'4th Quarter Negative Growth' Warning from Wall Street... U.S. Economists Also Say 'Reciprocal Tariffs Are a Big Mistake'

Trump Tariff-Driven Perfect Storm... Stagflation Looms

Economic Growth Forecasts Lowered Across the Board

"Inflation and Unemployment Rates to Rise Until Next Year

Could See Negative Growth for Two Consecutive Quarters This Year"

Concerns Over Sharp Price Increases Due to High Tariffs

Inflation Forecast at 'Highest in Over Three Years'

UK GDP to Shrink by 1.5%P, China by 1.3%P

Concerns are spreading that U.S. reciprocal tariffs will dampen corporate investment and private consumption, leading the global economy into a recession. The view is gaining traction that tariffs will be passed on to consumer prices, potentially dragging the U.S. economy into stagflation (a situation where economic stagnation and inflation occur simultaneously).

◇ Apple and Nike Hit Hard by Tariffs

According to Bloomberg News, Wall Street investment banks rushed to lower their U.S. real GDP growth forecasts on the day following the reciprocal tariff announcement, the 3rd (local time). Jonathan Pingle, chief economist at UBS, predicted, "Inflation and unemployment rates in the U.S. will rise until 2026," and "There will be negative growth for two consecutive quarters this year." Barclays also forecasted that the U.S. economy could see -0.1% negative growth in the fourth quarter compared to the previous quarter.

Nomura Holdings expected the U.S. economic growth rate to be just 0.6% this year, a significant drop from the 2.1% forecast at the end of last year. Deutsche Bank and Bank of America (BofA) also analyzed that the impact of reciprocal tariffs could reduce U.S. GDP growth by 1 to 1.5 percentage points. BofA had predicted a 2.4% growth for the U.S. economy by the end of last year.

The market views reciprocal tariffs as effectively acting as a 'tax increase', which will dampen corporate investment and consumer sentiment. JP Morgan Chase assessed that this reciprocal tariff would result in a tax increase effect of $660 billion (about 947 trillion won), calling it "the largest tax increase since 1968."

◇ IMF: "Significant Risk to Global Economy"

U.S. companies, which have expanded their supply chains globally based on free trade order, are expected to be the biggest victims of this reciprocal tariff. According to the Federal Reserve Bank of St. Louis, the share of imports in U.S. GDP has expanded more than fourfold from 3.1% in 1947 to 13.9% last year. As leading U.S. companies like Apple and Nike moved their production bases to countries with cheaper labor like China and Vietnam, the import share increased. With the Trump administration imposing high tariffs on China (34%) and Vietnam (46%), Apple and Nike's stock prices plummeted by 9.25% and 14.44%, respectively, on this day.

In the U.S. economic community, criticism is spreading that "President Trump's reciprocal tariffs are a big mistake." Brad Gerstner, CEO of Altimeter Capital, an investor in innovative companies, said he spoke with about 10 CEOs at the Business Roundtable, which includes Apple, BofA, Boeing, and FedEx, and "Executives believe these tariffs are excessive and will deal a significant blow to the U.S. economy."

Additionally, the sharp price increases due to high tariffs are raising concerns about stagflation. Nomura Securities evaluated that the personal consumption expenditure (PCE) inflation rate, which was 2.5% in February, could rise to 4.7% by the end of the year due to the tariffs. According to the Financial Times (FT), the one-year inflation swap reflecting the year-end inflation forecast soared to 3.5%, the highest in over three years.

Red flags are also being raised for economic growth rates in various countries. Barclays warned that the UK, which was already experiencing slowing growth, could fall into a recession. It suggested that GDP could decrease by 1.5 percentage points, exceeding the 1% economic growth rate forecast by the Office for Budget Responsibility this year.

China's Kaiyuan Securities also projected that China's GDP could decrease by 1.3 percentage points due to the tariff impact. It estimated that China's exports to the U.S. would decrease by 30%, and total exports by 4.5%. China set its economic growth target at 5% this year.

Vietnam, which faces the highest tariff rates among U.S. trade partners, could see more than 5% of its GDP evaporate, according to ING Group. ING projected that if a 46% tariff is applied to Vietnam's exports to the U.S., which account for about 12% of its economy, 5.5% of its GDP would be at risk.

Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF), warned that "President Donald Trump's reciprocal tariff policy poses a significant risk at a time when global economic growth is slowing."

Reporter In-Yeop Kim inside@hankyung.com