President Donald Trump has garnered mixed reactions to his administration’s tariffs, which he claims have contributed to a surge in the stock market.
During an interview with Kristen Welker from NBC News, Trump highlighted that the S&P 500 and Nasdaq had reached new all-time highs, attributing this success in part to his tariffs.
However, he failed to mention that many investors appear to be skeptical about the long-term implications of his tariff policies.
This skepticism is captured in Wall Street’s acronym “TACO”—Trump always chickens out—implying that investors do not believe Trump will fully implement his threats to impose steep tariffs on imports globally.
When the tariffs were initially announced in April, there was immediate fallout, with the values of stocks, bonds, and the U.S. dollar experiencing significant declines.
Merely a week later, Trump announced a three-month pause on the most punitive tariffs, which could soar as high as fifty percent, with hopes of negotiating new trade deals.
Yet, as the ninety-day period concluded with only a couple of preliminary agreements reached with the U.K. and Vietnam, Trump once again delayed the tariffs, pushing the deadline to August 1st, stating it may not be entirely firm.
Wall Street analysts express a confident cynicism regarding these delays, with Max Kettner, an investment strategist at HSBC, stating, “I don’t care about tariffs anymore. What’s to stop them saying, ‘let’s give it another three months?'”
Despite the stock market remaining largely unperturbed, the climate for businesses that engage in international trade has grown considerably more uncertain due to Trump’s ongoing tariff threats.
Currently, a ten percent tariff is being levied on most foreign-produced goods, with items from China facing a confirmed minimum of thirty percent.
The overall tariff revenue from these measures has reportedly surged, reaching $27.2 billion last month, contributing to a fiscal year total of over $113 billion.
Some tariffs on specific industries have also seen drastic increases, like the twenty-five percent levy on autos and auto parts, and Trump’s recent declaration of a fifty percent duty on copper.
The rising copper prices on U.S. futures markets reveal a ripple effect on related industries, as many businesses face heightened costs for materials crucial for their products.
In a combative move, Trump has threatened additional tariffs on items from both Mexico and the European Union, as well as a significant fifty percent levy on imports from Brazil due to political disputes.
Despite doubts about whether these latest threats will manifest, data from Yale’s Budget Lab indicates that the average effective tariff rate has risen dramatically to 15.8 percent, the highest level seen since the Great Depression.
Should Trump execute these tariffs by the August deadline, predictions suggest the effective rate could climb further to eighteen percent.
In the larger picture, the immediate National Consumer Price Index has not reflected significant increases in product prices due to tariffs, attributed to businesses stocking up on inventories prior to implementation.
Furthermore, many companies are absorbing the additional costs instead of passing them onto consumers, a strategy unlikely to last in the long term.
Economists anticipate a change, with remarks from leaders such as the CEO of Hasbro indicating that elevated prices are likely in the coming months.
Michael Wolf, an economist from Deloitte Touche Tohmatsu Limited, reiterated the inevitability of increasing prices as inventory depletes and businesses can no longer sustain their profit margins unadjusted.
In past instances, such as the tariff increases in 2018, it took several months for consumers to see the impact of higher costs, reinforcing expectations for similar patterns this time around.
The chaotic implementation of Trump’s tariff strategy has raised economic uncertainty across various sectors and has dampened the momentum previously observed in the post-pandemic recovery.
The U.S. economy exhibited recovery strengths compared to other advanced economies following COVID-19, but that growth has recently flagged.
Forecasts suggest that GDP growth is expected to slow down significantly, expected to be just 1.4 percent in 2025 amidst prevailing tariff pressures and a possible uptick in unemployment rates.
Deloitte’s financial outlook provides multiple scenarios affecting future growth, ranging from a hopeful easing of trade tensions leading to a reduction in effective tariffs to a bleak analysis predicting a recession as a result of failed negotiations.
Depending on the outcomes of ongoing trade discussions, the nature of the U.S. economy moving forward may vary substantially.
Should tariffs continue or escalate, the possible consequences could lead to a contracting economy and rising unemployment, amid higher costs on borrowing.
Conversely, negotiating sustainable trade agreements could pave the way for recovery in GDP growth and stabilize the labor market at favorable rates.
The scenarios painted through these economic forecasts relay the potential fallout that may follow President Trump’s decisions regarding tariffs, presenting a stark outlook depending on whether he is indeed the ‘TACO’ man or remains committed to his tariff policies.
Ultimately, regardless of the path ahead, the legacy of Trump’s economic maneuvering and tariff implementations is already causing significant disruption, raising questions about stability and growth in an otherwise recovering economy.
image source from：newyorker
