U.S.: A significant negative wealth effect looms if the trade war persists

Hot Charts

Economics and Strategy

March 4, 2025 (Vol. XXV, No.9)

U.S. Watch

By Stéfane Marion and Matthieu Arseneau

While Washington maintains that the U.S. economy is well-positioned to withstand a trade war-given that exports account for just 11% of GDP-the same may not hold true for its stock market. As today's Hot Chart illustrates, foreign sales contribute a substantial 41% of the revenues generated by S&P 500 companies. This suggests that while the direct short-term impact of a trade war on GDP may be limited, the indirect effects- such as a declining stock market and widening corporate bond spreads-could have a far more significant economic impact via a negative wealth effect for investors and U.S. households. If the tariff war persists, we anticipate a notable drag on U.S. economic growth in the coming quarters.

NBC Economics and Strategy (data via BEA and Factset)

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