Economist Proposes Tariff Plan to Benefit All

A top economist suggests a path to maintaining tariffs while also benefiting the global economy. This plan aims to reduce uncertainty for businesses and potentially generate substantial revenue for the U.S. government.

Tariff Strategy Unveiled

In a recent note, Torsten Sløk, Chief Economist at Apollo Global Management, outlined a strategy. This approach involves keeping tariffs on China at 30% and 10% for all other nations. He proposes giving countries a year to lower non-tariff barriers and liberalize their economies.

Maybe the strategy is to maintain 30% tariffs on China and 10% tariffs on all other countries and then give all countries 12 months to lower non-tariff barriers and open up their economies to trade.

This would seem like a victory for the world and yet would produce $400 billion of annual revenue for US taxpayers.

Maybe …

— Torsten Slok (@torstenslok) June 22, 2024

“This would seem like a victory for the world and yet would produce $400 billion of annual revenue for US taxpayers,”

—Torsten Sløk, Chief Economist, Apollo Global Management

According to the U.S. Department of Commerce, in 2023, the total value of U.S. imports of goods from China was $427 billion (U.S. Census Bureau). This highlights the significant trade relationship at stake.

Potential Impacts and Perspectives

The current 90-day pause on reciprocal tariffs is set to expire next month. This temporary measure aimed to facilitate trade negotiations, yet few significant agreements have materialized.

Sløk previously expressed concerns over tariffs, predicting a potential recession and harm to small businesses. However, his current stance suggests a shift, possibly viewing them as less damaging.

Furthermore, more clarity on tariffs could provide the Federal Reserve with a clearer understanding of inflation. While some Fed officials, like Christopher Waller, suggest potential rate cuts, others, such as Mary Daly, favor delaying such actions.

Chris Harvey, head of equity strategy at Wells Fargo Securities, anticipates tariffs settling around 10%-12%. He believes that these levels would have a minimal impact. Harvey is also optimistic about the S&P 500, forecasting it will soar to 7,007.

The focus remains on reaching deals with significant economies, like India, Japan, and the EU. This would allow markets to look beyond immediate tariff effects and anticipate future economic trends, as stated by Harvey.