New tariffs could push inflation higher, economist says

With President Trump unleashing sweeping tariffs, here's how it might impact your wallet.

Transcript

00:00Well, we also have the tariff deadline on Friday.

00:03We know that President Trump has said it will not be extended.

00:07We'll see if that's actually the case.

00:09But it sounds to me like you think that will be more of a one-off kind of price shock.

00:14But how should we be thinking about the economic impact of even one-off higher prices?

00:20Yeah, it's not good.

00:23I mean, and in fact, you know, you look through all the ups and downs and all the rounds of the tariffs and the noise.

00:28Because tariff rates are going up, and they're going up a lot.

00:31I mean, you go back to the beginning of the year, the effective tariff rate across all countries' products was just over 2%.

00:38Now, with everything in place, it feels like we're going to settle in somewhere around 15% to 20%.

00:45That's a very substantive increase, and that means higher prices and inflation will pick up.

00:51I think the price level will rise by a point, a point and a half.

00:54So instead of inflation, where it is today at 2.5%, that's the consumer expenditure deflator, that measure,

01:01will be at 3.5%, 4% by next spring, summer.

01:05That's pretty substantive.

01:06And it will also mean weaker growth because, you know, those tariff increases, those higher prices are an effective tax increase.

01:15It cuts into people's purchasing power.

01:17You know, if I have to spend more on an imported good, food or clothing or whatever it is, I have less to spend on everything else.

01:25And so that cuts into economic growth.

01:27So, you know, I buckle in.

01:29You know, I think the next 6-12 months are going to be uncomfortable for the economy.

01:32You know, I think we'll be able to avoid recession, but it's very close.

01:36And I think we can stay with a high degree of confidence that it's going to be an uncomfortable environment.