Comments from Citigroup’s Chief Economist via a Reuters report ICYMI. In brief:
- “Tariffs are a stagflationary shock to the U.S. economy”
- 40% to 45% chance of recession
- expects Q2 GDP up, driven by consumers making purchases ahead of tariffs coming into effect
- largest negative impact on U.S. growth is expected during H2
- market reaction to tariffs and Trump’s attacks on Federal Reserve chair Powell may have a long-lasting impact
- Trump’s attack on Powell shows an “implicit admission of these negative effects” associated with the tariffs
- Markets’ reaction since the announcement of tariffs shows a loss of confidence in U.S. policies
- “Should we mark down estimates of real GDP growth for the U.S. over the next three to five years? Maybe, if you think there is a lasting structural damage to the economy due to compromising of U.S. institutions”
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These remarks from Cit came before the latest policy reversals from Trump;
- Trump backing away from tariffs, backing away from firing Powell – will it last?
- Trump says he has no plans to Fire Federal Reserve Chair Powell
- Trump says he is going to be very nice to China, they have to make a deal
The Citi comments will be useful to refer back to if/when Trump reverses again.
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Updating yen and euro:
This article was written by Eamonn Sheridan at www.forexlive.com.
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