Morgan Stanley Warns of Slower Growth and Inflation Boost Due to Trump's Tariff Proposals
In a recent note, Morgan Stanley highlighted the potential impact of former President Donald Trump's tariff proposals on the U.S. economy. The bank warned that these tariffs could lead to much slower economic growth and a rise in inflation in the near-term.
The proposed tariffs could have downside risks for U.S. growth, with particular emphasis on China. If implemented rapidly, they could result in increased costs across various industries, affecting both consumption and business investment.
Morgan Stanley analysts explained that more than 50% of goods imported into the U.S. are capital and intermediate goods, making tariffs a tax on domestic spending and manufacturing. The proposed tariffs could significantly increase the average tariff on Chinese goods, potentially impacting U.S. consumption, business investment, GDP growth, and job gains.
The bank also expects inflation to rise quickly under the proposed tariffs, which could complicate the Federal Reserve's policy response. While rate cuts may be delayed initially, the Fed is likely to resume easing measures as growth slows.
Overall, the full impact of the tariffs will depend on their implementation, potential retaliation, and currency adjustments. Investors should closely monitor developments related to these tariff proposals and their implications on the financial markets.
