Goldman Sachs Economist Doubts Trump Tariff Reinstatement July 9

Goldman Sachs Chief Economist Jan Hatzius has cast doubt on the likelihood of Donald Trump reinstating his "reciprocal tariffs" on July 9. This assessment comes as the 90-day pause on increased tariffs, which was announced in mid-June, is set to expire. Trump had previously indicated that he would send letters to all other nations regarding these tariffs, but Hatzius believes that the reinstatement is unlikely to occur on the specified date.

The reciprocal tariffs, first announced by Trump in April, imposed significant levies on imports from some of America's closest trading allies. These tariffs were met with criticism from businesses, consumers, and governments, who cited severe uncertainty as a major concern. Trump's announcement of a 90-day pause in implementation was seen as a temporary relief, but the expiration of this pause has raised questions about the future of these tariffs.

Trump's stance on tariffs has been a contentious issue, with some analysts predicting that he would implement reciprocal tariffs on the European Union at a rate of 15 percentage points, raising the total effective tariff rate by about 20. However, Hatzius's analysis suggests that this may not be the case. The economist's assessment is based on the current political and economic climate, as well as Trump's past actions and statements.

The uncertainty surrounding the tariffs has had a ripple effect on various industries, with some companies facing the challenge of getting goods out of China and into the US before the pause on higher tariffs expires. The potential reinstatement of the tariffs has also raised concerns about the impact on consumer prices and the overall economy.

Federal Reserve Chair Jerome Powell has acknowledged the effects of the tariffs on prices, stating that the Fed is still waiting to see the full impact. Powell noted that the pass-through of tariffs to consumer price inflation is a complex and uncertain process. This uncertainty has made it difficult for businesses and consumers to plan for the future, adding to the overall economic uncertainty.

Hatzius hinted during an event at the conservative think tank American Enterprise Institute that the White House is more likely to extend the negotiation period with trade partners rather than strictly adhere to the July 9 deadline. Hatzius's team estimates that the overall U.S. tariff rate has already increased by about 10 percentage points this year. "We anticipate an additional 4 to 5 percentage points due to the 25% targeted tariffs in industries such as semiconductors, communication equipment, pharmaceuticals, and copper. This is the significant additional taxation we still expect to materialize," he noted.