{"id":64997,"date":"2025-10-08T07:24:13","date_gmt":"2025-10-08T07:24:13","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/64997\/"},"modified":"2025-10-08T07:24:13","modified_gmt":"2025-10-08T07:24:13","slug":"top-wall-street-economist-sees-2-ways-tariffs-could-play-out-and-neither-is-good-for-the-average-worker","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/64997\/","title":{"rendered":"Top Wall Street economist sees 2 ways tariffs could play out\u2014and neither is good for the average worker"},"content":{"rendered":"\n

Flying between Helsinki, Prague, Milan, and Geneva to meet with clients, Nathan Sheets,<\/a> Citigroup\u2019s top economist, has a bird\u2019s-eye view of how tariffs are reshaping the global economy.<\/p>\n

But on the ground, he warns, the consequences of President Donald Trump\u2019s renewed tariff wars are showing up in ways that will hit regular Americans the hardest.<\/p>\n

\u201cWe haven\u2019t seen tariffs at these kinds of levels in the United States for many decades,\u201d he told Fortune while en route to Zurich. \u201cAnd so an implication of that is that we\u2019re learning about how tariffs affect the economy in real time.\u201d<\/p>\n

Sheets, who also served in President Barack Obama\u2019s administration as the U.S. Treasury\u2019s top economic diplomat, estimates that U.S. consumers are currently bearing about 30% to 40% of tariff costs\u2014but that number is poised to rise to around 60% as companies run out of room to absorb higher import prices. \u201cFirms can only absorb so much,\u201d he said. \u201cThey\u2019ll need to push more through to the consumer.\u201d<\/p>\n

Sheets isn\u2019t alone among Wall Street economists in arguing this. Earlier this week, Morgan Stanley\u2019s chief U.S. economist, Michael Gapen, argued that firms have been absorbing the hit as much as they can, and tariffs have effectively been a \u201ctax on capital<\/a>,\u201d at least so far.<\/p>\n

That pass-through is already starting to appear in the data, Sheets added, though unevenly. Goods inflation in several categories has accelerated since the tariffs took effect earlier this year: Audio equipment is up 15%, furniture and bedding nearly 7%, and tools and hardware around 4%.<\/p>\n

Most of those are imported products\u2014things that show up in your household, not your grocery cart, he said.<\/p>\n

Sheets believes that retailers will pass through the tariff effects subtly, through key \u201cpricing windows,\u201d when they are already likely to be raising prices, such as during the holiday shopping season and the New Year.<\/p>\n

Companies can afford to do that, he said, because they stocked up on inventory before tariffs were imposed and have been drawing down those cheaper supplies. But that cushion is running out.<\/p>\n

\u201cWe\u2019re starting to see it,\u201d he said. \u201cBy spring, it\u2019ll be more visible in the data.\u201d<\/p>\n

The economist said firms are walking a fine line: Consumers are still \u201cfatigued\u201d from post-pandemic inflation and are not in the mood to tolerate another wave of price increases, but companies can\u2019t keep eating the costs forever.<\/p>\n

\u201cOne thing you wouldn\u2019t want to do is raise your price, make your customers mad, and then have the tariffs adjust downward,\u201d he added. \u201cSo they\u2019re judging carefully their capacity to pass it through, and the timing in which they do it.\u201d<\/p>\n

The second way tariffs could play out, Sheets warned, is through a kind of snake-eating-its-own-tail effect: hurting the same U.S. manufacturing base they\u2019re meant to protect.<\/p>\n

\u201cThere\u2019s a fundamental reality here,\u201d he said. \u201cWage rates in the United States are relatively high. If you\u2019re going to use U.S. labor and pay them competitive wages, there are just certain kinds of manufacturing activities that are very difficult to do profitably.\u201d<\/p>\n

That, he argued, is why so many jobs shifted to China and Mexico over the past 40 years\u2014and why tariffs may bring factories back, but in a \u201cvery capital-intensive\u201d way: think automatons, not more workers.<\/p>\n

\u201cFirms will say, \u2018I can\u2019t afford to pay U.S. wages for this activity, so I\u2019m just going to fully automate it,\u2019\u201d Sheets said. You bring back production, you bring back investment\u2014but you don\u2019t bring back nearly as many jobs.\u201d<\/p>\n

Trump, on \u201cLiberation Day,\u201d promised<\/a> to usher in a golden age of manufacturing and reshore production through his tariffs. But Sheets argues that he might have just accelerated the push to automate factories through AI and advanced robotics, which make it easier than ever to run a factory with fewer people.<\/p>\n

\u201cWe saw this with the computer revolution,\u201d the economist said. \u201cSome jobs vanish, new ones emerge, but they\u2019re not the same jobs.\u201d<\/p>\n

Sheets said that for now, most U.S. allies are taking a \u201cwait and see\u201d approach rather than retaliating with their own tariffs, largely because they still depend on access to the American market.<\/p>\n

But he warned that if more countries follow Washington\u2019s lead and start weaponizing tariffs, the global trading system that\u2019s defined the postwar era could begin to fracture.<\/p>\n

He compared the situation<\/a> to the early 1930s, when the Smoot-Hawley tariffs triggered widespread retaliation and a collapse in global trade that worsened the Great Depression. Back then, the world turned inward, and the result was \u201cdevastating,\u201d he said. He cautioned that, thank goodness, other countries aren\u2019t following the U.S. lead\u2014so far.<\/p>\n

Still, Sheets said he thinks there\u2019s room to rethink\u2014not abandon\u2014the economic order that\u2019s held for decades. Global leaders did so about every 40 years: In the 1940s, they came up with the IMF and the World Bank, and in the \u201880s and \u201890s the development of the WTO.<\/p>\n

\u201cMaybe it\u2019s time to do more deep thinking about how we can have an effective global trading system,\u201d he said.<\/p>\n

This story was originally featured on Fortune.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Flying between Helsinki, Prague, Milan, and Geneva to meet with clients, Nathan Sheets, Citigroup\u2019s top economist, has a…\n","protected":false},"author":2,"featured_media":64998,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[138,219,111,139,69,7677],"class_list":["post-64997","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-economy","tag-new-zealand","tag-newzealand","tag-nz","tag-tariffs"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/64997","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=64997"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/64997\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/64998"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=64997"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=64997"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=64997"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}