Goldman Sachs: We expect Trump's tariff increase to fuel USD strength in 2025

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Goldman Sachs: We expect Trump's tariff increase to fuel USD strength in 2025

Goldman Sachs anticipates President-elect Trump's proposed tariff hikes--expected to be double the size of the previous round--combined with tax cuts, to significantly bolster the USD in 2025, despite initial market volatility.

Key Points:

• Aggressive Tariff Strategy:

  • President Trump's proposals target China, Mexico, and Canada, signaling his preference for tariffs as a unilateral and impactful policy tool.
  • Goldman Sachs economists project tariff increases to be roughly double the scale of previous measures, implemented rapidly in 2025, with the risk of further escalations.

• Tax Cuts Supporting USD Strength:

  • Alongside tariff hikes, Trump's tax policies are expected to stimulate short-term economic growth, further reinforcing Dollar strength over the coming year.

• Broader Policy Packages Expected:

  • Initial tariff announcements may evolve into comprehensive measures, including additional taxes and investigations, increasing the market's sensitivity to these developments.
  • The resulting policy mix could deepen the Dollar's upward momentum.

• Sustained Market Impact:

  • While initial market reactions to tariff announcements have been short-lived, Goldman Sachs expects subsequent policy implementations to generate prolonged impacts, making it harder for markets to shake off the effects.

Conclusion:

Goldman Sachs underscores that Trump's aggressive economic policies--doubling tariff hikes and implementing tax cuts--will likely provide robust support for the USD in 2025. The evolving nature of these policies points to continued Dollar strength, as the broader market absorbs their implications.

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                This article was written by Adam Button at www.forexlive.com.

Source: Goldman Sachs: We expect Trump's tariff increase to fuel USD strength in 2025

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