New Trump Tariffs Expected to Push up Inflation

According to calculations by the Federal Reserve Bank of Boston, tariffs imposed by the Trump administration early Tuesday have the power to drive up U.S. core inflation (excluding food and energy) by 0.5-0.8 percentage points. Other tariffs Trump has mentioned during his campaign, for example additional tariffs of 60 percent on Chinese goods and 10 percent on all global could would even have the power to drive up core inflation in the country by 2.2 percentage points. After core inflation reached as high as 6 percent in 2022, it most recently stood at an annualized 3.3 percent (as of January).

The calculation also concluded that that 10 percent of core personal consumption expenditure was related to imports and therefore vulnerable to tariff-related price increases. While the biggest shares of this came from China, Mexico and Canada, sectors especially dependent on imports in the United States are pharmaceuticals and medical products as well as motor vehicles, many of which are produced in neighboring countries. Garments, hospital and nursing home services, video, audio, photo and information processing and food services could also be disproportionately affected by inflation brought about by tariff action.