The chart book we used during our conference call yesterday is available here.
What Might Trump’s Liberation Day Mean to the US Economy and Financial Markets?
The Impact of Tariffs on the US Economy
The table below shows our estimates of the impact on US GDP and inflation of tariffs and the decline in consumer sentiment and corporate sentiment.
Whether we will have a recession or not depends on the duration of this shock. If these levels of tariffs stay in place for several months and other countries retaliate, it will cause a recession in the US and the rest of the world.
We will be discussing the outlook for the economy and markets on a conference call today at 9 am EDT, you can register here.
Higher Policy Uncertainty Having a Negative Impact on Capital Markets
When policy uncertainty went up, capital markets activity started slowing down, with a decline in loan issuance, IPO activity, and M&A activity, see charts below.
Corporate Confidence Declining
Surveys of CEOs and CFOs show that corporate confidence has declined in recent months, see charts below.
Persistently Elevated Uncertainty Is a Downside Risk to the Outlook
If uncertainty stays elevated for an extended period, it will have a more negative impact on the economy, see chart below, which shows the impulse responses of a temporary and a permanent shock to economic policy uncertainty in a vector autoregression model with GDP and economic policy uncertainty.
