Analysis: The magnitude of the reciprocal tariffs exceeds market expectations, exacerbating the risk of stagflation in the U.S. economy

ChainCatcher news, according to Jin10 data reports, China International Capital Corporation (CICC) stated that Trump announced "reciprocal tariffs" on April 2, exceeding market expectations. The reciprocal tariffs combine "carpet" tariffs with "one country, one tax rate," covering more than 60 major economies.

Calculations show that if these tariffs are fully implemented, the effective tariff rate in the U.S. could rise significantly by 22.7 percentage points from 2.4% in 2024 to 25.1%, surpassing the tariff levels after the implementation of the Smoot-Hawley Tariff Act in 1930.

CICC believes that reciprocal tariffs may increase uncertainty and market concerns, exacerbating the risk of "stagflation" in the U.S. Estimates indicate that tariffs could push U.S. PCE inflation up by 1.9 percentage points and reduce real GDP growth by 1.3 percentage points, although they may also bring in over $700 billion in fiscal revenue. In the face of "stagflation" risks, the Federal Reserve may have no choice but to wait and see, making it difficult to cut interest rates in the short term. This will further increase the risk of economic downturn and add downward pressure on the market.