Goldman Sachs anticipates President-elect Trump’s proposed tariff hikes—expected to be double the size of the previous round—combined with tax cuts, to significantly bolster the USD in 2025, despite initial market volatility.

Key Points:

• Aggressive Tariff Strategy:

  • President Trump’s proposals target China, Mexico, and Canada, signaling his preference for tariffs as a unilateral and impactful policy tool.
  • Goldman Sachs economists project tariff increases to be roughly double the scale of previous measures, implemented rapidly in 2025, with the risk of further escalations.

• Tax Cuts Supporting USD Strength:

  • Alongside tariff hikes, Trump’s tax policies are expected to stimulate short-term economic growth, further reinforcing Dollar strength over the coming year.

• Broader Policy Packages Expected:

  • Initial tariff announcements may evolve into comprehensive measures, including additional taxes and investigations, increasing the market’s sensitivity to these developments.
  • The resulting policy mix could deepen the Dollar’s upward momentum.

• Sustained Market Impact:

  • While initial market reactions to tariff announcements have been short-lived, Goldman Sachs expects subsequent policy implementations to generate prolonged impacts, making it harder for markets to shake off the effects.

Conclusion:

Goldman Sachs underscores that Trump’s aggressive economic policies—doubling tariff hikes and implementing tax cuts—will likely provide robust support for the USD in 2025. The evolving nature of these policies points to continued Dollar strength, as the broader market absorbs their implications.

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