Barclays strategists warn that Trump's proposal to significantly increase tariffs will have a detrimental impact on the profits of European and American companies on both sides of the Atlantic. They point out that the real U.S. economy may suffer a blow of up to 1.4 percentage points.
Financial Associated Press, September 13th (Editor Liu Rui) in this week's U.S. presidential election "Hart Debate", Trump's tariff plan has also become a key topic of discussion. Trump proposed a universal 10% tariff on imported goods from all countries, plus a tariff of 60% or higher on goods from China.
However, Barclays strategists warn that Trump's proposal to significantly increase tariffs will have a negative impact on the profits of European and American companies on both sides of the Atlantic.
Profits of European and American companies will be affected.
Barclays believes that if Trump's tariff plan is implemented, it will result in a 3.2% reduction in profits for companies in the S&P 500 index constituents by 2025. Moreover, if other countries take similar retaliatory measures, profits of S&P 500 constituents may further decrease by 1.5%.
In addition, the impact of Trump's tariff plan on European companies may be more severe. Barclays states that this "comprehensive trade war" initiated by Trump could drag down the profit growth of European companies by "high single digits (6% to 9%)".
Strategists say that among U.S. companies, those in the raw materials, non-essential consumer goods, industrial, technology, and medical care industries seem to face the greatest risks, as they are highly dependent on global supply chains.
In Europe, companies in Italy and Germany that produce transportation equipment, automotive products, beverages, and chemicals may suffer more severe blows.
However, the Trump campaign team does not agree with the analysts' views. Brian Hughes, a senior advisor to the Trump team, said in a statement,
"Trump's policies will drive economic growth, reduce inflation, incentivize American manufacturing, and protect our country's working class from the impact of imbalanced policies favoring other countries."
"Just like in 2016, Wall Street predicts that Trump's policies will result in slower growth and rising inflation," he said, "The actual performance of growth and job growth is far better than these views."
Strategist: Will cause long-term damage to the U.S. economy
Strategists warn that while the direct impact of Trump's tariffs may be limited, they may indirectly lead to price increases and slower economic growth, which could cause greater damage to businesses.
"The proposed new tariffs, if implemented, will have a direct negative impact on corporate profits. Although moderate, the indirect effects of rising cost inflation and slowing economic growth will become an increasingly headwind."
Setting aside the stock market, Barclays said that because tariffs inhibit economic growth, yields on long-term U.S. government bonds could decline. If the Trump administration imposes a 10% tariff on all U.S. imports and does not face retaliation, the U.S. dollar against a basket of other major currencies could appreciate by at least 3% to 4%.
Barclays strategists also pointed out that as the market lowers its expectations for economic growth, the impact of tariffs on the economy could ultimately lower U.S. bond yields, leading the Federal Reserve to further loosen its monetary policy.
They pointed out that if a 60% tariff is imposed on imported goods from china, and a 10% tariff is imposed on goods from other parts of the world, the real economy of the usa may suffer a blow of up to 1.4 percentage points.
They stated that in the credit market, the us investment-grade notes of industries such as pharmaceuticals, aerospace & defense, building materials, and retail are 'highly exposed' to the risk of tariff hikes, although the current prices do not reflect too much risk.
