S&P Global Ratings believes that U.S. President Donald Trump's proposed tariffs—10% on all imports and 60% on Chinese goods—are unlikely to be passed entirely. S&P notes that although these levels seem unlikely, even partial execution could cause inflation and influence economic growth.
Based on its research, S&P Global estimated that a 10% universal tariff might boost the U.S. consumer price index by 1.8% points, therefore causing a temporary increase in inflation. "This would mark a one-time change in prices rather than a continuous inflationary trend," S&P said. Due to the loss of income for American households and weaker exports, the economic drag might cut real GDP by as much as 1% point.
Should it be applied, a 60% tax on Chinese imports may increase consumer prices by an extra 1.2% point, therefore influencing GDP by roughly 0.5% point. While S&P pointed out that these tariffs would hasten supply chain diversification away from China, they also suggested a possible downgrading of the U.S. credit rating in the next years should political concerns impact institutional stability or the dollar's reserve currency position.
