Investing.com - A spike in uncertainty around President Donald Trump’s trade policy is likely to exert a "meaningful" drag on U.S. economic growth over the coming quarters, according to analysts at Deutsche Bank (ETR:DBKGn).
In a note to clients, the analysts led by Matthew Luzzetti said their research indicates that uncertainty around Trump’s tariffs, which were lifted to the highest level in a century in early April, touched record levels last month.
As a result, they estimate that annualized real gross dometic product -- a key growth metric -- could be depressed by as much as 2.5 percentage points in the third and fourth quarters this year. Their prior projections in February and March saw the decline at between 1-1.5 percentage points.
"[T]he estimates point to further downside risks to our second-half forecast, which already sees near-zero growth," the analysts wrote.
"These estimates reinforce the notion that recession risks are elevated and emphasize that trade policy would need to deliver some relief soon to avoid weaker growth outcomes."
Trump unveiled sweeping "reciprocal" tariffs on dozens of U.S. trading partners at a White House event on April 2, arguing that the moves were necessary to reshore manufacturing jobs, boost government revenues, and correct perceived trade imbalances.
The president later delayed these tariffs by 90 days for most countries, although he lifted levies on Chinese imports, exacerbating concerns over a trade war between the world’s two largest economies.
Many economists have flagged that the tariffs could refuel inflation and weigh on growth, while several businesses have said the duties are making it more complicated to gauge their financial outlooks. Gross domestic product in the U.S. contracted in the first quarter, although separate indicators have pointed to resilience in consumer spending and the labor market.
On Thursday, Trump and U.K. Prime Minister Keir Starmer announced a trade agreement between the U.S. and Britain, bolstering hopes that the White House could secure deals with other nations. Talks are due to take place in Switzerland this weekend between U.S. and Chinese officials, with Trump suggesting that the heightened levies on Beijing will eventually be lowered.