Apollo Economist Proposes 30% China Tariffs to Boost Revenue

Torsten Sløk, chief economist at Apollo Global Management, has proposed a scenario where President Donald Trump’s tariffs could be extended to ease economic uncertainty and boost federal revenue. This comes as the 90-day pause on Trump’s “reciprocal tariffs” is nearing its end.

In a recent note, Sløk suggested that maintaining tariffs at 30% on China and 10% on other countries, with a 12-month period for these countries to lower non-tariff barriers and open their economies, could be a strategic move. This approach would provide more time for other countries and U.S. businesses to adapt to a new trade environment with permanently higher tariffs, thereby reducing uncertainty and benefiting business planning, employment, and financial markets.

Sløk’s proposal comes at a time when businesses and consumers are uncertain about the future of Trump’s tariffs. The temporary reprieve on tariffs was intended to allow time for negotiations, but aside from agreements with the U.K. and a short-term deal with China, few other deals have been announced. Negotiations with other top trading partners are ongoing, with administration officials indicating that deals are close to being reached.

Sløk’s speculation is significant because he previously warned about the potential economic harm of Trump’s tariffs. In April, he cautioned that tariffs could trigger a recession by summer and that the trade war with China could severely impact American small businesses. However, his recent note suggests a more optimistic outlook, where tariffs could generate $400 billion in annual revenue for U.S. taxpayers while providing a boost to the global economy.

The uncertainty surrounding tariffs has also affected the Federal Reserve’s stance on inflation. Most policymakers are in a wait-and-see mode, expecting stagflationary effects from tariffs. However, there is a split among Fed officials. Governor Christopher Waller suggested that economic data could justify lower interest rates as early as next month, expecting only a one-off impact from tariffs. In contrast, San Francisco Fed President Mary Daly indicated that a rate cut in the fall might be more appropriate.

Sløk is not alone in his revised perspective on Trump’s tariffs. Chris Harvey, head of equity strategy at Wells Fargo Securities, expects tariffs to settle in the 10%-12% range, low enough to have a minimal impact. Harvey sees the S&P 500 soaring to 7,007, making him one of the most bullish analysts on Wall Street. He emphasizes the importance of making progress on trade and reaching deals with major economies to allow markets to focus on the future rather than near-term tariff impacts.