Donald Trump could change his trade policies once he takes office next January, since the imposition of tariffs on his trading partners would end up increasing inflation in the United States, Citi stated.
“We suspect that Trump’s internal and external policies may be quite different from his campaign speeches,” the US financial group said in a report.
Trump promised 25% tariffs on imports from Mexico and Canada, as well as tax incentives for companies that prefer to invest in the United States.
In this regard, Citi explained that if they establish tariffs and tough measures against illegal immigration, the prices of goods will also probably rise and the supply of labor will be squeezed, which will translate into higher inflation, one of the main issues. of the Republican campaign.
Citi estimated that headline US inflation will fall to 2% during the first half of next year, thanks in part to a “strong dollar” and cheaper imports.
However, he noted that there is caution about Trump’s political decisions: “Of course, Trump’s agenda carries risks.”
“As in his first administration, President Trump will try to boost growth while trying to prevent greater American demand from simply leaking abroad as the United States consumes more imports,” the bank noted.
Trump vs China
Citi expected Trump to implement some version of the 60% or higher tariffs on imports from China that he quickly imposed and promised in his election campaign.
“Only with time will we know if this is a negotiation tactic to achieve other objectives related to China,” he said.
However, the firm noted that it is skeptical that much more than a change in production and trade between the two countries will be achieved.
He explained that some US companies would almost inevitably face harsh retaliatory measures from the Asian giant: “Severe and widespread US tariffs would represent a clear threat to Chinese exports, which have been a rare bright spot for its economy lately.”
He added that he will watch closely to see whether China becomes bolder or more timid in its efforts to boost growth at home.
Regarding GDP forecasts for 2025, Citi noted that the US economy could grow 2.4%, the Chinese economy would expand 5.2%, while global GDP would advance 2.9%.
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