Morgan Stanley economists estimate that the implementation of the proposed Republican tariffs could negatively impact U.S. economic growth and weaken employment. In a recent report, economist Seth Carpenter noted that if the tariffs are fully implemented, inflation rates are expected to accelerate in the short term, and GDP growth will be delayed.
The report highlights that historically, the inflationary effects of tariffs occur rapidly. According to their model, the Personal Consumption Expenditures (PCE) price index, which is favored by the Federal Reserve, could increase by 0.9 percentage points within four quarters.
Morgan Stanley also indicated that higher tariffs would suppress investment spending and consumption, counteracting the positive impact of reduced imports on GDP. They project that GDP growth could slow by 1.4 percentage points over several quarters.
