On March 19, the Financial Associated Press reported (Editor: Liu Rui) that recently, Goldman Sachs warned in its latest macro research report "Everything about the Decline of American Exceptionalism" that Trump's tariffs are reshaping America's trade policies and agreements, and it is expected that the effective tax rate in the USA will increase by an average of 10 percentage points this year, the highest level in decades, which is about five times the level during Trump's previous term.

The effective tax rate in the USA may increase by 10 percentage points this year.

Goldman Sachs Analyst Jenny Grimberg and others wrote in the report:

"It is expected that the average tariff rate in the USA will rise by 10 percentage points this year, which lowers our GDP growth forecast for the USA in 2025 to 1.7%, down from 2.4% at the beginning of this year, marking the first time in the past two and a half years that we have given a lower economic growth expectation compared to market consensus."

Currently, the market has revised down its expectations for economic growth in the USA - according to our estimates, the adjustment is quite significant -$S&P 500 Index (.SPX.US)$recently entering the corrective Range is clear evidence.

Goldman Sachs expects that the effective tax rate in the USA will soar.

In fact, China International Capital Corporation recently also provided similar forecasts.

Analysts at China International Capital Corporation calculate that the effective tariff rate in the USA for 2024 is 2.41%. However, assuming the USA imposes reciprocal tariffs on its top 15 trading partners (excluding mainland China, Taiwan, and Japan), the rate increase would equal the difference between the current weighted most favored nation tariff rates of its trading partners and the USA. Assuming that import volumes remain unchanged, the result is that the effective tariff rate in the USA could rise to 5.46%.

If value-added tax is added, the rate increase will be significantly larger. Assuming that import volumes remain unchanged, the result is that the effective tariff rate in the USA will further increase by 8.76 percentage points to 13.07%.

Bullish on European Stocks and China AH Stocks.

Although Goldman Sachs still expects the US stock market to continue rising, it has recently lowered its target for the S&P 500 Index from 6500 to 6200 points and reduced its earnings growth expectations per share for 2025 from 9% to 7%. Given the significant uncertainty of US policies, Goldman Sachs has also moderately lowered its valuation expectations.

In sharp contrast to the recent decline in US stocks, the market has significantly raised its expectations for economic growth in Europe, driving strong performance in European Assets.

Goldman Sachs believes that this performance will continue. Specifically, Goldman Sachs believes that given the substantial valuation gap that still exists between US and European stock markets, European stocks can continue to outperform Large Cap.

Goldman Sachs recently raised its earnings growth forecasts per share for Europe in 2025/2026/2027 to 4%/6%/6% (from 3%/4%/4%), partly because we anticipate that increased defense spending in Europe will drive economic growth.

Goldman Sachs believes that in light of the Bullish Signals from the European Council and Germany, Europe has taken a hopeful step towards increasing spending. In Germany, the coalition government has reached a preliminary agreement on the recently announced large-scale fiscal plan.

Goldman Sachs also mentioned that, in addition to Europe, China and the broader Emerging Markets Stocks have performed relatively well this year, and Goldman Sachs believes there is further room for growth.

Goldman Sachs believes that the decline of American exceptionalism further underscores the reasons for regional diversification, continuing to be Bullish on defense, Technology, and Medical Care Stocks in Europe, as well as A Stocks and Listed in Hong Kong in China, along with certain Stocks in Emerging Markets.

Editor/Rocky