onlyTrustedInfo.comonlyTrustedInfo.comonlyTrustedInfo.com
Notification
Font ResizerAa
  • News
  • Finance
  • Sports
  • Life
  • Entertainment
  • Tech
Reading: Commentary: Inflation would be licked, if not for the Trump tariffs
Share
onlyTrustedInfo.comonlyTrustedInfo.com
Font ResizerAa
  • News
  • Finance
  • Sports
  • Life
  • Entertainment
  • Tech
Search
  • News
  • Finance
  • Sports
  • Life
  • Entertainment
  • Tech
  • Advertise
  • Advertise
© 2025 OnlyTrustedInfo.com . All Rights Reserved.
Finance

Commentary: Inflation would be licked, if not for the Trump tariffs

Last updated: May 12, 2025 8:00 pm
Oliver James
Share
6 Min Read
Commentary: Inflation would be licked, if not for the Trump tariffs
SHARE

President Trump could be basking in a huge W. While campaigning last year, he promised to bring prices down rapidly. He could now claim that he’s done it. Inflation fell to 2.3% in April, which is basically in the normal range. Most prices have stabilized. Some are declining. The inflation shock that began in 2021 is over.

But another inflation shock may be coming, thanks to Trump himself.

While Trump has dialed back his most aggressive tariffs on imports, substantial tariffs still remain in place. And most economists expect those tariffs, which are a tax on imports, to raise costs in coming months and bring on a bout of reinflation.

Read more: What Trump’s tariffs mean for the economy and your wallet

Markets soared on May 12 after Trump and China agreed to deescalate their trade war and lower sky-high tariffs that had been in place for a month. But that was not a return to normal. There’s still a new 30% tariff on most Chinese imports. And that’s not final. The current agreement is only in place until August. The mercurial Trump could still push tariffs higher.

There’s also a new 10% tax on imports from most other countries. Plus a new 25% tax on imported steel, aluminum, and automobiles. Overall, the average import tax has risen from 2.5% before Trump took office to about 18%. Americans will pay the extra cost through higher prices.

Some economists thought tariff price hikes would show up in the April inflation data. They didn’t. That suggests US importers did a good job building inventories before the tariffs went into effect and have been able to keep retail prices under control.

But higher prices are coming. Moody’s Analytics expects year-over-year inflation to jump to 3.8% by June. Goldman Sachs forecasts peak inflation of 3.6% in 2025. Other forecasts are similar.

That’s not nearly as bad as the 9% inflation that seared consumers in 2022. But inflation drifting back toward 4% is still problematic. The Yale Budget Lab estimates that an overall price jump of just 1.7% will lower the average household’s purchasing power by $2,800 per year. Since tariff inflation will affect many everyday products, it will hit lower-income people harder on a proportional basis.

Prices will jump most for products that come from China, which now face the highest tariffs. The Yale Budget Lab forecasts price hikes of 15% for leather goods such as handbags, 14% for clothing and electronics, 11% for textiles, and 9% for automobiles and basic pharmaceuticals. Those are expected price hikes for all products in the US market, not just imports; that’s because higher import prices generally allow domestic manufacturers to raise their prices too.

Higher-than-necessary inflation will also keep interest rates higher, raising borrowing costs for consumers and businesses. When Trump took office, investors thought the likelihood of a Federal Reserve short-term interest rate cut by June was 64%, according to the CME FedWatch tool. The odds now are just 8%. The Fed has clearly communicated that it’s not likely to cut rates, barring a recession, until it’s certain inflation isn’t coming back.

Drop Rick Newman a note, follow him on Bluesky, or sign up for his newsletter.

Inflationary threats keep longer-term rates higher too, because investors demand higher returns to commit their money if they think inflation will erode its value. The rate on the benchmark 10-year Treasury note surprised investors during recent weeks by rising when it normally would have been falling, part of the reason being rising inflation expectations.

Consumers are also gloomy about coming price hikes.

The University of Michigan’s consumer sentiment index has plunged since Trump took office, largely because consumers expect inflation to reaccelerate. In the latest survey, respondents on average said they expect inflation to hit 6.5% within a year, the worst inflation outlook since 1981. Consumers are considerably more bearish than forecasters, probably because they already feel progressively burned by four years of inflation that wrecked family budgets.

Trump may look at all this another way: If he was going to impose inflationary tariffs no matter what, then isn’t it better to do it when inflation is low than when it’s high? It’s true that 4% inflation is better than 9%. But 2% is better than 4%.

We almost got there.

Rick Newman is a senior columnist for Yahoo Finance. Follow him on Bluesky and X: @rickjnewman.

Click here for political news related to business and money policies that will shape tomorrow’s stock prices.

Read the latest financial and business news from Yahoo Finance

You Might Also Like

Could Nebius Group Be a Sleeper Growth Pick?

Edmunds electric SUV test: 2025 Hyundai Ioniq 5 vs 2026 Tesla Model Y

Procter & Gamble stock makes headway despite market trending lower on tariff worries

Are Salaries Keeping Up With Inflation? Experts Weigh In

5 Bank Accounts That Will Give You Free Money

Share This Article
Facebook X Copy Link Print
Share
Previous Article Heidi Klum Goes Topless in a Pair of Form-Fitting Denim Overalls Heidi Klum Goes Topless in a Pair of Form-Fitting Denim Overalls
Next Article Trump says he’s still open to attending talks on Ukraine, unsure about Putin Trump says he’s still open to attending talks on Ukraine, unsure about Putin

Latest News

Jensen Huang dismisses Anthropic CEO’s claim that AI will eliminate jobs: ‘He thinks AI is so scary, but only they should do it’
Jensen Huang dismisses Anthropic CEO’s claim that AI will eliminate jobs: ‘He thinks AI is so scary, but only they should do it’
Tech June 10, 2025
Chile holds seismic drills as chance of a big quake rises
Chile holds seismic drills as chance of a big quake rises
Tech June 10, 2025
Photos show accuser in NYC crypto kidnapping leaving house freely, defense lawyers say
Photos show accuser in NYC crypto kidnapping leaving house freely, defense lawyers say
Tech June 10, 2025
Bayesian yacht that sank off Sicily killing 7 to be raised in late June under updated recovery plan
Bayesian yacht that sank off Sicily killing 7 to be raised in late June under updated recovery plan
Tech June 10, 2025
//
  • About Us
  • Contact US
  • Privacy Policy
onlyTrustedInfo.comonlyTrustedInfo.com
© 2025 OnlyTrustedInfo.com . All Rights Reserved.