Some short-term consequences are already unavoidable. Some areas of the US will face shortages of imported goods, especially from Asian countries. More broadly, aggregate demand is likely to be depressed, as virtually every economic actor — including firms, investors, and households — takes a “wait-and-see” approach to investment and consumption. Welcome as it is, the China-US agreement to suspend prohibitive tariffs for 90 days does not fully resolve the uncertainty.
To call the current global economic environment “uncertain” grossly understates the confusion that has taken hold in recent months, and especially since US President Donald Trump introduced his “Liberation Day” tariffs in early April.
He paused them almost immediately, after capital markets — especially US bond markets — were thrown into turmoil. But no one, except perhaps some administration insiders, knows whether Trump will reactivate the tariffs, suspended for 90 days as affected countries attempt to negotiate new bilateral trade agreements with the US, sometime this summer, or replace them with a series of negotiated arrangements with trading partners. Nonetheless, we can predict some of the effects Trump’s policies will have on the US and global economies.
