The U.S. government's new tariffs and threatened tariffs have sparked widespread backlash at home, as officials, economists and industries worry the tariff hikes would exacerbate the country's persistent inflation and increase production costs.
Some Federal Reserve officials have warned that the new tariffs will burden consumers and deepen inflation.
President of the Federal Reserve Bank of Chicago Austan Goolsbee cautioned that the tariffs will have a long-standing impact on inflation and make it harder for the Fed to curb the inflation.
The U.S. now faces a series of new challenges to the supply chain, including walkouts and natural disasters, as well as the threat of large tariffs and the potential for an escalating trade war. These will drive up the inflation, and ignoring the potential inflationary impact of tariffs would be a mistake, Goolsbee said.
Similar concerns were echoed by Philadelphia Fed president Patrick Harker and Atlanta Fed president Raphael Bostic, who highlighted the prolonged inflationary impact of the tariffs.
According to the latest data from the U.S. Department of Labor, the country's consumer price index (CPI) rose by 0.5 percent month on month and 3 percent year on year in January 2025, marking the sharpest rise since August 2023.
Economists fear the new tariffs would amplify these trends by raising import costs and domestic production expenses, ultimately transferring financial burdens to consumers.
Lindsay Owens, executive director of the Groundwork Collaborative, an economic policy think tank, warned lower-income Americans would bear the brunt, as they spend a larger share of their earnings on basic goods.
Marcus Noland, executive vice president of the Peterson Institute for International Economics, pointed out that retaliatory measures from trading partners could intensify price shocks.
U.S. industries, including manufacturing, retail, and energy, have united in opposition to the tariffs. Experts say businesses will face higher production costs and lower profits as tariff increases will drive up the prices of imported goods and raw materials, which may even lead to job losses.
According to the latest estimate of S and P Global, the new tariffs could cause a one-time 0.5 percent to 0.7 percent rise in U.S. consumer prices, and the U.S. real GDP over the next 12 months could be 0.6 percent lower than the current forecast.
The risk of a second wave of inflation looms large in the country, as the trade, immigration and fiscal policies of the Donald Trump administration continue to add uncertainties in national economy.
U.S. economists worry tariff hikes could increase inflation
U.S. economists worry tariff hikes could increase inflation
U.S. economists worry tariff hikes could increase inflation
