(qlmbusinessnews.com . Fri 4th Jul, 2025) London, UK —
Navigating Economic Volatility: The Impact of President Trump's Increased Global Tariffs
Shortly after Donald Trump's return to the White House in January, he initiated a series of increased tariffs, dismissing the economic risk warnings from economists and the business sector alike.
His initial focus was on Mexico, Canada, and China, extending then to steel, aluminium, and automotive sectors, before declaring a widespread imposition of new taxes on global goods on what he termed “Liberation Day” in April.
These strategies unsettled trade dynamics and induced volatility within financial markets. However, amid escalating concerns, Trump momentarily halted his most radical tariff policies, allowing a 90-day period for negotiations.
With the 9 July negotiation deadline looming, the US president is fine-tuning his strategy, keeping the American economy's performance in keen sight.
The repercussions thus far?
The stock market presented a mixed response. Trump's announcement included harsh levy plans: 20% on European Union goods, an eye-watering 145% on specific Chinese products, and a 46% tax on Vietnamese imports. However, a recent negotiation led to a revised 20% tariff agreement with Vietnam.
February saw the beginning of a downward trend in the US stock market, which took a significant dive in April following Trump's comprehensive tariff declaration on “Liberation Day”.
The S&P 500 index witnessed a sharp 12% drop within a week. Yet, the market recouped its losses after Trump scaled back, opting for a more palatable 10% tariff rate.
Currently, the S&P 500 has seen a 6% year-on-year increase. Shares in the UK and Europe have similarly recovered, although companies most susceptible to tariffs, like retailers and automobile manufacturers, continue to face challenges, with further risks as the negotiation deadline approaches.
The White House remains ambiguous, suggesting the deadline is “not critical” and hinting that Trump might present other countries “with a deal” on that day.
Liz Ann Sonders, Chief Investment Strategist at Charles Schwab, interprets the market's recovery as investor complacency, cautioning against potential shocks if Trump reintroduces higher tariffs.
On trade, an initial surge of goods entering the US occurred early in the year, followed by a steep decline in April and May. Nonetheless, US goods imports in the initial five months were 17% higher than the same period the prior year.
The forthcoming months hinge on whether Trump extends his tariff suspension or reinstates his stringent measures, according to Ben Hackett of Hackett Associates. He suggests a return to high tariffs could lead to a brief recession.
As for prices, it's premature for conclusions. Imported goods, constituting about 11% of US consumer spending, have seen modest price increases. Trump and his supporters downplay the impact of the substantially higher tariffs on the cost of living, pointing to recent modest inflation data.
Despite some products experiencing more noticeable price hikes, and with many tariff-affected goods yet to reach consumers, businesses might phase in price increases to avoid alienating customers, though economists anticipate the costs will ultimately be borne by consumers.
Consumer spending is showing signs of slowing down, with consecutive retail sales drops in April and May—the first such occurrence since the close of 2023. Though growth is anticipated to decelerate, the consensus among analysts is that the economy might avoid recession, contingent on continued job market strength.
Despite an uptick in layoff notices, the unemployment rate remains at a low 4.2%, with recent job creation reflecting the past year's average.
“We're essentially at an economic standstill, a ‘wait-and-see' phase, amidst significant uncertainty and policy instability,” stated Ms. Sonders, indicating a widespread cautious approach among businesses towards hiring and investments. She cautioned that while an immediate downturn might be averted, the economy is not expected to rebound robustly.
The comprehensive effects of Trump's trade tactics continue to unravel, with the global and US economies confronted with both immediate and long-term challenges.
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