JPMorgan Private Bank's Grace Peters says if tariffs move out of that range and reach 20% or 25% effective rates, it would "prove more problematic." Peters speaks on Bloomberg Television.

Washington

Donald Trump has signed an order to impose tariffs imports into the U.S. from countries including China, Mexico and Canada.

Global Tariffs

Grace Peters of JPMorgan Private Bank discussed the potential impact of tariffs on markets, noting that current expectations are for effective tariff rates to remain in the mid-teens range. She explained that this level is generally seen as manageable by both the economy and financial markets, with anticipated effects including a modest reduction in US GDP growth and a temporary increase in inflation.

However, Peters warned that if tariffs were to rise to 20% or 25%, it could create more significant problems for markets. She also highlighted the role of bond market reactions in shaping tariff policy and suggested that while equity market volatility is normal, markets are already looking ahead to potential recovery in the following year.

Why 20% tariffs could be 'problematic' for markets

are you expecting in terms of tariffs overall? We don't really know where we end up. We don't know and I don't think that we can feign any false sense of precision but I think that's exactly what the market is doing. It's saying look around mid-teens effective tariff rate is likely where we're going to land. With some of these letters it looks more like 17-18 percent, sometimes it's more like 13-14 but it's all in that range of a mid-teens level which I think the economy, major economies can stomach and the markets can digest. We know it's a very well-versed narrative that that will take about a percent of US GDP growth, add 50 basis points to 100 basis points perhaps to inflation as a one-off impact that then fades and that's why I think the market is looking through some of this tariff tennis. Now if we got to a stage where we moved out of that range, I think if we went to 20-25 percent effective tariff rates, I think that would prove more problematic but we don't think that's the central case. We've been saying for a while mid-teens is about right and that's why I think the market is taking this in its stride. And Grace, I mean again it's very difficult to understand some of the motives of the Trump administration but is it mid-teens because they worry about a fallout from markets and bond markets especially, is that the one that you're looking out for? Yes, that seemed to be the one if we think back to after Liberation Day. It was really the bond market I think that really caused the reaction and brought parties to the negotiating table. Volatility in equities we always say is normal. You know a 15 percent drawdown in equity markets is usually a good buying signal and I think for equity markets these are forward-looking discount machines. So as I say it's quite well versed the notion that growth is going to slow but it's also likely to recover in 2026. So I think the market is looking through to next year's earnings, to next year's GDP that should be better than the current year.

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Kyiv

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Ventura County

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Los Angeles

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Kuala Lumpur

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Ukraine Invasion

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Texas

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San Francisco

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Moscow

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Kerr County

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Sana'a

Middle East Conflict

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Cernadilla

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Why 20% tariffs could be 'problematic' for markets

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