Trump has used tariffs as a bargaining tool and will probably do so again, said Joshua Meltzer of the Brookings Institution.
But China is signaling pushback and Europe is more prepared policy-wise, he told AFP.
Governments appear to have “reached a similar conclusion that they are better off threatening retaliation at least at this stage, rather than capitulating,” Meltzer added.
EY chief economist Gregory Daco warned that tariffs and other measures could tip the world economy into stagflation — stagnation with elevated inflation — if pursued to their fullest.
Trump’s other promises include an across-the-board levy of 10 percent or more, with a steeper rate on China.
Growth risks
Domestically, Trump has touted tariffs as a means to protect US manufacturing, coupled with policies like tax cuts and deregulation that he says will spur growth.
His Treasury secretary nominee Scott Bessent said in a November interview that tariffs would not be inflationary even if there were a “one-time price adjustment.”
But Daco estimates higher import costs could lift consumer price inflation by 1.2 percentage points after a year.
“The long-run impact is that it shrinks the US economy and it reduces the value of our incomes,” said Erica York of the Tax Foundation.
While the Congressional Budget Office estimated a uniform 10 percent hike and added 50 percent on Chinese goods would slash deficits, this could also lower real GDP.
Emergency?
Analysts expect Trump could implement tariffs quickly using the International Emergency Economic Powers Act.
This allows the president to regulate imports during a national emergency, although it could be hindered by lawsuits.
A tried-and-tested method would be the trade law, with Trump previously using Section 301 as justification for tariffs.
But this takes more time as it calls for a government probe.
He could also use Section 232 of the Trade Expansion Act to hike tariffs on goods with national security implications.
© 2025 AFP