Tariffs: What’s ahead and why it matters
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Does the recent tariff rhetoric suggest that we're entering a global trade war? And what could that mean for economies and markets? I'm Alison Nathan, and this is Goldman Sachs Exchanges. Today, I'm joined by Kamaksha Trivedi, our head of global foreign exchange interest rates and emerging markets strategy research, Alec Phillips, our chief political economist, and Joseph Briggs, who co leads the global economics team within Goldman Sachs Research. Joseph and Alec are here with me in New York, and Kamakshi is in London. So, Alec, as we sit here on Wednesday morning, we have seen an absolute sl
So a lot has happened, and a lot more has been announced that hasn't yet happened. Starting with inauguration day, I think as we went into inauguration day, a lot of our clients had an expectation that you were gonna have a bunch of big tariff announcements. Instead, on inauguration day, we got a memo that had all sorts of recommendations and studies and reports due by April 1. And what that seemed to suggest is that, actually, we're gonna get a reprieve for a couple of months where maybe we wouldn't have some of those big announcements. And then, of course, actually, that day, president Trump
I wanna ask you more about that reciprocal tariff. But before I do, just give us a little bit of context. A lot of us have in our mind the trade war in 2018, '20 '19 in Trump's first term. So as you're sitting here, how does this compare to that? Is it faster? Is it bigger? How would you contextualize it?
Yes. Both. Right? In terms of faster, the thing I will point out is that if you look at the rise in the effective tariff rate on imports from China during Trump's first term, so the entire so called trade war with China, it ended up being around a 10 percentage point increase. And then the other big tariff that we got at that point was on steel and aluminum, which then we had a lot of exemptions to. If you look at what has happened in the last couple of weeks, we got a 10% across the board tariff on imports from China that actually covers more than all of the imports that were covered during t
Conakshia, would you agree with that? When you think about the market reaction so far, have you been surprised, or are there places where you think, you know, this is being priced more or less? Yeah.
I think it's fair to say that when you look at it on a broad basis, you take the currency markets, for example, which are the place where you should see the impact most directly because currencies can offset the the tariff impact to some extent by shifting relative prices. You did see when Canada and Mexico tariffs were imminent, the percent and a half. So to the question that we often get, are all the tariffs already priced? Is it all already reflected in market pricing? The short answer to that is no. You can see that that the dollar did strengthen a percent and a half. You did see the euro
And, Alec, I think the big question on a lot of people's mind is whether this reciprocal tariff is really going to be the big tariff. There's been so much discussion about a universal tariff. Do you think that this replaces a universal tariff, or do you think there's still a chance that we get a very extreme scenario like that?
Yeah. I mean, that is, in theory, the silver lining of the reciprocal tariff. Now I will say Trump talked about something called the Reciprocal Trade Act, which is essentially a legislative version of the reciprocal tariff during his first term. And if you look at the way he described the reciprocal tariff last week, he actually said, I'm going in this direction i
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