Trump's tariffs: JPMorgan sees tax rate jump to 20%

JPMorgan Wealth Management’s latest research outlines its base case for President Donald Trump’s proposed tariffs.

The firm expects the effective tax rate to rise to 10%-20%, up from 2% earlier this year.

While the tariffs will result in “some deals” between the US and its trade partners, the increase in import duties is still significant but falls within Wall Street’s pre-‘Liberation Day’ estimates.

JPMorgan warns that while the tariffs may prevent a recession, they could hurt economic growth, leading to higher unemployment and inflation.

To navigate this, JPMorgan suggests using structured notes for defensive stock exposure and income generation in volatile markets.

The firm also advises including hedge funds in diversified portfolios for downside protection and to take advantage of market inefficiencies.

🔗 Source: Business Insider

🧠 Food for thought

1️⃣ Historical precedents suggest wider economic impacts than current forecasts

JPMorgan’s predicted 10-20% effective tariff rate mirrors previous trade conflicts that had cascading effects beyond initial estimates.

The 1930 Smoot-Hawley Tariff Act led to retaliatory measures from trading partners that contributed to a devastating 61% drop in US exports by 1933, significantly worsening the Great Depression1.

More recently, the 2002 Steel Tariff, while appearing targeted, resulted in broader job losses across steel-using industries and provoked EU countermeasures against American exports1.

Higher tariffs consistently raise prices for American consumers. The Tax Foundation estimates the current tariff regime will increase the average household tax burden by approximately $1,243 in 2025 alone2.

Historical evidence shows that while tariffs may protect specific industries, they often trigger retaliatory measures that reduce overall economic growth through disrupted trade flows and higher prices.

2️⃣ Asymmetrical impacts across sectors create market volatility and investment opportunities

The tariff landscape will not affect all sectors equally, with industries heavily dependent on imports facing disproportionate challenges.