"Universal Tariff Up to 20%"... Wall Street Trembles Before 'Tariff Man' Trump

WSJ "Trump Tariff Specter Threatens Markets"
Inflation Rises 1.8%, Growth Rate Expected to Fall 2%

With the U.S. presidential election just about 80 days away, market fears are growing over the expected tariff hikes if 'Trump 2.0' takes office. The Wall Street Journal (WSJ) reported that tariff increases could fuel inflation and trigger a recession, warning that "Trump's tariff specter is threatening the market."

[Image source=AP Yonhap News]

On the 18th (local time), WSJ reported that ahead of the November election, the biggest concern among Wall Street investors is former President Trump's plan for sharp tariff hikes.

Former President Trump has decided to impose a universal tariff on all imports, recently proposing a top rate of 20%, double the previously mentioned 10%. Tariffs on Chinese imports are set to rise as high as 60%. Accordingly, the average effective U.S. tariff rate is expected to increase significantly from the current 11% on Chinese imports and 1% on all other imports, based on data from market research firm Wolfe Research.

Tariff hikes are highly likely to lead to higher import prices and inflation. TD Securities estimates that imposing a 10% universal tariff would raise U.S. inflation by 0.6 to 0.9 percentage points. Standard Chartered projects that if Trump's tariff promises materialize, inflation could rise by 1.8 percentage points over the next two years. The U.S. think tank Peterson Institute for International Economics (PIIE) also expects inflation to increase by 1.8 percentage points.

If inflation rebounds, the U.S. Federal Reserve (Fed) is likely to raise interest rates again. Jan Hatzius, Chief Economist at Goldman Sachs, forecasted that assuming all other conditions remain the same, Trump's tariff hikes alone could prompt the Fed to raise rates five additional times.

WSJ noted, "Tariffs apply not to foreign countries but to domestic companies importing products, and companies will pass most of the costs onto consumers through price increases," adding, "In the short term, universal tariffs will raise consumer prices, effectively taxing households and suppressing spending, thereby hindering economic growth."

TD Securities predicts that Trump's promised tariff hikes and illegal immigration restrictions could reduce U.S. economic growth by 1 to 2 percentage points and potentially lead to a recession. The U.S. Tax Foundation also forecasted the loss of 825,000 jobs and a 1.1 percentage point decline in growth.

Andy LaFerriere, Head of U.S. Policy Research at global investment bank Piper Sandler, said, "Trump will be surrounded by people who agree with tariffs or accept that tariffs are what he intends to do in his second term," expecting the tariff increase efforts to proceed smoothly.

WSJ pointed out, "Trump's tariff plan will impose a greater economic burden than the Democrats' plan to let tax cuts for high-income households expire at the end of 2025," noting that "Wall Street is closely watching who the potential winners and losers will be from Trump's promises."

This content was produced with the assistance of AI translation services.