Trump's plan of 10% import tariff likely a point for negotiation: S&P

US President Donald Trump's pledge to impose a universal 10 per cent tariff on imports and 60 per cent on Chinese goods is likely only a starting point for negotiations, ratings agency S&P Global said in a note on Thursday. 

Tariffs are unlikely to be imposed at those levels, but were Trump to follow though, the universal 10 per cent tariff could add as much as 1.8 percentage points to US inflation, the report said. It added that this would trigger a resurgence in inflation in the first year rather than having an ongoing inflationary effect, and hit output by as much as 1 percentage point. 

 

The increase in tariffs to 60 per cent on China could add as much as 1.2 percentage points to inflation and the hit to output could be around 0.5 percentage points, S&P said. 

S&P said it could lower its rating on the US, currently at AA+, in the next two-three years if political developments weigh on the strength of American institutions, jeapordize the dollar as the world's leading reserve currency, or if the already-high US deficit rises further. 

S&P's current fiscal projections assume the government deficit will remain around current levels, it added.   

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