Morgan Stanley warns that Trump tariffs could significantly hinder U.S. growth in the years leading up to 2026.

• Seth Carpenter, Morgan Stanley's chief global economist, predicted that the proposed tariffs by Donald Trump will negatively impact U.S. economic growth in the years leading up to 2026.
• If all of them are implemented simultaneously, it could lead to a "large negative impact" on the economy, Carpenter stated.
• He warned that growth in the U.S. may decrease significantly by 2026 due to tariffs and other policies.

Seth Carpenter, Morgan Stanley's chief global economist, predicted that the proposed tariffs by Donald Trump will negatively impact U.S. economic growth in the years leading up to 2026.

Trump has stated that he plans to impose a 10% to 20% tariff on all imports and extra tariffs ranging from 60% to 100% on goods imported from China, which he described as a way to extract funds from competing countries during the September Presidential debate.

The implementation of tariffs could result in a "big negative shock" to the economy if they are enacted all at once, according to Carpenter, who spoke to CNBC's Sri Jegarajah on the sidelines of Morgan Stanley's annual Asia Pacific Summit in Singapore.

According to the carpenter, the tariffs would result in higher inflation, as per Morgan Stanley's base case that they would be spread over 2025.

He warned that growth in the U.S. may decrease significantly by 2026 due to tariffs and other policies.

Tariffs increase inflation and hinder growth in the U.S., as Carpenter stated.

If the proposed tariffs are imposed, sectors such as automobile, consumer electronics, machinery, construction, and retail space will experience higher inflation, according to Mark Malek, CIO at brokerage firm Siebert.

The auto industry will be significantly impacted by Trump's proposed 60% tariff on Chinese goods and Biden's existing 100% tariff on Chinese-made EVs, while a universal 10% tariff on consumer electronics' imports will increase costs for companies such as Tesla, Microsoft, and Apple, according to Malek. These higher costs will likely be passed along to consumers, he added.

Despite the U.S. consumer price index increasing by 2.6% in October compared to the previous year, which was slightly higher than September's 2.4%, inflation has decreased in the U.S. after several years, leading the U.S. Federal Reserve to lower interest rates.

If sweeping tariffs are implemented, interest rate cuts may not be effective in 2025, according to Ben Emons, chief investment officer and founder of FedWatch Advisors, who also stated that tariffs could limit economic growth.