According to economists, tariffs set to be enabled on Tuesday may mean that consumers cannot grace this year’s high borrowing costs.
President Donald Trump has signed an order on Saturday to impose tariffs on the three largest trading partners with the United States. 25 % tariffs on imports from Canada and Mexico, and 10 % tariffs in China.
Economist hopes that if such tariffs are carried out and maintained, the price of US consumers will be raised.
According to Economist, the upward pressure on inflation could urge to suspend campaigns to reduce the interest rate in the near future when the federal preparation system has not yet returned.
Fed’s benchmark interest rate affects credit cards and other types of consumer borrowing costs.
“Under such circumstances, the windows that resume reduced interest rates at any time in the next 12 to 18 months in the next 12 to 18 months have just been closed,” Trump, Paul Ashworth, a Capital Economics North American economist. After signing, I wrote it on a memo on Saturday. Customs orders.
“Many uncertainty” regarding Trump’s tariff policy
Economist, of course, the situation is fluid and almost impossible to evaluate accurately.
For example, Trump, Monday, agreed to send 10,000 soldiers to her border to prevent drug trafficking on Monday, and then suspended 25 % of Mexico. I said.
For the time being, tariffs on Canada and China seem to come into effect on Tuesday as planned.
“There are many uncertainty about how policies are being developed,” said the Boston Federal Bank President Susan Collins on Monday.
How tariffs affect inflation and interest rates
According to JOE SEYDL, a senior market economist of JP Morgan Private Bank, the tariffs in Canada, China, and Mexico are estimated to increase US inflation by 1 % from 0.5 until 2026. I am.
These estimates are the “core” price (deprived of energy and food costs) measured by the personal consumption expenditure price index, which is a priority flagge of Fed.
It is important because the Fed uses an interest rate policy to reduce inflation and labor markets. The rise in inflation is equal to all the other, and it is expected to maintain a longer interest rate.
According to a memo published by Evercore ISI on Tuesday, the tariffs of Canada, China, and Mexico “push up” about 0.7 % points compared to the non -tariff baseline compared to the Turphif’s baseline.
“It will knock out at least one, and this year is still remaining,” said Evercore Note.
In December, the Fed officials predicted that interest rates will be reduced twice in 2025.
“Obviously, there are several uncertainty about whether these tariffs will go ahead. Given the one -month suspension of Mexico announced today,” FRB when the tariff goes ahead Is unlikely to be reduced again. “
Some have suggested that customs duties may push the central bank to raise interest rates again, but Brown believes that it is unlikely. He said tariffs would probably be a resistance to the US economy.
Similarly, the JP Morgan Project, which proposed tariffs, states that the US gross domestic product (economic production scale) will reduce 0.5 to 1 point to 2026.
He said that the economic resistance surpassed the impact of tariff inflation and could eventually lead the Fed.