JP Morgan’s world economist has a dark perspective on the aggressive tariff policy of President Donald Trump: “There will be blood.”
In a research note to customers published Thursday, Bruce Kasman of JP Morgan, as well as several other corporate economists, warned that the risk that the global economy fell into a recession increased from 40% to 60% in response to the announcement of the price of the “Liberation Day” on Wednesday.
Trump on Wednesday announced on Wednesday 10% tariffs on goods from any imported country in the United States, and even higher rates for 60 business partners with a persistent trade deficit with the United States.
The prices of the large -range “liberation day” have an impact penguins. They In addition to the existing rates against the best trade partners in the United States, Canada and Mexico.
“Disrupting American policies have been recognized as the greatest risk for the global prospects of all year round,” said JP Morgan’s research note. “The latest news is strengthening our fears because US trade policy has become decisively less suitable for businesses than expected.”
The economists of the banking giant describe the prices “at a basic level” as the increase in functional tax on American purchases of households and imported goods companies. Economists and supply chain experts have told Business Insider that the increased import costs caused by the Trump pricing plan should lead to higher prices for everything, pantry staples such as coffee and greater clothing and larger purchases such as cars and household appliances.
JP Morgan analysts have found that this week’s announcement, on the heels of previous tariff increases, increases the average American tax rate “by around 22%-at around 24%,” equivalent to around 2.4%of the total value of all goods and services produced in the country, or GDP.
“An increase in this size would be tied with the greatest increase in taxes since the Second World War,” said the JP Morgan research note. Its effects could be amplified “by reprisals, a slide in American commercial feeling and the disturbances of the supply chain”.
“We therefore emphasize that these policies, if supported, would probably push the United States and possibly the world economy in the recession this year. An update of our probability scenario makes this point, which increases the risk of recession this year to 60%,” said the note.
But a national or global recession “is not a fatal conclusion,” offered JP Morgan economists as a potential silver lining.
“Beyond the obvious point that political actions can be changed in the coming weeks, we continue to emphasize that American and global expansions are on solid ground and should be able to resist a modest shock.”
For the moment, however, the note indicates that JP Morgan economists “consider the complete implementation of the policies announced as a substantial macroeconomic shock” – to a little easily recovered, if Trump’s policies persist.
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