According to a report by JinShi, China International Capital Corporation (CICC) stated today that after calculation, if tariffs are fully implemented, the effective tariff rate in the United States will significantly increase by 22.7 percentage points from 2.4% in 2024 to 25.1%. This level exceeds the extreme scenario previously anticipated. For the United States, if the above-mentioned tariffs continue, the US economy will face even more severe risks of "stagflation". Tariffs are essentially government increases in taxes, with businesses and consumers bearing the costs, and their effect is equivalent to fiscal austerity. Trump's imposition of tariffs will lead to the transfer of currency from the private sector back to the government sector, resulting in a decrease in private sector net assets, suppression of investment and consumer spending, and an inevitable downturn in economic growth; Tariffs will also push up the price level and increase upward pressure on inflation in the short term. China International Capital Corporation (CICC) stated that without considering the impact of exchange rate fluctuations, calculations show that adding equivalent tariffs on top of previous tariffs may increase US PCE inflation by 1.9 percentage points, increase US fiscal revenue by $737.4 billion, and reduce US real GDP growth by 1.3 percentage points. Faced with the risk of stagflation, the Federal Reserve may find it difficult to cut interest rates in the short term. The difficulty of the Federal Reserve in cutting interest rates means a lack of "Federal Reserve put options," which will further increase the downside risk of the US economy and increase downward adjustment pressure on the market.
