US Tariffs Update and Economic Implications
Insights by Paul Diggle
Chief Economist at Aberdeen, Paul Diggle, provides a thorough assessment of the recent updates on US tariffs and their potential consequences. He highlights the likelihood of additional sector-specific tariffs being imposed on products like semiconductors, copper, lumber, and pharmaceuticals. The executive order mentioned specific products, hinting at imminent tariff adjustments.
Factors to Consider
Diggle notes that the impact on the US economy could lead to stagflation, depending on factors such as the duration perception of tariffs, firms’ ability to absorb price increases, currency fluctuations, and market reactions. A general rule suggests that a 1% rise in the US average tariff rate could increase the price level by 0.1% and reduce GDP by 0.05-0.1%.
Federal Reserve Dilemma
Discussing the Federal Reserve’s challenge, Diggle mentions the evolving stance on tariffs’ inflationary effects. Despite previous claims of transitory influences, the recent surge in inflation expectations poses a dilemma for the Fed.
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