President Trump’s newly announced tariffs have economists worried about a potential recession for both the U.S. and global economy. Forecasts suggest that if enacted, the average tariff on imports could soar to around 20%, reminiscent of drastic levies from the 1930s, which contributed to the Great Depression. According to Mark Zandi, chief economist of Moody’s Analytics, while a full-scale depression may be averted, serious recessions could ensue if trading partners retaliate.
However, Zandi indicates that the White House may introduce exceptions or subsidies, mitigating the downturn’s severity and possibly keeping effective tariffs at around 15%. Although inflation is anticipated to rise, with estimates suggesting it might jump from 2.8% to 4.8%, adjustments by retailers and shifts in consumer purchasing habits could temper these impacts.
In light of these tariffs, consumer spending, which accounts for 70% of economic activity, is projected to take a hit, affecting business confidence and stalling hiring and investments. The anticipated rise in prices due to tariffs may also steer demand towards domestically produced goods or those from countries with lower tariffs, potentially stabilising the dollar and offsetting some financial pressure.
Trump’s tariffs, starting at 10% on all imports and additional fees on countries linked to the trade deficit, are seen as a response to existing trade barriers. For instance, for shipments from the European Union, a steep 20% tariff is expected, with China facing even higher duties. Despite the tough new measures, experts believe the tariffs on Canada and Mexico may not see an increase, softening the overall impact.
Economists warn that President Trump’s sweeping tariffs could drive the U.S. and global economies toward severe recessions. An expected 20% tariff on imports may replicate historical economic strains, although potential White House interventions could soften the impact. Rising inflation and consumer spending challenges loom large, as does deteriorating business confidence. Nevertheless, offsets may arise as retailers adjust pricing strategies and purchasing habits shift.
In summary, President Trump’s tariffs could lead to significant economic challenges, including heightened inflation and potential stagnation of growth rather than outright recession. While the situation demands caution and the introduction of new strategies or exceptions from the White House may help ease the pressures, both consumer spending and business confidence are under threat, suggesting a complex economic landscape ahead.
Original Source: www.usatoday.com
