Goldman Sachs economists said that a sharp increase in US tariffs on Chinese imports, which could occur if Donald Trump wins the election, would negatively affect the US economy and increase inflation in the country.
"Raising the effective tariff rate by 1% will reduce U.S. GDP growth by 0.15% if China retaliates. Even if Trump uses these funds to finance tax cuts, the economy will still lose at least 0.05%. Additional tariffs may also raise basic consumer prices by a little more than 0.1%, as companies shift their costs to consumers," the economists said.
During his presidency, Trump imposed tariffs of up to 25% on Chinese imports worth more than $300 billion, prompting retaliatory measures from Beijing, and President Joe Biden largely kept them in place. Trump has announced an increase in tariffs for China to at least 60% if he is elected.
According to Goldman Goldman Sachs, the effective tariff rate on Chinese imports increased by 1.5% from 2017 to 2019, and Trump's proposals could raise it "much more significantly." "The direct impact of higher tariffs on GDP is likely to be moderately negative, with the impact on real incomes and consumer spending due to higher prices outweighing the reduction in the trade deficit," the economists warned.