When the real impact of tariffs will be felt

Moody's Analytics chief economist Mark Zandi breaks down the economic impact of tariffs.

Transcript

00:00Tariff rates are going up and they're going up a lot. I mean, you go back to the beginning of the

00:04year, the effective tariff rate across all countries' products was just over 2%. Now,

00:10with everything in place, it feels like we're going to settle in somewhere around 15 to 20%.

00:16That's a very substantive increase. And that means higher prices and inflation

00:20will pick up. I think the price level will rise by a point, point and a half. So instead of

00:25inflation, where it is today at 2.5%, that's the consumer expenditure deflator, that measure,

00:32will be at 3.5%, 4% by next spring, summer. That's pretty substantive. And it'll also mean weaker

00:39growth because those tariff increases, those higher prices are effective. A tax increase,

00:45it cuts into people's purchasing power. If I have to spend more on an imported good, food or clothing

00:52or whatever it is, less to spend on everything else. And so that cuts into economic growth. So

00:58I, you know, I buckle in. I, you know, I think the next six, 12 months are going to be uncomfortable

01:02for the economy. You know, I think we'll be able to avoid recession, but it's very close. And I think

01:07we can stay with a high degree of confidence that it's going to be an uncomfortable environment.