How a Trade War Might Play Out

Bloomberg Economics predicts “three waves of tariff hikes, starting in summer 2025, with levies on China ultimately tripling by the end of 2026 and a smaller hike on the rest of the world — focused on intermediate and capital goods that don’t directly impact consumer prices. The combined impact would be a tripling of average US tariffs to almost 8% by the end of 2026.”

“If that’s how things play out, US imports and exports of goods will drop from 21% of the global total today to 18%, including a plunge in US-China trade. US growth gets dinged, inflation faces fierce cross currents from higher tariffs and a stronger dollar, bullish stock markets have a bearish hurdle to clear and unemployment rises. But the extreme effects of the sky-high universal tariffs Trump floated on the campaign trail are avoided.”