What the smartest AI says about Trump's Tariffs

The Trump tariff war has begun (again), but this time it's not just hitting the US economy hard, it's hitting the entire world and everyone seems to be affected, including those with savings and investments in the stock market.

The news keeps coming and analysts are predicting and looking back at history to predict the future. But what does AI have to say? What does it expect to happen next?

I asked the smartest models out there, and here are the answers that could help you make a decision (or not).

Disclaimer
This discussion is provided for informational purposes only and does not constitute financial, investment, or legal advice. Always perform your own research and consider consulting with a qualified professional before making any decisions.

Let's see what the AI giants are saying about the Trump trade war. To avoid hallucinations, I gave them a full picture from the Trump tariff news coverage of the past few weeks. I used Perplexity and Tavily to do this.

#1 OpenAI o1

Here are the most likely scenarios to happen next (in the immediate to near term following the April 5th baseline tariff implementation), with realistic probabilities:

Scenario 1: Partial Walk-Backs & Negotiated Exemptions Amid Continued Chaos

Description: The severe market reaction (-$5 Trillion S&P 500 value wiped, global indices plunging), intense lobbying from industries (especially auto), and initial retaliatory moves (Canada, China, EU planning) create significant pressure. While Trump maintains a tough public stance ("Hang tough"), behind the scenes, targeted negotiations accelerate. The administration grants temporary exemptions or delays the full implementation of the harshest announced tariffs (like the specific high reciprocal rates due April 9th for EU, Vietnam etc., or the full non-US content auto tariffs). Deals might be struck with key allies (Canada/Mexico perhaps extending USMCA exemptions, maybe a deal with UK/EU on specific goods, India/Vietnam secure partial relief). China tariffs likely remain high, but further escalation might pause pending talks (e.g., the TikTok related hint). Steel/aluminum tariffs persist. Overall uncertainty remains high, markets stay volatile, but a full-blown immediate multi-front trade war is slightly averted through piecemeal deals. Consumer prices start noticeably rising on goods already tariffed.

Probability: 45%

Reasoning: This reflects Trump's pattern of maximalist pressure followed by negotiation, the severity of the market reaction demanding some response, hints from officials about "listening," and the fact specific negotiations are already occurring (India, Vietnam, Israel visit). It avoids total escalation while allowing Trump to claim negotiated "wins."

Scenario 2: Full Steam Ahead — Escalation and Deepening Trade War

Description: Trump disregards the market turmoil and initial retaliation, sticking firmly to the announced plan. The high reciprocal tariffs (EU 20%, China 34%, Vietnam 46% etc.) fully take effect on April 9th. Auto tariffs proceed as planned. Major trading partners (EU, China, potentially Canada/Mexico if exemptions fully expire) implement their full threatened retaliatory tariffs. Global supply chains face massive disruption. Markets continue to fall sharply, recession fears intensify globally. Inflation spikes significantly in the US as costs are passed on or shortages emerge. Trump doubles down on the rhetoric of economic revolution and fighting unfair trade, blaming others for the fallout.

Probability: 25%

Reasoning: This aligns with Trump's strong rhetoric, his stated belief in tariffs, the influence of hardliners like Navarro, and his history of downplaying negative economic indicators. However, the scale of the immediate global economic shock and unified international opposition makes a complete disregard for consequences slightly less likely than some form of adjustment.

Scenario 3: Muddling Through — Sticking to Current Tariffs, Delaying Next Steps

Description: The baseline 10% tariff (implemented April 5th), the existing 20% China tariff, the steel/aluminum tariffs, and the partial Canada/Mexico tariffs remain in place. However, the next major escalation points — the higher reciprocal rates due April 9th and the full auto parts tariffs — are officially "delayed pending review" or subject to extended negotiation periods beyond initial deadlines. This maintains pressure but avoids pouring fuel on the immediate fire sale in the markets. Retaliation remains at current levels (China's initial response, Canada's initial response). High uncertainty persists, supply chain adjustments continue hesitantly, and economic damage continues but avoids the cliff edge of Scenario 2.

Probability: 20%

Reasoning: A tactical pause allows the administration to assess the damage and leverage negotiations without fully committing to the most extreme measures immediately. It buys time but doesn't resolve the underlying conflict, fitting a pattern of policy uncertainty.

Scenario 4: Rapid De-escalation/Major Reversal

Description: The economic fallout (market crash, potential credit crunches, major corporate failures or layoffs) is so immediate and severe that it triggers a rapid political and economic crisis. Facing overwhelming pressure from business leaders, financial institutions, and potentially eroding political support, Trump announces a significant rollback or suspension of the majority of the newly imposed tariffs, perhaps keeping only the long-standing China tariffs or steel/aluminum ones. This would be framed as a temporary measure or a response to concessions (real or imagined).

Probability: 10%

Reasoning: This is the least likely scenario in the immediate term. It would require an economic crisis far deeper and faster than currently described, and would represent a major policy reversal, which Trump is typically loath to do unless forced by extreme circumstances or able to declare a resounding "victory."

#2 Gemini 2.5

Okay, analyzing the provided (future-dated) news articles describing the implementation of broad new Trump tariffs in early 2025 and the immediate fallout:

Here are the most likely scenarios for what happens next, based only on the information and context within the provided texts:

Scenario: Entrenchment, Market Pain, and Targeted Retaliation (45% Probability)

Description: The newly imposed tariffs (10% baseline, higher rates on China, EU, specific countries, plus steel/aluminum/auto tariffs) remain largely in place. The Trump administration, despite massive market sell-offs 20B+ from Canada initially, 34% from China, EU planning significant action). Businesses face significant disruption (JLR pauses shipments, automakers impacted, potential price hikes across sectors like retail, luxury goods). Consumer prices start rising noticeably. Markets remain highly volatile, potentially stabilizing at lower levels but with recession fears growing. The administration might offer minor tweaks or delays (like the initial USMCA goods adjustment) but fundamentally holds the line, waiting for partners to offer concessions or for domestic effects to play out according to their internal logic (boosting domestic industry). Focus remains on the negative trade balance metric.

Key Indicators from Text: Trump's defiant rhetoric ("hang tough," "economic revolution," "will never change"), Navarro's influence, tariffs taking effect, immediate and significant market crash, confirmed retaliation from major partners, business disruption already starting (JLR), warnings of inflation/slowdown.

Scenario: Forced Negotiation & Selective Easing (35% Probability)

Description: The sheer scale of the market crash, combined with intense lobbying from impacted US industries (especially autos, agriculture, retail) and strong, unified retaliation from allies (Canada, EU) forces the administration to the negotiating table sooner rather than later. While publicly maintaining a tough stance, backchannel talks accelerate. This leads to selective easing — perhaps broader exemptions for USMCA-compliant goods, delays or reductions for key allies who offer specific (even if symbolic) concessions (like Canada's fentanyl czar example, or potential EU moves on car tariffs/LNG purchases), or carve-outs for politically sensitive industries experiencing severe pain. The baseline 10% might remain, but the higher "reciprocal" rates could be modified or paused for specific partners pending talks. Markets might see a partial relief rally on signs of de-escalation, but underlying uncertainty persists.

Key Indicators from Text: Extreme market volatility ($5T loss), Fed warnings, PIIE analysis, business concerns (automakers, JLR, potentially pharma/ag), strong retaliation from allies (Canada/EU) alongside China, historical precedent of Trump adjusting tariffs after initial imposition (first term aluminum example), mention of potential talks (Vietnam, EU trade chief call with Lutnick), initial USMCA adjustments showing some flexibility.

Scenario: Further Escalation (15% Probability)

Description: Interpreting the market sell-off as temporary panic or manipulation ("market has spoken" — China's view, possibly Trump's too) and viewing foreign retaliation as weak or expected, Trump doubles down. This could involve accelerating planned reciprocal tariffs, increasing rates further (as threatened for EU alcohol), expanding tariffs to previously exempted goods (like energy or pharma), or acting on other threatened measures (like DST investigations, 100% BRICS tariff threat, tariffs on countries buying Venezuelan oil). This triggers even harsher retaliation from partners, deeper market declines, and significantly increases the odds of a global recession. The administration frames this as necessary pain for long-term gain and national security.

Key Indicators from Text: Trump's "will never change" rhetoric, Navarro's hardline influence, the sheer breadth of initial tariffs suggesting maximalist approach, threats of secondary tariffs (Venezuelan oil buyers), threat to raise tariffs if partners retaliate, framing as "economic revolution."

Scenario: Domestic Political/Legal Intervention (5% Probability)

Description: While less likely as an immediate next step based on the provided text, the economic chaos could galvanize domestic opposition beyond protests. Significant legal challenges to the use of IEEPA for broad tariffs could gain traction faster than expected, potentially leading to court injunctions pausing enforcement. Alternatively, severe economic impacts in key Republican states could create enough pressure within the party to force a more significant course correction than the administration initially plans, potentially overriding White House objections through legislative action (though the text mentions GOP blocking Democrat attempts).

Key Indicators from Text: Mention of IEEPA/NEA legal basis being novel for tariffs, protests occurring, past instances of congressional pushback on tariffs (though currently blocked according to text), inherent political risk of widespread economic pain.

In summary: The most probable immediate future involves continued economic pain and volatility as the implemented tariffs and initial retaliations ripple through the system (Scenario 1). However, the severity of the market reaction and unified allied response creates strong pressure for some form of negotiation and selective easing to prevent a complete meltdown (Scenario 2). Outright further escalation remains a distinct possibility given the administration's rhetoric (Scenario 3), while a rapid domestic check is less likely but not impossible (Scenario 4).

#3 Claude Sonnet 3.7

Based on the information provided, here's my assessment of the most likely scenarios that could unfold following Trump's implementation of tariffs:

Scenario 1: Global Trade War Escalation (45% probability)

The global economy enters a full-scale trade war as countries continue to respond with retaliatory tariffs. China has already announced 34% counter-tariffs on all US goods, the EU is preparing a two-phase retaliation package, and other countries are developing their own responses. Economic growth slows significantly in the US and globally, with supply chains severely disrupted. Many companies relocate manufacturing but not necessarily to the US. This could lead to:

• Sustained market volatility with periodic crashes
• Acceleration of deglobalization trends
• Consumer price increases of 3–8% across various sectors
• US economic growth dropping below 1% for 2025–2026
• Geopolitical alignments shifting as countries form new trade blocs

Scenario 2: Negotiated Settlements (30% probability)

After the initial shock, pragmatism prevails as key trading partners and the US engage in serious negotiations to reduce tariffs. Trump uses the initial market tumult as leverage to secure bilateral deals with several countries, starting with smaller economies (like Vietnam) and eventually including larger trading partners. Some tariffs remain but at lower levels than initially threatened. The administration portrays these deals as victories while trading partners secure critical exemptions. This leads to:

• Market stabilization after 2–3 months of volatility
• Selective reshoring of manufacturing to the US
• Moderate inflation increase of 1–3%
• Negotiated exemptions for specific industries/products
• Uneven economic impacts across different sectors

Scenario 3: Partial Implementation and Rollback (15% probability)

The severity of market reaction and economic disruption forces the Trump administration to significantly modify the tariff plan. While maintaining the tough rhetoric, the administration expands exemptions, delays implementation for more products, and quietly negotiates reductions for major trading partners. This "strategic flexibility" is presented as forcing concessions from trading partners while actually representing a substantial retreat from the initial policy. Results include:

• Gradual market recovery as policy is softened
• Limited actual implementation of the most severe tariff rates
• Creation of complex exemption processes benefiting companies with lobbying power
• Mixed economic signals as policy uncertainty continues

Scenario 4: Domestic Crisis and Emergency Response (10% probability)

The economic impact of tariffs, combined with retaliatory actions, creates a severe economic crisis in the US. Job losses mount, inflation spikes, and markets continue to decline. This forces an emergency response from the Federal Reserve (dramatic rate cuts) and Congress (emergency economic legislation). The administration is forced to substantially abandon the tariff strategy while searching for alternative economic policies that can be implemented quickly. This leads to:

• Sharp economic contraction approaching recessionary levels
• Emergency economic policy measures
• Political backlash against the administration
• Major shift in economic policy approach

Analysis

The most likely outcome appears to be a sustained period of trade conflict that creates significant economic disruption before potentially moderating through negotiations. The stock market reaction has already been severe, with the S&P 500 experiencing its worst week since 2020 and losing over $5 trillion in value.

Key variables that will determine which scenario unfolds include:

• The willingness of trading partners to negotiate versus retaliate
• The administration's flexibility in modifying its approach based on economic impact
• The resilience of supply chains and ability of companies to adapt
• The Federal Reserve's response to inflationary pressures
• Domestic political pressure if economic conditions deteriorate significantly

The administration's recent approach suggests it is betting on Scenario 2, where market pain creates leverage for negotiations, but the structural economic impacts and complexity of global supply chains make Scenario 1 the most likely outcome in the near term.

Closing Statement (Not Financial Advice):

No matter which scenario unfolds, one thing is certain: the current trade climate remains fluid and unpredictable, potentially impacting global markets and individual investments in ways both expected and unforeseen. Please remember that this overview is for informational purposes only and does not constitute financial, investment, or legal advice. Always do your own research and consider consulting with a qualified professional before making any decisions.