The head of one of the world’s largest banks said the company’s business clients have told her that they “can absorb” a 10 percent tariff.
Citigroup CEO Jane Fraser said on May 5 that those same clients have indicated that a 25 percent tariff or higher wouldn’t be as tolerable. Fraser spoke at the Milken Institute’s Global Conference in Los Angeles.
Over the past month, the world’s financial sector adopted a reactionary posture as the United States announced a suite of tariffs and trade policy changes. On April 2, President Donald Trump declared that the country would impose tariffs as high as 50 percent on almost all of its trading partners.
For now, most of the tariffs have been temporarily reset to 10 percent, as Trump and his Cabinet have said they want to use the tariffs to negotiate more favorable trade deals.
Fraser said that while the tariff policies and revisions are coming “hard and fast,” the financial sector needs to “keep a perspective and be very mindful about what the longer term looks like amidst all the announcements.”
The head of the New York-based international banking corporation said there will likely be a three-phase adjustment period over the rest of the year.
First, she said, spending from both private consumers and corporations will “pull forward.” The April financial figures, she said, indicate “reasonably robust” spending so far.
Next, there will be a “limbo” moment where global corporations will wait and see what comes to pass, she said.
“In that investment spending, some of that’s been suspended, some of the decisions on [capital expenditures] or on hiring have also been on hold,” Fraser said. “That will have an impact on demand in the economy.”
The final stage will come, she said, when the dust settles on tariffs. Once the long-lasting measures are concrete, then there will be definite impacts on “supply as well as on pricing.”
“It’s worthwhile sitting there, observing what’s going on calmly, but being very mindful about what the long term is going to be, and looking for the indicators of how that plays out,” Fraser said.
Trump has said most tariffs will remain at 10 percent until July 9. The U.S. has already begun to negotiate trade agreements with the leaders of many of its largest trading partners.
However, a major trade impasse with the Chinese communist regime remains, as each country has placed a tariff of more than 100 percent on goods imported from the other.
