Tariffs are just hours away from going into effect: How long will they last?

Key Takeaways

• President Donald Trump's far-reaching tariffs go into effect at midnight April 9, leaving just hours for trading partners to negotiate their way out of them.
• Economic forecasters have warned that a recession will occur if import taxes aren’t reduced significantly in a timely manner.
• The tariffs raise the risks of high inflation and economic stagnation, or "stagflation" the longer and higher they stay.

The “reciprocal tariffs” that President Donald Trump has imposed on U.S. trading partner countries are set to take effect at midnight. The fate of the U.S. economic system could be determined by how long these tariffs last.

According to the White House, tariffs of at minimum 10% have been imposed on almost all countries. Additional tariffs will be imposed against certain countries at 12:01 am early Wednesday morning. On Tuesday, Trump posted on social media about negotiating lower tariffs for South Korea and other nations. His top economic advisor, Treasury Sec. Scott Bessent said that 70 countries had called him to make deals.

Talk of deals led to speculation that his aggressive and broad-ranging tariffs were a negotiation tactic, rather than an attempt to overturn the post-WWII period of free trade. The hopes of a trade deal fueled a rally in the stock market that temporarily reversed some recent losses.

The next few days could be crucial for Tariffs

Forecasters have said that the direction of the economy depends on how quickly agreements are reached and for how long tariffs remain in place. Goldman Sachs economists said that the economy has a 45% risk of going into recession in the next year, assuming Trump reduces tariffs significantly compared to what he announced on Monday. Jan Hatzius wrote in a comment that a recession would be likely if Trump’s tariffs were implemented as he had originally outlined them. This is true even if later deals are negotiated.

Jim Reid, the head of thematic research and macro at Deutsche Bank, wrote a comment that said: “A U.S. Administration which doubles down on its policies will have enormous global implications for the years and decades to come.” “At the present, there is little sign that they will back down, which could lead to further market turmoil.” The next few days are more important than ever before.

Could Stagflation be afoot?

If the tariffs are not removed, they will likely result in higher prices for U.S. consumer, since many products come from overseas or are built with materials or parts imported. The economy would suffer a major blow if the tariffs were to remain in place.

UBS estimated the iPhone 16 manufactured in China could see its price rise from $1,119 to $350. This calculation was done a day after Trump threatened to slap an additional 50% on top of his 54% tariff, bringing America’s largest trading partner to 104%.

Tariffs could also cause a slowdown in business, which would reduce economic growth, and increase the risk of recession and an increase in unemployment. Deutsche Bank forecasts the unemployment rate will rise to 5% at the end of this year. It has been hovering between 4% and 4.2% for months.

Slower economic growth and higher inflation may create “stagflation,” an economically painful condition for households.

It Wouldn't Be the First Time Trade Policies Have Shifted Last Minute

In previous rounds of Trump's trade wars, the president has announced tariffs only to alter them at the last minute or negotiate deals shortly after the fact.

The rapidly shifting policy and the possibility that the tariffs will stick have left consumers and business leaders uncertain about the future, tanking consumer confidence. Hatzius wrote that this uncertainty increases the risks for the economy.

The tariffs could be rescinded by anyone without Trump’s consent, unless Trump backs down or negotiates a deal. Trump’s authority under emergency presidential powers to impose the tariffs has been challenged in several lawsuits.

The Congress could also limit Trump tariff powers. A bipartisan bill, introduced last week, would require the president’s approval for any tariffs. The bill is said to have the support of seven Republican senators, but could be vetoed by Trump.