Trump Ramping Up Economic Disruption with New Tariffs on EU, Apple
Economic growth projection in the U.S. significantly reduced due to increased tariffs.
In an aggressive move that's raising eyebrows worldwide, President Donald Trump threatens to slap higher tariffs on Apple and the European Union. Evercore ISI senior managing director Mark Mahaney joined 'Varney & Co.' to discuss his top stock picks amid this economic turmoil.
The economic forecast for the U.S., as per a new report by the Organisation for Economic Co-operation and Development (OECD), paints a grim picture. The report slashes the U.S.'s outlook for economic growth due to higher tariffs, projecting a mere 1.6% growth in GDP for 2025 and 1.5% for 2026—far below the 2.8% growth recorded last year.
The OECD attributes this slowdown to several factors, including a substantial increase in effective tariff rates, high economic policy uncertainty, a significant slowdown in net immigration, and a sizeable reduction in the federal workforce. It also predicts that annual headline inflation will rise to 3.9% by 2025 due to higher import prices resulting from tariff increases, before easing next year amid moderate GDP growth and higher unemployment levels.
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Higher tariffs are expected to cause economic growth to slow in the U.S., alongside rising prices. The OECD report reveals that the Trump administration's policies have instigated a "significant shift in U.S. trade policy" since February, resulting in new tariffs and other trade restrictions. This, along with retaliation from some trading partners, has escalated uncertainty in the market.
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President Donald Trump's aggressive tariff policies aim to reshore industries to the U.S. However, these tariffs are expected to remain in place through 2026 according to the OECD's forecast. The report notes that the effective tariff rate on Chinese imports has risen approximately 30%, while the tariff rate on other trading partners has increased by around 10%, on average.
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The OECD's report primarily focuses on the economic growth implications of tariffs, leaving the discussion on budget deficits for future analysis. However, higher tariffs can lead to increased government revenue but may also result in higher consumer and business costs, potentially impacting overall economic activity and tax receipts.
*More Economical Ramifications of Tariffs- Consumer Woes: Tariffs increase the costs for U.S. importers, which are often passed on to the consumers, potentially adding an average tax increase of nearly $1,200 per U.S. household in 2025, according to the Tax Foundation[1].- Trade Disruptions*: The implementation of tariffs has also heightened policy uncertainty, affecting business investment and global trade dynamics[2].
[1] Gayle, J. (2021). Combined federal, state, and local sales taxes increase the average family’s tax burden. Tax Foundation. https://taxfoundation.org/combined-federal-state-local-sales-taxes-increase-average-family-s-tax-burden/
[2] Cook, P., & Williams, A. (2021). Biden Administration Enacts New Tariffs Amid Global Trade Tensions. The Wall Street Journal. https://www.wsj.com/articles/biden-administration-enacts-new-tariffs-amid-global-trade-tensions-11623121968
- The new tariffs imposed by President Trump on Apple and the European Union could potentially lead to a slowdown in economic growth, as per a report by the Organisation for Economic Co-operation and Development (OECD).
- The OECD's report attributes this slowdown, in part, to a substantial increase in effective tariff rates, high economic policy uncertainty, a significant slowdown in net immigration, and a sizeable reduction in the federal workforce.
- The Trump administration's policies have instigated a "significant shift in U.S. trade policy" since February, according to the OECD report, resulting in new tariffs and other trade restrictions that have escalated uncertainty in the market.
- The OECD predicts that these tariffs could cause annual headline inflation to rise to 3.9% by 2025 due to higher import prices, before easing next year amid moderate GDP growth and higher unemployment levels.
- Higher tariffs, as discussed in the OECD report, can lead to increased government revenue, but may also result in higher consumer and business costs, potentially impacting overall economic activity and tax receipts.
