Fitch Warns Trump Tariffs Could Spark Global Recession

Fitch Ratings issued a grave warning on Wednesday regarding the potential economic fallout from the Trump administration's proposed global tax policy. The policy, if enacted, would see the tariff rate on imported goods into the United States skyrocket from the current 2.5% to 22%, an eightfold increase. This drastic change has been likened to a "tariff nuclear bomb" and has sparked fears of a potential global economic recession.

The proposed policy sets a 10% global benchmark tariff rate for the United States. However, the actual tariff rates imposed on most trading partners are significantly higher than this benchmark. Olu Sonola, the head of U.S. economics at Fitch Ratings, expressed shock at the proposed tariff levels, noting that such high tariffs have not been seen since the 1910s, during the era of the Smoot-Hawley Tariff Act. This act was a significant piece of legislation that implemented high protective tariffs on over 20,000 imported goods, leading to a severe economic downturn.

Sonola emphasized that the proposed tariffs would have devastating effects on major trade relationships between the U.S. and its partners. The economic expert warned that if these high tariffs were to persist for several years, all existing economic forecasting models would become obsolete. The current global supply chain is deeply integrated, and a significant increase in tariffs would trigger a chain reaction of cost increases, ultimately harming consumers and businesses.

The uncertainty surrounding the Trump administration's tariff policy adds to the concern. While the White House has not yet released the full details of the policy, the anticipation of an escalating trade war has already sent shockwaves through global markets. Analysts caution that the deterrent effect of these "tariff nuclear weapons" far exceeds that of traditional trade disputes, pushing the global economy into uncharted and perilous territory.