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Tariffs Push Inflation Higher
Wall Street warns tariffs will lift inflation as politicians clash over policy.
Goldman Sachs faces criticism for its view that tariff driven inflation will rise, a view shared by many on Wall Street.
Tariffs Push Inflation Higher as Wall Street Warns
Goldman Sachs faces criticism for its view that tariff driven inflation will be heavier this year. It is not alone in this assessment on Wall Street, even as the latest CPI report appeared fairly calm. With these tariff increases this year, pre tariff inventories fading and tariffs staying higher, economists expect prices to rise as firms pass costs to customers. A JPMorgan Chase note says tariffs could subtract 1 percent from GDP and add 1 to 1.5 percent to inflation, though the pass through to consumer prices is unclear. President Trump attacked Goldman on social media while Goldman defended the call on CNBC. If many economists share the same view, this could mean inflation pressure across the rest of the year.
Key Takeaways
"Tariffs could subtract 1% from GDP and add 1-1.5% to inflation, some of which has already occurred"
JPMorgan economist Michael Feroli on tariff impact
"It appears that the downward trend in core inflation has been broken as tariffs start to feed through into retail prices"
UBS senior economist Brian Rose
"There is considerable uncertainty around the degree of pass through to consumer prices"
Feroli's note
"No one is predicting runaway inflation just a gradual climb"
Market observers on inflation path
The debate over tariff pass through reveals a larger policy puzzle. Tariffs are a tool tied to political aims, but their real cost is felt by households and businesses through higher prices. The lack of a clean, predictable pass through makes forecasting inflation harder for policymakers and for consumers who are already juggling higher costs. Markets will watch how quickly inflation moves up and how that will affect the Federal Reserve path. In the near term, observers expect inflation to rise gradually and for growth to slow modestly, shaping a fragile balance between price stability and economic resilience.
Highlights
- Tariffs leak into prices over time and timing matters
- Inflation creeps higher even as growth holds
- Pass through is messy and uncertain not a clean tax
- Policy makers must balance inflation risk with growth needs
Political and market risk from tariff debate
The article links tariff forecasts to political rhetoric and market reactions, raising potential backlash and investor sensitivity. It notes policy timing as well as public reaction risk.
The tariff debate will continue to ripple through markets and policy making in the months ahead
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