Trump said Wednesday that the US will apply a minimum of 10% collection on all imports to the US, but many countries’ tariffs will far exceed that. It is estimated that China’s cumulative actual efficiency is above 50%. The European Union has levied 20%, while Vietnam sees tariffs of 46%.
Bloomberg Economics estimated that the new taxation could raise the average effective tariff rate in the US from 2.3% in 2024 to about 22%. Omair Sharif, president of Inflation Insights LLC, calculated the levels from 25% to 30%.
For Fed officials still working to curb prices that have risen soared during the pandemic, the flow of inflation from the president’s actions could limit policymakers’ ability to intervene and strengthen the economy.
Federal Reserve Chairman Jerome Powell will speak at a meeting in Arlington-Va.
“The Fed is placed between rocks and difficult places,” says Wells Fargo & Co. said Jay Bryson, chief economist.
Joseph Brusuelas, chief economist at RSM US LLP, agreed that the new administration will be far more severe than many analysts expected, increasing the chances of a US recession.
“We expect inflation to range in the 3% to 4% by the end of the year,” he said. “The laws filmed today by the White House put the Fed in a more difficult position given the pressure on both sides of its mission.”
The Fed has not changed last month. Policymakers emphasize that the labour market is sound and the economy is solid overall. But the uncertainty caused by Trump’s rapidly evolving trade policy hampered feelings among consumers and businesses, even before Wednesday’s announcement.
A thorough study from the University of Michigan provided consumers’ outlook on inflation over the next five to ten years, which rose to its highest level in March. Personal financial outlook has fallen to a record low.
Many business leaders are in standby mode and put their investment plans on hold until the tariff policies and tax law outlook become more clear. Forecasters have also downgraded their growth outlook this year, according to a new survey by Bloomberg economists.
Economists said a substantial escalation of tariff tensions due to round-trip retaliation against key trading partners could slow down economic activity in the US and around the world.
“If you get that escalation scenario, you’re just talking about the fundamentally low-productivity economy around the world,” Seth Carpenter, chief global economist at Morgan Stanley, told Bloomberg Television on Wednesday morning ahead of the tariff announcement. “It’s not a zero-sum game. In fact, it could be a net loss for the overall global order.”
