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Investing.com -- Nigel Green, CEO of deVere Group, one of the world’s largest independent financial advisory and asset management organizations, has issued a stark warning about the potential impact of new tariffs announced by President Donald Trump. The tariffs, set at 25% on Mexican and Canadian goods, are due to come into effect on March 4. Additionally, Trump has threatened to impose a further 10% on Chinese imports on the same date.
Green has expressed concern over the timing of these tariffs, as the US economy is showing signs of slowing. He believes the consequences could be devastating, with the potential for inflation to spike as higher tariffs drive up prices for businesses and consumers. As Mexico, Canada, and China are America’s top trading partners, these tariffs will impact every sector, increasing costs on essential goods and putting pressure on household budgets.
Green also warned of the potential for economic growth to falter, leading to the dreaded scenario of stagflation - a stagnating economy coupled with rising prices. This situation could limit policy options, fuel uncertainty, and shake investor confidence. The Federal Reserve may have to reconsider its plans to ease rates in light of this trade policy shift, as higher interest rates on increasing government debt could compound the crisis.
US manufacturers that rely on Mexican and Canadian supply chains could be hit hard, and consumers may feel the impact at the checkout. Businesses may stall investments amid rising uncertainty, and retaliatory tariffs from trading partners could hurt American exports and deepen the economic slowdown.
Green also warned of market reactions to these tariffs. Investors betting on a Trump-driven market surge may need to reconsider their positions. The dollar could face increased volatility, and equities, which had been pricing in a more stable economic outlook, may react with sharp corrections.
China, Mexico, and Canada are unlikely to sit idly by. China has previously mitigated US tariffs through targeted countermeasures, currency adjustments, and strengthening trade ties elsewhere. Mexico and Canada also have leverage, and retaliatory tariffs could hit American agricultural exports, auto parts, and key industries that rely on North American trade agreements.
The uncertainty is causing problems for businesses, making forward-looking investment riskier, putting hiring plans on hold, and weakening economic momentum. Global investors will need to reassess their strategies, factoring in the heightened risks to US assets and corporate earnings.
Consumer sentiment, already fragile, could be further damaged by additional costs on imported goods. Green concluded his warning by stating that the combination of sticky inflation, slowing economic activity, and heightened uncertainty is a recipe for stagnation.
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