Prices displayed at a grocery store in New York on February 1, 2023.
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Seth Carpenter, chief global economist at Morgan Stanley, said the tariffs proposed by Donald Trump will weaken U.S. economic growth in 2026.
President-elect Trump has said he intends to impose a blanket tariff of 10% to 20% on all imported goods and impose additional tariffs of 60% to 100% on goods imported from China. During a presidential debate in September, he described the practice as a means to extract money from competing countries.
There is also the question of when and how quickly these tariffs will be implemented. Carpenter told CNBC’s Sri Jegarajah on the sidelines of Morgan Stanley’s annual Asia-Pacific Summit in Singapore that if enacted all at once, it could have a “huge negative impact” on the economy.
Carpenter maintained Morgan Stanley’s base case for spreading these tariffs through 2025 and said it would lead to higher inflation.
“By 2026, we think U.S. economic growth starts to decline significantly as a result of these tariffs and some other policies,” he warned.
“It’s very clear that tariffs drive up inflation. It’s very clear that tariffs are a drag on economic growth in the United States, and not just in the countries where they are imposed,” Carpenter added.
Mark Malek, chief information officer at brokerage Siebert, noted that if the proposed tariffs are imposed, especially on top of those already imposed by the Joe Biden administration, prices in a range of industries including automotive, consumer electronics, machinery, construction and retail will will rise.
Trump’s proposed 60% tariff on Chinese goods, coupled with Biden’s 100% tariff on Chinese-made electric vehicles, will “have a significant impact” on the auto industry, while a 10% tariff on consumer electronics imports is common “It will increase costs for companies like Tesla, Microsoft and Apple,” Malik said. He added that these higher costs may be passed on to consumers.
Although U.S. consumer prices The index increased by 2.6% year-on-year in October, slightly higher than September’s 2.4%. U.S. inflation has declined over the years and prompted the Federal Reserve to cut interest rates.
Ben Emons, chief investment officer and founder of FedWatch Advisors, said that if tariffs are fully implemented, the market may fully price in the impact of a rate cut in 2025, adding that tariffs may also “suppress” economic growth.
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