Since March 2025, global markets have been experiencing heightened volatility under the looming shadow of U.S. tariff policies. Recent data indicates that several senior economic advisers to President Trump have proposed a new reciprocal tariff plan. This move has not only disrupted import-export businesses and market sentiment but has also triggered a ripple effect across global supply chains, significantly altering the landscape of international trade.
Leading financial institutions have conducted in-depth analyses of the potential impact of tariffs on markets. The general consensus is that tariffs are increasing uncertainty and could negatively affect global economic growth. Particularly, Goldman Sachs and BCA Research have issued bearish forecasts, predicting a decline in the S&P 500 index.
Tariffs are expected to have a significant impact on industries such as automobiles, footwear, and apparel, which may face rising costs and suppressed market demand. Meanwhile, defensive stocks like consumer staples could perform better due to the relative stability of their demand. In contrast, technology and cyclical stocks may face heightened pressure due to increased market volatility.
Citigroup: Rising Economic Uncertainty and Stagflation Concerns
Citigroup believes that the tariff policy amplifies economic uncertainty and exacerbates concerns over stagflation. In the short term, the market may exhibit a knee-jerk reaction, with a stronger dollar and downward pressure on both U.S. stocks and Treasury yields. In the long run, the vulnerability of the U.S. economy may be underestimated.
The U.S.'s relative advantage over other economies is diminishing, as seen in its fiscal deficit compared to Europe's more flexible stance, the declining dominance of U.S. tech stocks, and cracks appearing in America's economic growth narrative. If major trading partners retaliate with equivalent tariffs, the U.S. GDP growth rate could decline by 0.5%-0.7% in the first year, with prolonged difficulty in returning to previous growth levels.
Morgan Stanley: 10% Tariffs on Chinese Goods and Wider Trade Restrictions
Morgan Stanley analysts expect the U.S. to impose an additional 10% tariff on Chinese imports and extend tariffs to certain products from Europe and Asia, including Vietnam. The automotive, footwear, and apparel industries face the biggest challenges, as their ability to raise prices without losing demand is limited.
Tariffs on vehicles and auto parts from Mexico and Canada could push car prices beyond consumer affordability, dampening market demand. Meanwhile, potential tariffs on Vietnamese goods would negatively impact footwear companies.
Goldman Sachs: Higher Tariffs and Increased Recession Risk
Goldman Sachs forecasts that the average U.S. tariff rate will rise to 15% in 2025, significantly higher than the previously expected 10%. Consequently, Goldman has increased the probability of a U.S. recession in the next 12 months from 20% to 35%.
While tariffs may temporarily strengthen the dollar and improve the trade deficit, they could ultimately weigh on economic growth. As a result, Goldman has lowered its year-end target for the S&P 500 from 6,500 to 6,200 points.
Barclays: Global Growth at Risk, Preference for Fixed Income Over Equities
Barclays warns that uncertainty surrounding Trump’s tariff plans could slow global economic growth to 2.9% in 2025, down from 3.3% in 2024. With supply chains disrupted, prices are likely to rise, demand to weaken, and growth to slow. Strategists noted that they are "more uneasy about risk assets than they have been in quarters" and now recommend a preference for core fixed-income assets over equities.
BCA Research: Recession Risks and Inflationary Pressures
BCA Research warns that both the U.S. and other major economies may slip into recession in 2025, with tariff-induced inflation limiting central banks’ ability to respond, thereby prolonging economic downturns.
Although the labor market remains strong for now, BCA Research cautions that this could be a "false comfort." They expect the S&P 500 to drop to 4,450 points by year-end.
📉 Sectors at Risk (Bearish Stocks)
Automobile Industry ( $General Motors(GM)$, $Ford(F)$, $Tesla Motors(TSLA)$ : Higher costs may lead to price hikes and reduced demand.
Footwear & Apparel ( $Nike(NKE)$ , $adidas AG(ADDYY)$ , $Lululemon Athletica(LULU)$ ): Limited pricing power, profit margins squeezed.
Technology Stocks ( $Amazon.com(AMZN)$ , $NVIDIA(NVDA)$ ): Slower economic growth raises caution over high-valuation tech stocks.
Export Manufacturing ( $Boeing(BA)$ , $Caterpillar(CAT)$ ): Tariffs could reduce export orders and hurt profitability.
📈 Sectors Likely to Benefit (Bullish Stocks)
Defensive Stocks ( $Procter & Gamble(PG)$ , $Wal-Mart(WMT)$ , $Coca-Cola(KO)$): Consumer staples remain stable amid market volatility.
Energy Stocks ( $Exxon Mobil(XOM)$ , $Chevron(CVX)$ , $Occidental(OXY)$ ): Supply chain disruptions could drive energy prices higher, benefiting oil and gas stocks.
Gold & Fixed Income Assets ( $SPDR Gold Shares(GLD)$ , $iShares 20+ Year Treasury Bond ETF(TLT)$ ): Safe-haven assets may attract capital inflows.
As the world awaits the official announcement on April 2, investors will be closely watching the markets for immediate reactions and longer-term shifts in investment strategies.
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Be prepared