Executive Summary:
In this Q&A, Sebastian Vismara, Head of Economic Research at BNY Investments, breaks down the latest US tariff measures and their potential economic and market impacts.
- Tariff escalation: The US has imposed significant new tariffs, with more potential measures on the horizon.
- Economic impact: Tariffs are expected to slow GDP growth, raise inflation, and increase business uncertainty.
- Labour market risks: Unemployment could rise, with the potential for more severe job losses if growth slows further.
- Recession risk: The probability of a US recession has risen sharply without additional fiscal support.
- Federal reserve outlook: The Fed may consider rate cuts to cushion the economy, but high inflation could limit its flexibility.
- Policy motives: Tariffs appear to serve both as a revenue source and a tool for negotiating global trade concessions.
- Market implications: The US dollar may strengthen, while gold and international bonds could benefit from increased uncertainty.
