Will Trump’s Tariffs Raise US Prices?

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00:00And the big question really is, with companies likely to pass on the cost to U.S. consumers,

00:07what kind of impact or inflationary impact might we expect?

00:13Are people going to be paying a lot more at the till?

00:17I know Donald Trump previously said that there will have to be short-term paying for long-term gain,

00:23but how long are people going to put up with that?

00:25It's a very interesting question.

00:26I mean, the truth is that until now, they haven't really seen any great effect on prices coming out of this,

00:33and inflation has remained under control in the U.S.

00:35We've seen the latest data was actually quite close to target of 2%.

00:39I think what happened originally is that everyone exported to the U.S. to try and avoid those tariffs,

00:46and we've seen a big increase in production in various countries, including in Europe,

00:51but also China and elsewhere, and a lot of exports to the U.S.

00:55when they were trying to beat those tariffs, which they knew were going to be imposed,

00:59although we didn't quite know at what rate.

01:01And what happened, of course, is that the U.S. economy shrunk in the first quarter slightly as a result of that

01:06because of so many imports coming in, and that's the way GDP and economy, gross domestic product is calculated.

01:12In the second quarter, what we've seen, the consumer, and of course businesses that have been bringing things in,

01:17didn't do that.

01:17In fact, it went the other way, and imports fell very significantly, and GDP rose in the second quarter.

01:24But it means the consumer has less choice possibly looking ahead, and those price increases will come.

01:30And it is one of the reasons why interest rates have stayed high in the U.S.,

01:33as we know there was a decision just a couple of days ago to leave interest rates unchanged by the Fed,

01:39which really infuriated President Trump.

01:41But I think it is because they're waiting to see what the eventual impact of the tariffs might be before they decide how to move.