Trump's Tariff Proposal

LONDON (Reuters) – U.S. President Donald Trump's pledge to impose a universal 10% tariff on imports and 60% on Chinese goods is likely only a starting point for negotiations, according to a note from ratings agency S&P Global on Thursday.

Tariffs are unlikely to be imposed at those levels. However, if Trump follows through, the universal 10% tariff could increase U.S. inflation by as much as 1.8 percentage points. The report indicated that this increase would likely trigger a resurgence in inflation during the first year rather than sustaining ongoing inflation, potentially affecting output by about 1 percentage point.

Regarding the 60% tariff on China, S&P noted it could add as much as 1.2 percentage points to inflation, with a corresponding hit to output around 0.5 percentage points.

Furthermore, S&P stated it might lower its rating on the U.S., currently at AA+, within the next two to three years if political developments undermine the strength of American institutions, jeopardize the dollar's status as the world's leading reserve currency, or if the already-high U.S. deficit increases further. S&P's current fiscal projections assume the government deficit will remain stable around current levels.