, higher inflation, and increased costs for businesses and consumers.
Oxford Economics, however, places the odds of a full-blown trade war at only 5%, noting that markets remain unfazed despite dire warnings. Trump has also indicated willingness to consider alternatives to tariffs, such as agreements with trading partners to address issues like undocumented migration and drug trafficking.
As long as there are potential off-ramps from tariff threats, markets are likely to remain relatively stable.