US real GDP at risk of 1% hit 'over several quarters' due to retaliatory tariffs, says Citi economist

A top Citi economist is projecting a one percent hit on US real GDP if retaliatory tariffs follow and get enforced, with a potential risk of US inflation rising by half a percent in the near term, showing that America will not be ‘immune’ from the ripple effects.

In conversation with CNBC-TV18, Robert Sockin, a Global Economist with Citi said they uncertainty now revolves around how long the fresh tariff measures will remain in force, and the uncertainty that follows with it. He is hopeful that the tariffs will not in force for a durable period and will likely be used a negotiating tactic.

“The US GDP could fall 1% over next few quarters if the tariffs persist and trading partners levy retaliatory tariffs,” Sockin said, pointing at the potential hit on American economy due to the fresh round of tariffs coming into effect. Sockin said the retaliatory tariffs by the trading partners could amplify the ‘stagflationary effects’ on America, resulting in a ‘large, negative hit’ on real growth, spread over several quarter period.

“Its a difficult and dangerous balancing act,” added Sockin, underscoring US may not be immune to the negative effect of the tariff imposition.

The tariffs on Canada and Mexico impact around $1.5 trillion worth of annual imports, and while the ‘economic damage’ will be the largest for both these nations, Sockin said there will negative economic effect on American economy as well. Trump has already said that there no room for negotiation now, paving the way for 25 percent tariffs to come in effect on Canada and Mexico from March 4. In retaliation, Canada as well as Mexico have announced counter-tariff measures that will be put in place once US tariffs roll out. Canada said it will imposing duties on US imports, which will remain in place till US tariff are not withdrawn. The counter-measures could also derail the trade pact with Canada and Mexico that Trump had negotiated with during his first term.

Soon after Trump’s statement, China imposed tariffs on American exports, and included 10 companies in an unreliable entity list, in a measure of retaliation. It also imposed tariffs of up to 15% on US exports such as Soybeans, chicken, beef and cotton, escalating trade tensions.

“US’s unilateral tariff increase damages the multilateral trading system, increases the burden on US companies and consumers, and undermines the foundation of economic and trade cooperation between China and the US,” the statement by China’s Ministry of Finance read.

Already, the jitters following Trump’s announcement of tariff imposition from March 4 has sent Asian indices to a month low, following the worst day for S&P 500 in 2025. President Trump has also ratcheted up the tariff levy on China by doubling the earlier announced duty to now 20 percent.

This is being updated.