According to The Kobeissi Letter, the new tariffs announced by Trump, combined with expected retaliatory measures, are projected to contract GDP by between -3% and -4% if these tariffs persist long-term. Additionally, PCE inflation is anticipated to rise toward 4% in the coming months as price increases take effect. This outlook suggests a cautious approach for traders, particularly in sectors vulnerable to tariff impacts.

According to @KobeissiLetter, prolonged economic uncertainty historically poses significant downside risks, with five quarters typically resulting in a 1.5% GDP contraction. The current trade war has already entered its first quarter, indicating potential continued economic pressure if uncertainty persists. This situation could be a critical factor for traders to monitor closely.

According to The Kobeissi Letter, the Federal Reserve's strategy of maintaining 'higher rates for longer' is challenged by the current economic conditions of slowing growth and rising inflation. This situation suggests a period of stagflation, impacting financial markets as GDP contracts and inflation rises, placing the Federal Reserve in a difficult position. This analysis is crucial for traders as it indicates potential volatility in interest rates and inflation-sensitive assets.

According to The Kobeissi Letter, the Atlanta Fed has updated their Q1 2025 GDP estimate to -0.5%, or -2.8% when considering gold imports and exports, marking the first expected contraction since 2022.