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JPMorgan Chase & Co. believes a proposed round of tariffs under Donald Trump’s potential re-election as U.S. president could have a bigger impact on consumer prices than during the Republican leader’s first term.
Trump imposes tariffs Serving as President of the United States from 2017 to 2021 is one of the biggest policies of his administration. His administration imposed tariffs on thousands of products worth approximately $380B in 2018 and 2019.
Trump has promised to adopt similar policies if re-elected – imposing a 60% tariff on all imports from China and a general tariff of 10% on all imports from the rest of the world.
The Republican presidential candidate sparred with now-President Joe Biden over the issue in the first televised debate hosted by CNN on Thursday. Trump claims his tariff proposals will not drive up consumer prices. Biden fired back, saying the average American spends $2.50 or more a year.
“The Trump 1.0 tariffs raised the trade-weighted average tariff from around 1.5% to just over 3%, raising an additional $60B in customs revenue. If this all falls on consumers, a basket of consumer prices will rise by approx. 0.3% %,” JPMorgan’s Michael Feroli said in a research note on Friday.
“The evidence from that period suggests that the transmission of consumer prices was incomplete. In other words, retailers and other businesses absorbed some of the higher tariffs. On the other hand, there is also evidence that domestic producers used some of the tariffs.” Increased market power drives prices higher, so we believe 0.3% is a reasonable estimate of the impact of these tariffs on price levels.
“Following similar reasoning, imposing a 60% tariff on all Chinese imports—a roughly 48% increase—would statically raise the price level by a little over $200B, increasing the price level by 1.1%. Performing similar calculations for a 10% general tariff, That works out to $280B, or about 1.5% of the price level,” Feroli added.
The analyst also noted that tariff announcements during Trump’s presidency “had a huge negative impact on the stock market.”
“This disconnect may reflect that trade models do not capture intangible factors such as policy uncertainty. In any case, there is considerable uncertainty in estimates of the growth impact,” Feroli said.
For investors looking to track the election through market tools, here are some politically driven Republican and Democratic ETFs:
- God Bless America ETF (YALL)
- American Conservative Value ETF (ACVF)
- Point Bridge America’s First ETF (MAGA)
- Democracy Market Core ETF (DEMZ)
- Abnormal Whale Subversion Democracy ETF (NANC)
- Unusual whale upends Republican ETF (KRUZ)
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