A top credit-rating agency warned Wednesday that the most significant credit risks from President Donald Trump’s tariffs are tied to the potential for slower growth or an all-out recession.
S&P Global released the report after Trump’s first 100 days in office. The report focused mainly on tariffs and uncertainty about those tariffs.
“The April 2 tariff announcements by the U.S. administration – and the subsequent escalation in the trade conflict between the U.S. and China – went far beyond what financial markets expected,” S&P noted. “President Trump’s 90-day pause of most tariffs didn’t remove the uncertainty around what could ultimately occur.”
Trump announced a slate of tariffs on April 2, which he called “Liberation Day” for American trade. Seven days later, on April 9, he paused nearly all of those higher rates. Trump said the pause would last 90 days as his trade team talks with more than 75 other nations. Trump maintained a 10% baseline tariff and a 145% import duty on goods from China. He also kept tariffs on foreign-made passenger vehicles and auto parts, but Trump cushioned the blow for U.S. automakers. Tariffs on steel and aluminum also remain in place.
The tariffs could hit state and local governments.
“The tariffs and other policy shifts that slow economic growth or worsen inflation could have an outsize effect on government entities, in particular those that are struggling to maintain balanced operations,” according to the credit report. “S&P Global Ratings believes that, with some exceptions, the largest risk to most public finance sectors is from the potential for slower economic growth or recession.”
Economists, businesses and a growing number of publicly traded companies have warned that tariffs could raise prices on a wide range of consumer products.
Trump has said he wants to use tariffs to restore manufacturing jobs lost to lower-wage countries in decades past, shift the tax burden away from U.S. families and pay down the national debt.
A tariff is a tax on imported goods. The importer pays the tax and can either absorb the loss or pass the cost on to consumers through higher prices.
