Deutsche Bank Warns Of $800 Billion Corporate Tax Surge, Cuts S&P 500 Outlook Amid Trump Tariff Concerns

Deutsche Bank has revised its forecast for the S&P 500, attributing the change to potential harm to corporate earnings caused by tariff policies.

What Happened: Deutsche Bank has lowered its year-end expectation for the S&P 500 to 6,150, a significant reduction from its earlier target of 7,000. The bank’s analysis suggests that tariff hikes will disproportionately affect American companies, equating to an “$800 billion tax increase,” reported Business Insider.

The bank calculated this figure by applying the new effective U.S. tariff rate of around 25% to $3.25 trillion worth of goods imported to the U.S. last year. A team led by chief strategist Binky Chadha noted, “U.S. corporates intermediate most goods imports, whether for consumption or as components for further processing, and we see them bearing the bulk of the tariff hit with few avenues for relief.

Chadha indicated that a decline in presidential approval ratings might be the trigger for reversing tariff policy, though that shift hasn’t occurred yet. A sustained market rally could follow a credible positive move on trade, potentially emerging if President Donald Trump’s approval falls into the low-40s or 30s.

As a result, Deutsche Bank now projects S&P 500 earnings-per-share to hit “$240” this year, a 15% decrease from its previous forecast and a 5% decline from 2024 earnings. The bank also expects the S&P 500 to trade between 4,600 and 5,600, with positive news on tariffs potentially triggering a sharp upside.

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Why It Matters: This revision comes amid concerns over the impact of tariffs on the market. On Thursday, Wolfe Research warned that the S&P 500 could plunge to 3,700 points in a mild recession scenario, a potential 37% decline from its January levels, due to tariff-related uncertainties.

Despite these concerns, the market showed signs of resilience. On the same day, the S&P 500 saw a 2% rally driven by gains in Nvidia NVDA and Tesla TSLA shares. However, the market mood remained cautious, reflected in the CNN Money Fear and Greed index still in the “Fear” zone.

Deutsche Bank’s revised forecast underscores the potential impact of tariffs on the market, highlighting the need for investors to closely monitor policy developments.

Year to date, the S&P 500 is 6.5% down and is almost 11% below its February all-time high. 

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.