Morgan Stanley categorizes the Trump administration’s macroeconomic policies into three main areas:
- tariffs,
- immigration,
- and fiscal measures.
The report anticipates that tariff policies will be among the first to be implemented. MS model an immediate imposition of 10% global tariffs and 60% China tariffs:
- core inflation in the U.S. could increase by roughly 0.9 percentage points
- GDP growth reduction by about 1.5 percentage points
But, MS add, the tariff policy might be introduced gradually instead, which would reduce the impacts by spreading them over time.
Morgan Stanley add that while the negative effects of tariffs would slow economic growth, the current strength of the U.S. economy means that an immediate recession would not necessarily follow.
Immigration:
- reducing immigration could restrict the labor supply in the U.S., thereby increasing inflationary pressure.
Fiscal policy:
- significant fiscal stimulus might not materialize until into 2025, with potential changes only taking place in 2026.