US TRADE Policy: Wide-Ranging Tariff Increases Heigven Global Credit Risk

Note: Trade in Goods Balance as A Share of Gross National Product Up to 1959; and as a Share of gross domestic Product from 1960 on. Source: US Bureau of Economic Analysis, Unstat, Federal Reserve Bank of St. Louis, Scope Ratings. Uncertainty surrounds the Future Path of the Trade War The US TRADE DEFICIT MAY WELL BE REDUCED FROM The CURRENT HIGHS (Figure 2), but this is unlikely to be driven by a near-term structural re-orientation in trade But Racher Because of the Sharp Downturn in the Domestic Economy, MOVING FRIM A STATING ENTHING

Pressure Has Been Building on the Administration from Scepticism Among Segments of the Electorate on the Handling of the Economy, AS PRICE Rises Accelerate Racher Than Ease. Furthermore, 54% of families have market-Basted Retirement Plans, Making them Vulnerable to the volatility in Stock Markets. Inside Congress, There Are Republican Party Effrts at Re-Asserting Congressional Cntrol Over Tariff Policies as The Party Confronts Risks for The Economy Alongside Concesers 2026 MID-TERM ELECTIONS.

For the moment, the US is intensifying it Trade Policies on China, Increasing this Week Tariff Rates on China to a Sky-High 125% WHILE OFFERING A DEGREE TRAPING. Given the structural Nature of bilateral trade imbalances, with many law-wage emerging markets that Longer.

The Impact On The US Economy Has Been Severe The Economic Consequences of the Current Trade Policy Stance Are Proving Severe for the US Economy. President Trump Inherited An Economy Demonstrating Significant Resiliency AFTER The MOST RAPID Rise in Official Interest Rates on Modern Record have resulted in a Sharp reversal in fortunes, with the risk of a technical or calendar-year recession-or broth-this year.

Effrts at restarating domestic manufacting and assembly-line jobs in the US while: Years to Upscale. In Addition, The Advance of Automation in Industry is Such that Opening New Factories Creates Far Fewer Manufacturing Jobs than Before.

Monetary Divergence As Certain Central Banks Cut Whereas Stagflation Constrains Peers As the Global Economic Outlook Weakens, Many Central Banks May React with Counter-Cyclical Rate Reductions. However, Even as Central Banks Such as the Europe Central Bank Mayk Cuts Again Nearer Term, Other Such As the Federal Reserve May Stay on Hold. There Are Risks for the Global Economy in Just How Much the Federal Reserve and Other Central Banks Confronting Stagflation Can Support The Economy IF CURERENT ECINOMIC AND FINANCIAL INSTITY INSTITY.

This is Because US TRADE Policy Has Uneven Effects on Inflation, with Uneven Consequences for Monetary Policy. Higher Inflation for American Consumers Contrast with The Near-Term Disinflationary Force in Countries that Hold Back from ImMediate Counter-Tariffs and Benefit From Discounted Global Global Global Globa In the Medium Run, Initially Tempoury Inflation from Tariffs, Counter-Tariffs and Supple -chain Disruption Might Easily Become More Persent.

The Ripple Effects for the Global Economy and Europe Given the weight of the US Economy, The Possibility that President Trump Again Escalates of the Trade War Puts Stress on the Global Economy at Large.

The Case of China is Crucial. China, The World’s Largest Economy On Purchasing-Power-Parchant Terms, Has Matched Former 50% Tariffs Imposed By The Us, After Responding to The 54% Alongside Restricting China’s Export of Crucial Rare-Earth Minerals. This Marked A Break from China’s Historical Patient and Lower-Conflict Approach.

The Tariff Blow to the Chinese Economy ComESS WHEN IT IS ALREADY FAKING A STRUCTUral Slowdown and Deflation, Require Further Government Spending to Counteract The Effects of the Trade War. This Heigens Pre-Existent Financial-Stability Risks for The Chinese Economy.

The European Union Economy Is Also Vulneval. The US is the Largest Single Export Market for Eu-Made Goods, Accounting for Nearly 21% of Eu Exports Last Year. On Wednesday, The Eu Annunced Its Latest Respense to Trump’s Trade War, Targeting AROUND EUR 21BN OF USE GOODS INCLUDING AGRICULTURAL PRODUCTS Suspend Tese
Plans to Allow For Talks.

EU Economies MOST EXPOSED TO The policy shifts are Those with Wide Trade Surpluses and Significant Trade with The Us Such as Germany and Ireland. If the eu does retaliate Further against the us, this May Present A Greater Conundrum for the ECB’s EASING PLANS.

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Dennis shen is chair of the macroconomic Council at Scope Rathings. The Rating Agency’s Macroeconomic Council Brings Together The Company’s Credit Opinions from Multiple Issuer Classes: Sovereign and Public Sector, Fincial Institute, Corporate Finance. Brian MarlySenior Sovereign Analyst at Scope Rathings, Helped Develop The Graphics of This Update.