Morgan Stanley Warns of Tariff Policy Impact on Markets

Morgan Stanley, led by Michael Zezas, released a report on July 7 addressing potential scenarios with U.S. tariff policies, affecting markets globally.

An analysis by Morgan Stanley outlines risks of U.S. tariff policies to GDP growth. Potential scenarios could lead to increased market volatility, impacting traditional markets and cryptocurrency assets.

Morgan Stanley’s 3 Scenarios on U.S. Tariff Policies

Michael Zezas’ report, a prominent analysis from Morgan Stanley, outlines three primary scenarios for U.S. tariff policy. The report suggests that the U.S. might extend tariff suspension, induce tactical escalation, or pursue mild tariff adjustments. Such decisions are influenced by ongoing trade negotiations.

The implications of these scenarios include potential increases in tariff rates, affecting inflation and economic growth. Morgan Stanley Research notes, “Tariff policy remains a key variable in the market, and an aggressive tariff path could exacerbate the downside risks to the economic outlook and affect GDP growth expectations for 2025/2026.” These changes could also influence investor sentiment and broader financial markets, impacting trading strategies and risk appetite.

Market reactions remain speculative, with analysts and stakeholders closely monitoring updates. While the Federal Reserve may adjust monetary policy based on tariff-induced inflation, industry leaders emphasize the need for proactive risk management amid prevailing uncertainties.

Tariff Strategies Could Delay Federal Reserve Rate Cuts

Did you know? U.S. tariff escalations during 2018–2020 led to increased volatility in crypto markets, influencing assets like BTC and ETH significantly.

According to CoinMarketCap, Bitcoin (BTC) is valued at $107,796.82 with a market cap of $2.14 trillion as of July 7, 2025. Its 24-hour trading volume reached $45.77 billion, despite a 0.54% price drop in the same period. Over 90 days, BTC showed a 39.25% increase, reflecting high market activity.

Insights from Coincu suggest that any aggressive tariff approaches could delay rate cuts by the Federal Reserve, emphasizing the importance of closely monitoring policy shifts. Michael Gapen, U.S. Chief Economist, Morgan Stanley, explains, “Tariff-induced inflation will keep the Fed on the sidelines and as a result, Morgan Stanley Research is no longer anticipating a June rate cut. Tariff rates are rising much more quickly than we anticipated.” Such strategies have historically led to increased market turbulence, affecting GDP outlooks and contributing to varied inflation trends.