Businesses and consumers remain in limbo over what will happen next with President Donald Trump\u2019s tariffs, but a top economist sees a way to leave them in place and still deliver a \u201cvictory for the world.\u201d<\/p>\n
In a note on Saturday<\/a> titled \u201cHas Trump Outsmarted Everyone on Tariffs?\u201d, Apollo Global Management Chief Economist Torsten Sl\u00f8k laid out a scenario that keeps tariffs well below Trump\u2019s most aggressive rates long enough to ease uncertainty and avoid the economic harm that comes with it.<\/p>\n \u201cMaybe the strategy is to maintain 30% tariffs on China and 10% tariffs on all other countries and then give all countries 12 months to lower non-tariff barriers and open up their economies to trade,\u201d he speculated.<\/p>\n That comes as the 90-day pause on Trump\u2019s \u201creciprocal tariffs,\u201d which triggered a massive selloff on global markets in April, is nearing an end early next month.<\/p>\n The temporary reprieve was meant to give the U.S. and its trade partners time to negotiate deals. But aside from an agreement with the U.K. and another short-term deal with China to step back from prohibitively high tariffs, few others have been announced. <\/p>\n Meanwhile, negotiations are ongoing with other top trading partners. Trump administration officials have been saying for weeks that the U.S. is close to reaching deals.<\/p>\n On Saturday, Sl\u00f8k said extending the deadline one year would give other countries and U.S. businesses more time to adjust to a \u201cnew world with permanently higher tariffs.\u201d An extension would also immediately reduce uncertainty, giving a boost to business planning, employment, and financial markets.<\/p>\n \u201cThis would seem like a victory for the world and yet would produce $400 billion of annual revenue for US taxpayers,\u201d he added. \u201cTrade partners will be happy with only 10% tariffs and US tax revenue will go up. Maybe the administration has outsmarted all of us.\u201d<\/p>\n Sl\u00f8k\u2019s speculation is notable as he previously sounded the alarm on Trump\u2019s tariffs. In April, he warned tariffs have the potential to trigger a recession by this summer<\/a>.<\/p>\n Also in April, before the U.S. and China reached a deal to temporarily halt triple-digit tariffs, he said the trade war between the two countries would pummel American small businesses<\/a>.<\/p>\n More certainty on tariffs would give the Federal Reserve a clearer view on inflation as well. For now, most policymakers are in wait-and-see mode, as tariffs are expected to have stagflationary effects. But a split has emerged.<\/p>\n Fed Governor Christopher Waller\u00a0said Friday that economic data could justify lower interest rates<\/a> as early as next month, expecting only a one-off impact from tariffs. But San Francisco Fed President Mary Daly also said Friday a rate cut\u00a0in the fall<\/a> looks more appropriate, rather than a cut in July.<\/p>\n Still, Sl\u00f8k isn\u2019t alone in wondering whether Trump\u2019s tariffs may not be as harmful to the economy and financial markets as feared. <\/p>\n Chris Harvey, Wells Fargo<\/a> Securities\u2019 head of equity strategy, expects tariffs to settle in the 10%-12% range<\/a>, low enough to have a minimal impact, and sees the S&P 500 soaring to 7,007, making him\u00a0Wall Street\u2019s biggest bull<\/a>.<\/p>\n He added that it\u2019s still necessary to make progress on trade and reach deals with big economies like India, Japan and the EU. That way, markets can focus on next year, rather near-term tariff impacts.<\/p>\n