Barron's market reporter Jacob Sonnenschein discusses the impact of President-elect Trump's tariffs on the U.S. economy for Barney & Company.
Goldman Sachs announced this week that it will impose a 25% tariff on all goods from Mexico and Canada, while President-elect Donald Trump's plan to increase tariffs on products from China will drive up costs for Americans. I warned you that it would happen.
Economists at the Wall Street bank said in a note Tuesday that the proposal presented by President Trump a day earlier would impose additional taxes on 43% of U.S. imports and could push inflation up by nearly 1%.
Goldman Sachs warned this week that President-elect Donald Trump's plans to raise tariffs on China and impose them on Canada and Mexico will push up inflation. (Scott Olson/Getty Images/Getty Images)
“Using our rule of thumb, every 1 [percentage point] An increase in effective tariff rates will raise the core [personal consumption expenditures] “We estimate that the core price of PCE would increase by 0.9% if the proposed tariff increases go into effect,” said a memo written by Goldman Sachs economists Alec Phillips and Lonnie Walker. It is written.
The PCE index is a measure of inflation recommended by the Federal Reserve Board. The Department of Commerce announced Wednesday that sales for October were up 0.2% from the previous month and 2.3% from the same month last year. Core PCE, which excludes volatile food and energy prices, rose 0.3% from the previous month and 2.8% from a year earlier.
Experts say President Trump's proposed tariffs could push up food prices
The central bank has focused on the headline PCE figure as it seeks to bring price growth back to its 2% target, but policymakers believe core data is a better indicator of inflation. There is.
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President Trump announced on Monday that once he takes office, he will issue an executive order imposing 25% tariffs on all goods imported into the United States from Mexico and Canada, as well as increasing tariffs on China due to the influx of illegal immigrants. illegal drugs.
President Trump, who will be sworn in as president on January 20, 2025, said in a post on Truth Social that thousands of people are flowing into Mexico and Canada “at levels we have never seen before.” said.
New president says Mexico may retaliate with its own tariffs following Trump's threat
“Currently, the caravan coming from Mexico is made up of several thousand people and it appears that nothing will stop them in their quest to cross the now open border,” he wrote. “On January 20th, in one of my first executive orders, I will do everything necessary to impose a 25% tariff on Mexico and Canada on all products imported into the United States and their ridiculous border opening. sign the document.”
“This tariff will remain in effect until we stop drugs, especially fentanyl, and all illegal aliens from invading our country!” he added. “Both Mexico and Canada have the absolute right and power to simply resolve this long-simmering problem.”
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Dating back to his first administration, President Trump has long urged Mexico to be more proactive in preventing illegal immigration and illegal drugs from entering the United States.
In a subsequent post, President Trump said he would impose a 10% tariff on all Chinese goods imported into the United States, citing “large quantities” of drugs, particularly fentanyl, being smuggled into the United States.
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Economists at Goldman Sachs said President Trump's announcement against Canada was “somewhat surprising” after threatening to impose 25% tariffs on Mexico during his first administration.
“Overall, this announcement suggests that such tariffs, rather than more systemic tariff policies (e.g., a 10% to 20% “universal standard tariff”) that President Trump frequently discussed during his presidential campaign, It is reminiscent of the first Trump administration, when it was announced as a negotiation tactic. campaign,” they wrote.
FOX Business' Eric Revell and Louis Casiano contributed to this report.
