Morgan Stanley, led by Michael Zezas, released a report addressing potential scenarios of U.S. tariff policies and their impact on global markets.
U.S. Tariff Policy Scenarios
The report outlines three main scenarios for U.S. tariff policy: extension of tariff suspension, tactical escalation, and mild adjustments. These decisions are influenced by ongoing trade negotiations.
Market Impacts from Tariff Increases
Potential tariff hikes may lead to inflation pressures and slowed economic growth. Morgan Stanley Research noted, "Tariff policy remains a key variable in the market, and an aggressive tariff path could exacerbate the downside risks to the economic outlook and affect GDP growth expectations for 2025/2026."
Implications for the Federal Reserve and Economy
Tariff escalations from 2018 to 2020 resulted in increased volatility in crypto markets. As a result of aggressive tariffs, rate cuts by the Federal Reserve may be delayed, emphasizing the need for close monitoring of policy shifts. Michael Gapen, U.S. Chief Economist at Morgan Stanley, explained, "Tariff-induced inflation will keep the Fed on the sidelines, and as a result, we are no longer anticipating a June rate cut."
Thus, potential changes in U.S. tariff policies will have significant implications for the market, economic growth, and financial strategies, necessitating responses from market participants to current conditions.
