President Donald Trump’s handling of the economy has the approval of 59 percent of the economists, money managers, and strategists surveyed in CNBC’s Fed Survey.
Economic growth is seen as hitting nearly 3 percent in 2018, according to the survey. The S&P 500 is expected to rise about 6 percent, while both inflation and unemployment are seen as staying low. The yield on the 10-year is seen as rising to about 3.5 percent by the end of 2019, up from about 2.95 percent today.
Unsurprisingly, most of the participants in the CNBC Fed survey are not fans of tariffs, with 59 percent saying it will reduce economic growth and 54 percent saying it will reduce employment.
Perhaps more surprising is how small they think the economic impact will be. On average, they see the current round of tariffs and retaliation as reducing annual growth by around one-tenth of a percentage point. That would mean a 3.5 percent economy would grow at 3.4 percent instead, not optimal but not a catastrophe. Even if all the tariffs currently contemplated were put in place, the total effect would take just three-tenths of a percentage point off growth.
Perhaps because of how small of an impact tariffs would have, most economists think the U.S. is by far most likely to prevail in trade disputes with Canada, China, and the European Union.
Of course, if economic growth were lower, the effects of tariffs would be more perilous. Shrinking a 2 percent economy to a 1.6 percent economy would likely spark recession fears. This underlines the importance of Trump’s tax cuts and regulatory reforms, and undermines the critics who said the economy did not need additional economic stimulus. The stimulus created by the tax cuts gave the American economy more resilience in the face of trade disputes.