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Economists, market observers and consumers are still trying to understand the consequences of President Donald Trump’s message on Wednesday from rifleS
The plan, part of Trump’s Make America Bealy Again initiatives, includes a major 10% tariff for all US trading partners, as well as up to 50% of the Nations with which the United States has a trade deficit. Imports from China, South Korea and Japan, for example, face 34%, 25% and 24% rates respectively. EU products will come with a 20% fee.
Investors’ reaction was quickS S&P 500 – proxy for the wide stock market of the United States – ended the session on Thursday by 4.8% and now sits more than 12% under its highest FebruaryS
Main market concerns: economic turmoil. If other countries respond to Trump’s tariff increases by raising their own duties, the escalating conflict can become a trade war for which economists say Can it slow down global economic growthS
And since tariffs are collected by imported companies, economic experts say that US-based companies that use foreign goods will probably pass at least some of the tariff costs with the customers who can revive inflation.
Here’s what economists and market experts say to expect.
Expect inflation but not necessarily recession
If the tariffs remain at the recently announced levels, the average percentage of the entire US imports will rise to 18.8%, compared to 2.5% in 2024, According to the tax foundation assessmentsS
But just because US businesses are facing higher import costs does not mean that they will go a comparable price together for consumers.
Consumers are unlikely to feel all the weight of increases, especially since businesses are aware that their customers already feel financially stretched, Jeffrey Roach, chief economist of LPL Financial, Recently told CNBC to do itS
“In weakening of the economy In general, consumers will be very sensitive to price changes, he said. “I think the corporations will say,” We will eat part of this “and maybe we will not be able to go as much as they may think.”
However, expect some prices to rise – at least in the near future.
“Higher tariffs are likely to lead to 3% to 5% more inflation in the next year and a half than the United States would have without them,” says Bill Adams, Chief Economist at Commerica Bank. Inflation It is currently at 2.8% compared to the yearThis may mean an increase of 2 percentage points this year (up to 4.8%), followed by an increase of 1 point next year, at the low end, he says.
And although inflation is heated, it can emphasize the economy, Adams and other economists believe that there is still room for growth, even in some winds.
“The recession in the next 12 months seems more likely than it seemed at the beginning of the year, but we still think that the economy is most likely to expand in 2025 and in particular 2026, as it seems likely that the administration will use tax revenue to finance the wider tax reductions that will come into force.”
Expect short -term shaking on the market
An old Wall Street threesome says the markets hate nothing more than uncertain. And although investors have received their answer to what tariffs the administration will install, there are big questions about how these tariffs can develop over time, including possible higher tariffs from other countries.
While the dust settles, “the markets will be a look of flicker,” says Scott Helfstein, head of the Global X investment strategy. “This is maybe a little larger than here, maybe a little higher than here, but to a large extent, as we absorb the news from yesterday.”
Among the questions that investors will still seek answers to: Will the tariffs remain at current levels? Some market experts do not think so.
“We would expect the tariffs to be reduced by the levels announced by the President,” Mark Huffle, Chief Investment Officer of UBS Global Wealth Management, wrote in a recent note. “The president himself has invited negotiations, and the Minister of Finance (Scott), Benten, said in an interview with Bloomberg that the announced rates are the” high end of the number “and that the countries can take steps to take down tariffs.”
However, do not expect them to shrink significantly. Asked if Trump could turn the course or whether it was perhaps tactics of negotiation, US secretary of trade Howard Luni was firm in his refusal. “I don’t think there’s a chance” He said in an interview with CNN. “This is the rearrangement of global trade, right? That will happen.”
Some trading partners may not kindly take these tactics, and some have already responded with their own tariff measures. China and the EU, for example, have declared plans for economic counteractionS
Overall, however, the economy is heading for the tariff message, showing some signs of basic force, including a Labor and encouraging corporate revenueSays Helfstein.
Even if things are shaken in the short term, topics that were expected to stimulate market growth in the long run – such as AI profits and automation – remain intact, he adds. Investors may simply have to wait while companies sort the tariff business strategies.
“These trends will continue – just maybe a little different way.”
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