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The estimates show how Trump is playing with fire by expanding the trade war with China to include tariffs on a wide range of consumer goods, including video game consoles, televisions and clothing.
The tariffs will have a "significant" impact on the "US consumer / voter portfolio before the 2020 elections," said JPMorgan equity strategist Dubravko Lakos-Bujas, in a report sent Friday to bank clients.
He added that tariffs on China would eliminate most of the benefits that households have derived from Republican tax cuts.
The trade war casts a shadow on the economy
The fierce battle between the world's two largest economies is likely to provoke a serious slowdown or even a recession. This risk has caused turbulence on the stock market and pushed nervous investors to invest their money in bonds.
"The strongest economies can become vulnerable to recession as a result of protectionist policies and trade wars," said Kristina Hooper, Invesco's chief global market strategist, in a note to his clients on Monday.
Many US companies agree that the Trump government aims to ensure that China plays a fair game in trade, especially against non-trade barriers, such as forced transfers. of technology. However, the use of tariffs as a bargaining tool is causing more and more concern.
The first two sets of tariffs on China focused on spare parts and other intermediate goods. However, the impact on households is still significant, as these rates were 25%, said Kamal Tamboli, of JPMorgan, to CNN Business.
"Your average Joe will finally see the price rise," Tamboli said. "If you consider tax reform as a fiscal stimulus, it is clearly the opposite of that."
Some delayed rates
However, some goods from China should still be subject to a 10% tariff on September 1st. This includes food products such as peanuts, meat and cheese, a significant amount of footwear imported from China, clothing such as gloves and scarves, and consumer products such as smart speakers, printers and televisions. .
"There is no easy way to compensate consumers," wrote Lakos-Bujas.
He added that the high impact of the latest series of tariffs on US households meant that there was "a good chance" that the Trump administration would end up completely removing taxes. `
It is of the utmost importance that the trade war avoid infecting consumer spending, which is the bulk of the US economy.
Home Depot, Kohl support for rates
Corporate profits are already under pressure from the trade war.
JPMorgan lowered its estimate of S & P 500 profits in 2020 to reflect September 1 tariffs. He warned that profits would worsen if tariffs set for December 15 were applied.
"The US consumer is facing the impact of tariffs, trade talks are fluid, but consumer demand could be impacted," Carol Tome, chief financial officer at Home Depot, told analysts.
"Everyone has been very well prepared to face this problem," Kohl CEO Michelle Gass said Tuesday.
She has left the door open for price hikes, saying that Kohl's "will make very wise and surgical decisions as these problems arise."
Small businesses at risk
Large firms are more likely to absorb tariffs because they have more weight to raise prices, stronger balance sheets and more diversified supply chains.
JPMorgan warned, however, that tariffs could be a "significant barrier" for small businesses because they are less able to pass on costs to customers and suppliers. The company noted that small businesses make up almost half of the US economy and workforce.
"The unintended fallout of tariffs on the economy" and on corporate profits, Lakos-Bujas said, "could be much more serious" if small businesses were forced to cut jobs to face tariffs.
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