Economic impact of the proposed reciprocal tariffs to have a modest effect on U.S.- analyst

Published 17/02/2025, 14:48
© Pavlo Gonchar / SOPA Images/Sipa via Reuters Connect

Trump administration's "Fair and Reciprocal Tariff Plan" was unveiled, aligning with expectations of a directive rather than immediate actionable news.

The plan calls for agencies to draft specific tariff proposals, with a series of reports on other countries' tariff and non-tariff barriers due by April 1. Subsequently, the U.S. Trade Representative (USTR) and the Department of Commerce will initiate investigations.

Analysts at Wolfe Research have assessed the economic impact of the proposed reciprocal tariffs, predicting only a modest effect on the U.S. economy. The analysis suggests a slight downturn in GDP and a minor increase in inflation.

The magnitude of the impact is expected to vary depending on whether the tariffs are implemented at the country level or product level, with the latter potentially having a more significant effect.

The White House has hinted at product-specific tariffs, citing examples such as European Union autos, Brazilian ethanol, and Indian motorcycles during the announcement. Despite this, the overall effect on major U.S. trade partners may be limited due to existing free trade agreements and retaliatory structures, such as those with China.

The Trump administration is also placing emphasis on non-tariff barriers, particularly value-added taxes (VATs), which introduces additional complexity to the policy's potential outcomes.

While Wolfe Research acknowledges the possibility of substantial tariff increases for some trade partners, they also highlight the likelihood of such a scenario as low. However, if it were to occur, analysts believe it could have a significantly negative impact on the U.S. economy.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2025 - Fusion Media Limited. All Rights Reserved.