President Donald Trump’s planned tariff announcement on April 2 may give the market a negative surprise, according to Goldman Sachs economist Alec Phillips. The initial duties are meant as a basis for talks, which encourages officials to set high rates. A recent survey shows market participants expect an initial 9% reciprocal tariff rate, but it could be double that.
Stocks surged on Monday after Trump mentioned scaling back planned tariffs, with the Nasdaq Composite index gaining 2.3%, the S&P 500 rising 1.8%, and the Dow Jones industrial average climbing 1.4%. However, Phillips notes that despite lowered rhetoric from Trump, the new duties are likely to cover almost all US trade.
The proposed tariffs could boost the US’s effective overall tariff rate by 10 percentage points, with a risk scenario of 15 percentage points. Additional uncertainties include proposed 25% duties on countries buying Venezuelan oil and VATs being discriminatory against US goods. The administration may also delay duties on certain lines of goods.
On a positive note, postponements in imposing duties on Mexico and Canada indicate the administration’s willingness to delay. However, Phillips warns that the countries targeted under reciprocal tariffs account for three times as much imports as Canada and Mexico, making deliberate action essential.
Source: https://qz.com/trump-tariffs-shock-markets-investors-goldman-gs-1851772186