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Tariff Announcement 'Historic Day' for US Economy: Shawn Donnan & Anna Wong
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April 3, 2025
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6:00Now PlayingBloomberg's Shawn Donnan and Anna Wong react to the fallout from President Trump's wide-ranging tariff policy and break down how the move is likely to impact the US economy.
Wall Street economists said the US risks a recession this year and inflation could return to pandemic levels following the Trump administration’s announcement of major tariffs on global trading partners.
Nomura Securities International Inc. said it expects gross domestic product to expand 0.6% in 2025 after accounting for the new levies on imports, and a key measure of underlying inflation to rise to 4.7%.
Barclays Plc economists took a more pessimistic view toward GDP — projecting a 0.1% contraction — and a slightly more optimistic view of inflation, penciling in a 3.7% increase. They also look for the unemployment rate to climb by year-end.
President Donald Trump’s tariff announcement on Wednesday sent global financial markets into a tailspin, upending forecasts for ongoing expansion in the world’s largest economy. Several major banks offered provisional estimates of the impact which indicated a big hit to growth and boost to inflation, though they declined to make formal revisions, citing the possibility that the measures could be tempered in coming days.
“Clearly such a large adjustment poses material downside risk to the expansion. Our assessment would lift not only inflation into 2026, but also sees GDP fall and the unemployment rate rise,” UBS Chief US Economist Jonathan Pingle said Wednesday in a note. “We would expect two quarters of negative GDP growth.”
Trump says he wants to rebalance the global trading system in favor of American workers, who he argues have suffered for decades from unfair deals negotiated by his predecessors. In a statement following the announcement, the US Trade Representative Office said tariffs for each country were calculated based on the size of their trade surplus with and the values of their exports to the US.
The levies, if they remain in place, threaten to erase most of the progress made in reducing inflation over the last three years. The Federal Reserve’s preferred measure — based on the personal consumption expenditures price index excluding food and energy — stood at 2.8% in February, down from the pandemic high of 5.6% reached in February 2022.
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