Being a tariff man may come with some consequences for the US economy.
That’s the warning from former Trump communications director and Skybridge Capital founder Anthony Scaramucci.
“I don’t think this sort of blanket approach is the right way to do it, and I think he’s [Trump] is going to put us into a recession, frankly,” Scaramucci told me at the Bitcoin Investor Week conference (video above).
“Remember tariffs are a tax, and they’re primarily a consumer tax,” Scaramucci added. It’s “a consumption tax, sort of like a VAT [value-added tax]. And that’s a regressive tax. So what ends up happening is the poor people — it eats up more of their disposable income than any other income group.”
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Trump appears to be laser-focused on implementing more tariffs, even if it will cause pain to the economy. He’s set to impose 25% tariffs on Mexico and Canada this week after a 30-day pause. He also plans to hit China with another 10% tariff on top of the 10% he put in place several weeks ago.
The administration has also levied a 25% tariff on all imported steel.
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“Tariffs are actually — we’ve had a lot of experience with them. They’re an act of war, to some degree,” Berkshire Hathaway (BRK-B) CEO Warren Buffett said in a new CBS News interview on Sunday. “Over time, they are a tax on goods. I mean, the Tooth Fairy doesn’t pay ’em! And then what? You always have to ask that question in economics. You always say, ‘And then what?’”
The potential impact of tariffs varies.
The Tax Foundation estimated tariffs on Mexico, Canada, and China could collectively shrink US GDP by 0.4%. They would create a tax of more than $800 per US household in 2025.
EY chief economist Greg Daco estimated US GDP would contract by 1.5% in 2025 and 2.1% in 2026 if the tariffs kick in, as they would “dampen” consumer spending and business investment. Inflation would rise by about 0.7% in the first quarter, Daco projected.
Concerns about the tariff impact are beginning to surface.
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The Conference Board’s Consumer Confidence Index for February dropped for the third straight month. It notched the largest monthly decline since August 2021 as expectations for inflation — in part fueled by tariff fears — climbed.
The board found there was a sharp increase in the mentions of trade and tariffs, back to a level unseen since 2019.
“A full-scale US trade war against the world would deliver a ‘stagflationary shock’ to the US economy,” Apollo Global chief economist Torsten Sløk told me on Yahoo Finance’s Opening Bid podcast. “So the short-run effects of a trade war [are] certainly painful. Even this might be small numbers, but it’s certainly something that’s negative.” (Disclosure: Yahoo Finance is owned by Apollo Global Management.)