How Barclays predicts the Fed may respond to Trump’s tariff proposal
Republican presidential candidate Donald Trump’s proposed tariffs could have a negative impact on S&P 500-listed companies’ earnings if implemented during a potential second term, according to Barclays analysts. Trump’s plan includes imposing tariffs on imports, particularly targeting China, to protect American jobs and address perceived unfair trade practices. The analysts predict a 3.2% decrease in earnings next year due to the tariffs, with an additional 1.5% impact if other countries retaliate. Industries like materials, technology, and healthcare, which rely heavily on global supply chains, are deemed most vulnerable. The tariffs could also lead to supply constraints, price increases, and short-term Inflation in the US. The Federal Reserve may respond by initially keeping borrowing costs high to counter Inflation before potentially easing rates more significantly if economic conditions weaken due to trade policy uncertainty. The upcoming presidential election remains closely contested, with potential implications for future policy direction. In a divided Congress scenario, the new president may resort to executive actions, such as setting tariffs, to advance their agenda.
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Emma Collins, graduated in Financial Economics from the University of Chicago in the USA in 2016. She has since worked at an asset management firm in New York, where she specializes in investment strategies and portfolio management. Emma has a keen interest in financial analysis and has published several articles in renowned financial journals. Her work focuses on providing actionable insights to investors, and she is known for her forward-thinking approach to managing financial portfolios.