A $1.4 trillion economic bombshell

If you’re already overwhelmed by all the opinions out there about how Trump’s tariffs will hit stocks, just wait until you hear the various forecasts for the US economy.

The sweeping tariffs will cover $1.4 trillion of imported goods once fully implemented. Put another way: Imports comprise 11% of US GDP, and on top of that, 43% of US imports come from Canada, Mexico, and China—meaning that 5% of the GDP is directly affected by higher tariffs, according to Apollo Chief Economist Torsten Sløk.

Goldman Sachs Chief Economist Jan Hatzius previously predicted US GDP would grow by 2.5% in 2025, but he believes today’s tariff news will trim 0.4% from that figure.

US GDP is a big, broad number—most Americans will feel the pain acutely in the prices of goods and services, which will likely rise as businesses pass the cost of expensive imports on to consumers. Hatzius forecasts a 0.7% increase in core PCE prices, a figure EY analysts also point to. The Tax Foundation predicts American households will have to endure $830 in additional annual costs per year.

And that isn’t all: The already beaten-down housing market will likely take yet another hit, as tariffs keep mortgage rates higher for longer and cause construction costs to skyrocket.

“A substantial portion of the US building materials are imported from Canada,” explained Redfin economist Chen Zhao. “This increase in costs is likely to reduce housing supply and/or be passed on to homebuyers.”

The big picture: But perhaps the most painful long term consequences of today’s tariff talks are less tangible than lower GDP or higher prices at the store.

The economic alliance among the US, Mexico, and Canada has been a key foundation of the US’s economic strength. Starting a trade war with two of our biggest allies and a key trading partner isn’t a move that’s easy to reverse, even if these specific tariffs do end up being short-lived, as many analysts suggest they might be.

“Bullying doesn’t win over time on the playground or in the international arena. This self-inflicted supply shock is a strategic gift to Xi Jinping,” wrote famed economist Larry Summers on X over the weekend.—LB