Goldman Sachs that presidential candidate warned Donald TrumpChina’s proposed tariff plan could potentially hamper U.S. economic growth and fuel inflation.
What happened: Goldman Sachs analysts expressed concern that a substantial increase in U.S. tariffs on Chinese goods, as advocated by Trump, could have a negative impact on the domestic economy and trigger inflation, Bloomberg reported.
Analysts pointed out that a 1% increase in the effective tariff rate could reduce US growth by as much as 0.15% if China retaliates.
Even if tariff revenues were used to finance tax cuts that incentivize spending and investment, gross domestic product (GDP) would still experience a minimum decline of 0.05%.
The tariffs could also raise core consumer prices by just over 0.1%, as companies would pass on higher import costs to consumers, leading to a surge in inflation that would last a year.
See also: Xi Jinping’s resurfaced speech suggests China’s central bank emulates the Federal Reserve’s approach
During his presidency, Trump imposed tariffs of up to 25% on more than $300 billion in Chinese imports. President Joe Biden he broadly supported these tariffs. Trump has suggested raising Chinese tariffs to at least 60% if he wins re-election.
Senior economist Ronnie Walker noted that while each one-percentage-point increase in China’s tariffs potentially increases government revenues by about $30 billion per year, the overall economic impact would likely be negative. The increase in prices would exceed the decline in the trade deficit, resulting in a “moderately negative” effect on GDP.
Because matter: Trump’s potential return to the White House has both investors and markets worried. In February, Trump hinted at the possibility of imposing tariffs of more than 60% on all Chinese imports if he returned to the presidency. This news shook Chinese investors and prompted Goldman Sachs to sound an alarm on the economy and stocks.
In March, reports emerged that Trump had authorized a CIA operation to influence public opinion Xi Jinpingthe government in China. Furthermore, last week, secret Chinese online accounts posing as American Trump supporters were reportedly found, launching attacks on President Biden and fueling internal divisions ahead of the upcoming elections.
Read next: Benzinga’s ‘Stock Whisper’ Index: 5 Stocks Investors Are Secretly Tracking But Aren’t Talking About Yet
Image via Shutterstock
Designed by Benzinga NeuroBy
Kaustubh Bagalkote
The GPT-4-based Benzinga Neuro content generation system leverages Benzinga’s extensive ecosystem, including native data, APIs, and more to create rich, timely stories for you. Learn more.