Donald Trump’s proposed tariffs, which include a blanket 10% to 20% levy on all imports and additional tariffs of up to 100% on Chinese goods, are poised to significantly hinder U.S. economic growth heading into 2026, according to Morgan Stanley’s chief global economist Seth Carpenter. Speaking at Morgan Stanley’s annual Asia Pacific Summit in Singapore, Carpenter warned that if implemented abruptly, these tariffs could deliver a “big negative shock” to the economy.
Donald Trump’s tariff strategy, outlined during the September presidential debate, is designed to generate revenue from competing countries. However, Carpenter cautioned that the policy would drive inflation and act as a drag on growth not only for trading partners but also for the U.S. economy. While Morgan Stanley’s base case assumes a phased introduction of these tariffs through 2025, Carpenter predicts they would lead to a marked slowdown in economic growth by 2026.
“Very clear, tariffs push up inflation. Very clear, tariffs are a drag on growth for the U.S., not just for the countries that the tariffs are put on,” Carpenter emphasized in his remarks.
The potential impact of these tariffs extends across multiple sectors, particularly those reliant on imports. Mark Malek, chief investment officer at Siebert, highlighted that industries such as automobiles, consumer electronics, machinery, construction, and retail could face higher inflation as companies pass increased costs onto consumers.
Donald Trump’s proposed 60% tariff on Chinese goods would compound the challenges already posed by President Joe Biden’s existing 100% tariff on Chinese-made electric vehicles. The automotive sector, in particular, could see significant cost pressures, while a 10% universal tariff on consumer electronics imports would directly affect companies like Tesla, Microsoft, and Apple.
Despite recent signs of easing inflation in the U.S., with the consumer price index rising by 2.6% in October compared to 2.4% in September, sweeping tariffs could reverse this trend. Ben Emons, chief investment officer and founder of FedWatch Advisors, noted that the implementation of such tariffs could lead markets to reassess the potential for interest rate cuts in 2025. “Tariffs could restrain growth,” Emons warned, suggesting that monetary policy may become less flexible in the face of rising inflationary pressures.
The broader economic implications of Donald Trump’s tariff policy, from heightened inflation to slowed growth, underscore the challenges facing policymakers and businesses as they navigate the potential fallout of these sweeping trade measures.
