Trump’s tariff gambit will increase bets for the economy

U.S. President Donald Trump spoke with entertainer Kid Rock and then signed an executive order in Washington, D.C. on March 31, 2025 in the White House Oval Office.

Andrew Harnik | NebraskaDailyNews

President Donald Trump will begin his biggest bet in his second term on Wednesday, based on widespread import tariffs that will be a new era for the U.S. economy.

The bet cannot be higher.

Family sentiment was at a multi-year low when the president prepared the “Liberation Day” announcement. Consumers are worried that responsibilities will trigger another painful round of inflation, and investors say lower profits for higher prices means lower profits and stricter stock markets.

What Trump promises is that a new economy does not depend on deficit spending, and Canada, Mexico, China and Europe no longer take advantage of the desire of American consumers for ever-lowering products.

The biggest problem right now is that no one knows outside the government how to achieve these goals and the price to pay.

“People always want to get everything done right away and have to know exactly what’s going on,” said Joseph Lavorgna. “The negotiation itself doesn’t work that way. Good things take time.”

As far as his Lavorgna is concerned, now the chief economist at SMBC Nikko Securities, he is what optimistic Trump can achieve, but understands why the uncertainty of all this will shock the market.

“It’s a negotiation that requires judgment in a time-filled time,” he said. “End of the day, we’re going to get some detail and some clarity, and for me, everything will come together. But it’s too early for us to know exactly what the implementation might look like.”

Here’s what we know: The White House intends to impose “reciprocity” tariffs on its trading partners. In other words, the United States will match the fees charged by other countries to import U.S. goods to its country. Recently, although Lavorgna said he expects that number to reach around 10%, China is about 60%.

But what could be happening could be even more nuanced as Trump tries to reduce the record $131.4 billion U.S. trade deficit. Trump claims to be able to make deals, and armed measures against tough taxes are part of the strategy to get the best arrangements when producing more goods at home, promoting U.S. work and providing a fairer trade landscape.

However, the consequences may become rough in the short term.

Potential inflationary impact

On the surface, tariffs are taxes on imports, and on the theoretical basis it is inflation. But, in reality, it doesn’t always work that way.

During his first term, Trump imposed heavy tariffs on Nary, a sign of long-term inflation beyond the rise in isolated prices. That’s it Fed economists generally consider tariffs—one-time “temporary” fragments, but rarely are generators with basic inflation.

This time, though, may be different, as Trump tried something of a scale, as the catastrophic Smoot-Hawley tariffs in 1930 began a global trade war, which would be the worst case for presidential ambitions.

“This could be a major rewiring of the domestic and global economy, it’s La Thatcher of La Reagan, where you get a more enabled private sector that simplifies the government, which is a fair trading system,” Allianz’s chief economic adviser Mohamed Elian said on NebraskaDailyNews on Tuesday. “Also, if we get the tit-tat tariff, we get stuck and the scattered anchor is good, which becomes problematic.”

The U.S. economy has shown signs of scattered impulses, perhaps not in line with the routes of the 1970s and early 1980s, but growth has proven slowing down and inflation is higher.

Goldman Sachs lowered its forecast for economic growth this year with little positive attitude. The company cites “the latest deterioration in family and business confidence” and the second-order impact of tariffs as government officials are willing to grow lower in the short term with lower long-term trade targets.

Fed officials said last month that GDP is expected to grow by 1.7% this year. Goldman predicts that GDP is only rising at 1% using the same metric.

Additionally, Goldman Sachs raised its recession risk to 35% this year, although growth continued to be positive in the most likely scenario.

A broader economic problem

But Luke Tilley, chief economist at the Wilmington Trust, believes that the risk of a recession is even higher, not just due to tariffs.

“We are already in the pessimistic range,” he said. “A lot of that comes from the fact that we think consumers are not strong enough in the year and that we are seeing slower growth due to tariffs.”

Tilley also believes that the labor market is weakening as companies recruit and other decisions, such as capital expenditure type investments.

Tuesday Supply Management Institute In it, respondents viewed uncertain climate as a barrier to growth.

“Customers are suspending new orders due to uncertainty in tariffs,” said a manager in the transportation equipment industry. “The government has no clear direction on how to implement them, so it’s hard to project how they will affect the business.”

While Tilley believes the focus on tariffs that lead to long-term inflation is misplaced, for example, Smoot-Hawley actually ends up relaxing, he does see it as a danger to already struggling consumers and the economy as they may further undermine activity.

“We think tariffs are just a focus on growth. It will drive prices to rise for the initial couple (inflation) reading, but that will create so many economic weaknesses that it will eventually become a net reduction,” he said. “They are tax increases, they are contractions, and they will have a trade-off on the economy.”

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