Potential reciprocal tariffs are set to boost U. S. inflation, weigh on global economy—CapEcon

President Trump’s latest tariff plans may not have a big impact on the global economy since steel and aluminum account for a small share of world trade, but potential reciprocal tariffs are still set to boost price pressures and weigh on the world economy in 2025, according to Capital Economics. Trade in aluminum, steel and iron makes up just 3% of world trade even including fabricated products like drums and cans, and these metals account for only a small share of total exports to the U.S., said Jennifer McKeown and Hamad Hussain, economists at Capital Economics.
Stocks slumped Friday when President Donald Trump signaled he’d move this week to implement reciprocal tariffs on U.S. trading partners. They were bouncing back Monday, even with Trump adding on Sunday that he intends to impose 25% tariffs on all steel and aluminum imports into the U.S. And it all follows last Monday’s stumble that came as Trump threatened the U.S. and Mexico with 25% tariffs, only to postpone them after last-minute talks.
Why are stocks proving so resilient? Sameer Samana, head of global equities and real assets at Wells Fargo Investment Institute, argued in a Monday note that it’s because investors “appear to us to be viewing them as part of a portfolio of policies that includes extending tax cuts, reducing regulation, and generally fostering a pro-business environment.” Markets also view them as “transactional and part of a negotiation, which means that ultimately, we expect tariff policy to be targeted and mindful of the negative consequences of tariffs on the broader economy,” Samana