Recent tariff announcements from President Donald Trump are raising major concerns on Wall Street about their impact on the economy and corporate earnings. UBS’ Tariff Fear gauge, which measures how much the market has priced in the impact of tariffs, dropped from 30% in March to just 11% in April. That means investors may not fully understand how serious these new tariffs could be. UBS strategist Bhanu Baweja warned that if these policies stay in place, the average tariff rate on U.S. imports could rise from 2.5% to 24%, which may shrink the U.S. economy by 1.5% to 2% in 2025 and push inflation up to 5%.
Bank of America is also sounding the alarm. Its analysts estimate that if countries hit by Trump’s tariffs strike back with similar retaliatory tariffs, the combined impact could slash earnings for S&P 500 (SPX) companies by 32%. Even without retaliation, just the cost of higher prices on imported goods could reduce earnings by 5%. Savita Subramanian, head of U.S. Equity Strategy at BofA, said that there’s no clear guide on how to handle this kind of tariff situation.
She also warned that prolonged trade negotiations could slow business activity and increase the risk of a recession. Smaller companies and mid-sized firms are especially vulnerable. Investors are now nervous about two big problems happening at once: slower economic growth and rising inflation—a dangerous mix known as stagflation. These conditions make it even harder for the Federal Reserve to decide whether to raise or cut interest rates. Altogether, analysts say that the economy is heading into a period of higher uncertainty, with real risks of long-term damage if the tariffs stay in place.
Is SPY a Buy Right Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on the SPDR S&P 500 ETF Trust (SPY) based on 410 Buys, 86 Holds, and eight Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average SPY price target of $683.68 per share implies 27% upside potential.
