On Wednesday, the United States is set to begin what Trump calls “reciprocal” tariffs, which will be tailored to match what he sees is the burden each country places on his, including things like value-added taxes. Much is still unknown, including exactly what the US government will do on “Liberation Day.”
At Goldman Sachs, economists expect Trump to announce an average 15 per cent reciprocal tariff. They also raised their forecast for inflation and lowered it for US economic growth for the end of the year.
Altogether, they now see a 35 per cent chance of recession in the next year, up from an earlier forecast of 20 per cent, “reflecting our lower growth forecast, falling confidence, and statements from White House officials indicating willingness to tolerate economic pain,” according to Goldman Sachs economist David Mericle.
If the April 2 tariffs end up being less onerous than investors fear — maybe Trump includes no additional tariff increases on China, for example — stocks could rally. But if they end up being a worst-case scenario, which also gets businesses so fearful that they start cutting their workforces, something that hasn’t happened so far, stocks could sink much further.
Of course, there’s also the chance that April 2 does little to clear the uncertainty. It could end up being merely a “stepping stone for further negotiations” instead of a big “clearing event” for the market, according to Michael Wilson and other strategists at Morgan Stanley.
“This means policy uncertainty and growth risks are likely to persist — it’s a question of to what degree,” Wilson wrote in a report.
One worry is that even if Trump’s tariffs end up being less harsh than feared, all the uncertainty created by them could alone cause US households and businesses to freeze their spending, which would hurt an economy that had been running at a solid pace at the close of last year.
Either way, some familiar names were leading the way downward on Wall Street Monday.
Tesla fell 3 per cent to bring its loss for the year so far to 36.7 per cent. It’s been one of the worst performers in the S&P 500 so far this year in large part because of fears that the electric-vehicle maker’s brand has become too intertwined with its CEO, Elon Musk.
Musk has been leading US government efforts to cut spending, making him a target of growing political anger, and protests have been swarming Tesla showrooms as a result.
It’s a sharp drop-off following a surge of roughly 90 per cent in the weeks following November’s Election Day, when the thought was that Musk’s close relationship with Trump could help the company’s finances. Tesla’s stock is roughly back to where it was on November 5.
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Other Big Tech stocks also helped to pull the market lower. They’ve been at the centre of the recent sell-off in large part because of criticism that their stock prices had become too expensive. Critics pointed to how their prices rose much faster than their already quick-growing profits in recent years.
Nvidia, which has ridden the frenzy around artificial-intelligence technology to become one of Wall Street’s most influential stocks, fell 3.5 per cent to bring its loss for the year so far to 21.2 per cent.
Stocks of companies that need customers feeling flush enough to spend were also among Monday’s worst performers, as they’ve been so far this year.
United Airlines lost 2.5 per cent, and Delta Air Lines gave up 1.5 per cent.
On the winning side of Wall Street was Mr. Cooper, which jumped 14.4 per cent after the home loan servicer said it’s being bought by mortgage company Rocket in an all-stock deal valued at $US9.4 billion. The deal comes just weeks after Rocket acquired real estate listing company Redfin, and Rocket’s stock fell 10.4 per cent.
AP
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