Trump's planned tariffs could trigger substantial inflation, warns Nomura

The financial services group Nomura has recently published a report warning of significant inflationary and economic consequences if the 10 percent tariff proposed by Donald Trump is implemented across the board. Nomura emphasized that a comprehensive tariff approach, such as the one Trump intends, would be markedly more inflationary than the targeted tariffs of his first term. The previously imposed tariffs, which were limited to specific sectors, showed only minimal impact on inflation. An across-the-board tariff, by contrast, could increase core inflation by up to one percentage point, as a wide range of goods would be affected without unaffected countries serving as a buffer. Unlike targeted tariffs, which had little impact on retail prices due to margin adjustments and increased imports from exempt countries, across-the-board tariffs would cause prices to rise significantly, according to Nomura. The firm's analysis drew comparisons to Trump's tariffs on washing machines in 2018, which resulted in noticeable price increases for both consumers and producers. According to Nomura's calculations, U.S. distributors could absorb a substantial portion of the cost increases from the proposed tariffs, but would have less leeway to do so with across-the-board tariffs. Another economic effect could manifest in the form of tax increases and adverse impacts on economic growth. Higher tariffs could act as a tax on domestic residents, as affected exporters are unlikely to lower their sales prices prior to the imposition of tariffs, Nomura explained. Looking ahead, Nomura expects that a second Trump administration might continue its aggressive trade course. In addition to a comprehensive 10 percent tariff, Trump also has a 60 percent tariff on Chinese goods in view. If Trump is re-elected, we expect his confrontational trade strategies to continue, although we also foresee some exceptions for key trading partners and negotiated bilateral agreements, Nomura stated.