A prominent strategist has warned that former President Donald Trump’s proposed 10% tariff on imported goods could have a significant impact on the global economy. Michael Every, a global strategist at Rabobank, believes that the tariff could affect various asset classes, including equities, FX, and bonds.
Every suggests that the tariff isn’t just about imposing a 10% tax; it is about restructuring the global system to reindustrialize the United States. The aim is to make it cheaper to produce in America and more expensive to produce elsewhere, thus encouraging domestic production.
Despite bipartisan criticism, Trump’s tariff plan has gained traction. Treasury Secretary Janet Yellen acknowledged that while tariffs would raise the cost of goods, they could be necessary in some cases.
However, the policy has faced criticism from both sides of the aisle. The Tax Foundation think tank estimates that the tariff would effectively raise taxes on U.S. consumers by over $300 billion annually and could lead to retaliatory tax hikes by international trade partners on U.S. exports.
The American Action Forum (AAF) predicts that the policy could lead to a 0.31% ($62 billion) decrease in U.S. GDP, negatively impacting consumers and U.S. welfare by $123.3 billion.
Trump’s proposed tariff has been met with criticism from both sides of the political spectrum. Economist Paul Krugman has called it a “bad idea” and warned that it could damage the United States’ reputation as a trusted trading partner.
This is not the first time Trump has used tariffs as a tool in his trade policy. Last year, he vowed to impose a 100% tariff on Chinese goods if President Xi Jinping did not shut down China’s spy base in Cuba. Trump’s unpredictable approach to trade policy has raised concerns among analysts.
Despite facing multiple federal charges, Trump remains a leading Republican in most election polls for the 2024 presidential election. However, his proposed tariff and trade policies could have significant implications for the U.S. economy and its global trade relationships.
In conclusion, the proposed 10% tariff by former President Donald Trump could have far-reaching effects on the global economy. While it aims to reindustrialize the United States, critics argue that it could raise taxes on consumers, decrease GDP, and damage the country’s reputation as a trusted trading partner. The impact of this policy will be closely watched as it unfolds.
