Unfortunately impossible to know because dependent on a bunch of factors that are outside rationality. If the tariffs are scaled back tomorrow, probably the damage would be pretty limited but it's not looking like anybody reasonable is around or in charge...
I genuinely think a Great Depression sized 90% reduction is plausible. If the Trump administration somehow makes a trusted ironclad commitment that they will never ever reduce the tariffs, but doesn't actually convince anyone that the tariffs are good, the market will still expect Congress or the next administration to reduce them. And thus capital investments will still be largely impossible in any sector exposed to them. (Even if your investment isn't directly exposed, can you be confident that Trump won't blow it up on some other quixotic crusade?)
Europe needs money for importing energy. This is a life-or-death sort of thing, given how cold it gets in some European countries. Europe also imports large amounts of electronics and machinery.
The global energy market uses the U.S. dollar for pricing and settling transactions since the 70s - the "petrodollar" system.
If they EU push hard for it, they may get someone like Norway to accept Euros.
However, there are energy contracts locked into dollar-based pricing and many exporters need dollars because they hold dollar-based debt, buy goods in dollars or have a currency peg.
For them to accept the relatively unappealing Euros they might ask for a premium to offset conversion costs or risks.
But now everyone has the same problem getting dollars because everyone's got tariffs. The EU and their non-American suppliers. If said suppliers need dollars to pay back dollar-based debts, and those debtors aren't in the US, then they are also tariffed. Maybe they're all open to re-denominating debts and contracts in a currency that is easier to obtain and spend.
Capitulate on what? Trump's senior trade advisor was on TV earlier today saying that the tariffs are not subject to negotiation and seemingly rejecting Vietnam's offer to zero out all their tariffs on the US. Trump himself has repeatedly stated that he thinks tariffs are good for the US and plans to keep them as long as there are trade deficits. Is there any reason to believe that there's some set of policy concessions the EU could make tomorrow that would convince the Trump administration to drop tariffs?
Are you seriously suggesting that countries will just force their citizens to buy products they can't afford and don't want? Especially democratic nations? Seriously?
If the parent is saying that other countries can compromise by "importing more" until the trade deficit is fixed, there is no alternative to my statement. That is the argument being made. The government of that country would need to require it's citizens to purchase US goods regardless of their will or ability or need.
I reject the idea that it's my job to come up with a good implementation of an idea I don't support. I'm not on board with "buying more imports would be the capitulation" precisely because I can't imagine any sensible way EU regulators could achieve that. You could nibble at the edges and make the beef lobby happy, but the Trump administration's belief that trade deficits are necessarily caused by bad regulation which could be repealed is just wrong.
It's hard to say because they may back off on the tariffs and things go back to normal or there may be more trade war. Markets can crash by a lot if things go bad.
Look at volatility indicators perhaps? If they're unusually high, it suggests that further declines are very much possible if this policy change is not reversed.
Nah probably around 30% from ath, or a little more. 50% would be really extreme. The tariffs will have a massive impact but not that big, imo. It won't completely destroy the US economy.
