CICC: The equivalent tariff rate exceeds market expectations, exacerbating the risk of "stagflation" in the US economy

PANews reported on April 3rd, according to Jinshi, that CICC pointed out Trump announced "reciprocal tariffs" on April 2nd, exceeding market expectations. The reciprocal tariffs adopted a combination of "carpet-style" tariffs and "one country one tax rate", covering more than 60 major economies. Calculations show that if these tariffs are fully implemented, the effective tariff rate in the United States may rise sharply from 2.4% in 2024 by 22.7 percentage points to 25.1%, which will exceed the tariff level after the implementation of the Smoot-Hawley Tariff Act in 1930.

CICC believes that reciprocal tariffs may increase uncertainty and market concerns, and exacerbate the risk of economic "stagflation" in the United States. Estimates show that tariffs may push up US PCE inflation by 1.9 percentage points and reduce real GDP growth by 1.3 percentage points, although it could also bring more than $700 billion in fiscal revenue. Faced with the risk of stagflation, The Federal Reserve can only choose to wait and see, making it difficult to cut interest rates in short term.This will further increase economic downturn risks and add pressure for market downward adjustment.