How tariffs will impact the US economy

Bullish:

• $INFLATION - Inflation is expected to run higher than previously anticipated, closer to 3%, due to the increased tariff rates.

  • “With our new baseline of a 10 percentage point increase in the effective tariff rate, we think that means inflation actually runs closer to 3% despite those offsetting disinflationary pressures.”

    David·8:19
• $VOL - The probability of a recession in the next 12 months has increased, which could lead to higher market volatility.

  • “We raised our twelve month recession probability from 15% to 20%.”

    David·5:13

Bearish:

• $USD - The US dollar is expected to weaken due to larger tariff increases, which could lead to economic slowdown and reduced foreign investment.

  • “Now we're expecting that it will all add up to about a 10 percentage point increase in the effective tariff rate.”

    David·1:38
• $GDP - The 2025 GDP forecast has been reduced from 2.2% to 1.7% due to the larger impact of tariffs.

  • “So we've just cut our 2025 GDP forecast on the q four, q '4 basis from 2.2% to 1.7%. So we took off half a percentage point to reflect the larger impact of tariffs”

    David·4:14
• $BIZINVEST - Business investment and hiring decisions are expected to be negatively impacted due to increased uncertainty and larger proposed tariffs.

  • “I do think the uncertainty is more serious for investment and hiring decisions for two reasons. The first kind of simple straightforward reason is just that the tariffs being proposed are much larger.”

    David·12:41