President Donald Trump’s tariff plans are moving forward by levying taxes on imported goods that economists warn will lead to price increases for consumers that could push inflation higher and complicate the Federal Reserve’s efforts to stabilize the pace of price growth.
With Trump’s plans for a 10% tariff on all imports plus additional reciprocal tariffs on U.S. trading partners, as well as sector-specific tariffs such as the 25% tariff on imported vehicles and auto parts, either in force now or taking effect soon, price hikes related to tariffs could soon be reflected in the inflation data the Fed is monitoring.
Ryan Young, senior economist at the Competitive Enterprise Institute, told FOX Business that he expects it will be “about six weeks” before price increases due to tariffs start impacting inflation data.
“Assuming Trump goes through with the auto and reciprocal tariffs in early April, prices should go up right away for many goods. That will then show up in April’s CPI and PCE releases,” which are due to be released in May, he said.
Trump’s 25% tariffs on imported vehicles and auto parts are due to take effect on April 3, and the auto tariffs are likely to be passed on to consumers quickly. An analysis by JPMorgan found that “given strong pricing power, automakers will be able to pass on most of the tariffs” and that those auto tariffs “should boost vehicle prices by about 5%,” which they added would be on top of previously announced tariffs.
“It appears the tariffs will be effective next week, so we think the increases will be apparent quite soon. We expect that the rise in inflation will squeeze real disposable income growth to below 1% next quarter, presenting a material headwind to consumption growth,” the analysts wrote.
Read the full article here
