spot_img
HomeBusinessTariff Wars Can Push US Inflation -Chief Economist Mericle

Tariff Wars Can Push US Inflation -Chief Economist Mericle

The uncertainty that tariffs introduced may also impact investments

MUMBAI, Mar 14 (The CONNECT) – US President Donald Trump’s administration has “signalled a willingness to take larger risks than the first time around,” raising the prospect of larger tariff increases, Chief US Economist David Mericle says in the latest episode of Goldman Sachs Exchanges.

Economists now expect that the average US tariff rate will increase by 10 percentage points or more, which is likely to boost consumer prices, says Goldman Sachs.

The higher tariff assumptions imply that that the Federal Reserve’s preferred measure of inflation, core PCE, will rise to about 3%, Mericle notes.

While tariffs on their own represent only a one-time change to the price level rather than a more meaningful shift in the pace of inflation, he says the risk that trade policy concerns spark broader changes to inflation expectations bears watching, given the attention from both consumers and businesses.

“It is, I think, a little bit of surprise relative to what I might’ve expected several months back, just how focused businesses and consumers are on tariffs,” Mericle says.

“I would say at the very least this is something to keep an eye on — the risk of the tariffs sparking broader price increases.”

The larger tariffs are also likely to weigh on economic growth, says Mericle, whose team cut its 2025 GDP growth forecast on a Q4/Q4 basis from 2.2% to 1.7%.

In addition to the tax-like impact of tariffs on disposable income and consumer spending, “the uncertainty that tariffs introduced are probably going to have a larger effect, discouraging business investment [more] than I would’ve thought a couple of months ago,” Mericle tells Exchanges host Allison Nathan.

RELATED ARTICLES

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Most Popular