“On a static basis, today’s announcement would raise just under $400 billion in revenue, or about 1.3 percent of GDP, which would be the largest tax increase since the Revenue Act of 1968. We estimate that today’s announced measures could boost PCE prices by 1-1.5 percent this year, and we believe the inflationary effects would mostly be realized in the middle quarters of the year. The resulting hit to purchasing power could take real disposable personal income growth in 2Q-3Q into negative territory, and with it the risk that real consumer spending could also contract in those quarters. This impact alone could take the economy perilously close to slipping into recession.”
“And this is before accounting for the additional hits to gross exports and to investment spending. Headlines about retaliatory measures by US trading partners are already coming out, and we expect to learn more in coming days. The somewhat confusing nature of today’s news, coupled with uncertainty over how long these tariffs will remain in place, should make for an even less friendly environment for investment spending (though that is one way to narrow the saving – investment imbalance and hence narrow the current account deficit). We plan to revisit our forecast later this week,” writes some egghead at JP Morgan Chase in an “analysis note” or something.