LONDON (Reuters) – U.S. President Donald Trump’s pledge to impose a universal 10% tariff on imports and 60% on Chinese goods is likely only a starting point for negotiations, ratings agency S&P Global said in a note on Thursday.
Tariffs are unlikely to be imposed at those levels, but were Trump to follow though, the universal 10% tariff could add as much as 1.8 percentage points to U.S. inflation, the report said. It added that this would trigger a resurgence in inflation in the first year rather than having an ongoing inflationary effect, and hit output by as much as 1 percentage point.
The increase in tariffs to 60% on China could add as much as 1.2 percentage points to inflation and the hit to output could be around 0.5 percentage points, S&P said.
S&P said it could lower its rating on the U.S., currently at AA+, in the next two-three years if political developments weigh on the strength of American institutions, jeapordize the dollar as the world’s leading reserve currency, or if the already-high U.S. deficit rises further.
S&P’s current fiscal projections assume the government deficit will remain around current levels, it added.
(Reporting by Yoruk Bahceli; editing by Dhara Ranasinghe)
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