Investment bank UBS has warned about the potential economic impact of former President Donald Trump's proposed tariffs.
UBS predicts that implementing a 60 percent tax on Chinese imports and a 10 percent tax on other foreign goods could lead to a 10 percent decline in the S&P 500 index.
The analysis suggests that the S&P 500 could close at approximately 5,200 points by the end of next year and 5,650 points by 2026. This forecast is concerning given the S&P 500's recent peak of around 5,792 points.
UBS's analysis also highlights the broader implications of such tariffs on global trade dynamics, with potential retaliatory measures from U.S. trading partners leading to a slowdown in global economic growth.
The report projects a decline in global GDP growth rates, from 2.9 percent to 2.7 percent in 2025 and 2.0 percent in 2026.
The impact of the proposed tariffs is expected to be felt most acutely by investors in foreign stocks, with declines projected for the European Stoxx 600 index and the MSCI China index.
UBS's base case scenario, assuming a more stable political environment, predicts a more optimistic outlook for the S&P 500 and other indexes.
The analysis also explores the potential market performance based on the outcome of the upcoming U.S. elections, with different scenarios for a Republican or Democratic victory.
Investors are closely monitoring the implications of the proposed tariffs and the potential outcomes of the elections as they navigate the complexities of the changing economic environment.