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Tariffs push inflation risk
Wall Street economists warn tariffs could reaccelerate inflation even as CPI cools, a forecast under scrutiny.
Wall Street economists warn tariffs may reaccelerate inflation even as CPI cools, a forecast that invites scrutiny and debate.
Tariffs push inflation risk despite CPI cooling
Goldman Sachs chief executive David Solomon spoke from Davos on CNBC on January 22, 2025, defending a study that links tariffs to higher prices over time. President Donald Trump responded by criticizing Goldman and joking that Solomon should find a new economist or focus on being a DJ. Goldman argues that if the latest tariffs follow the pattern of earlier ones, consumers would bear about two thirds of the cost by fall. Other banks echo this view: UBS notes that the downward trend in core inflation has been broken as tariffs feed into retail prices, and JPMorgan Chase economist Michael Feroli says tariffs could add about 1 to 1.5 percent to inflation, some of which has already occurred. The article stresses that a consensus forecast does not guarantee outcomes, citing the 2023 debate about a looming recession that did not come to pass. The piece closes with a light nod to Solomon’s DJ persona amid the policy debate.
Key Takeaways
"If the most recent tariffs, like the April tariff, follow the same pattern that we've seen with those earliest February tariffs, then eventually, by the fall, we estimate that consumers would bear about two-thirds of the cost."
Goldman Sachs economist David Mericle quoted on the potential pass‑through of tariffs
"The downward trend in core inflation has been broken as tariffs start to feed through into retail prices."
UBS senior economist Brian Rose on tariff impact
"Tariffs could add 1-1.5 percent to inflation, some of which has already occurred."
Michael Feroli, chief US economist at JPMorgan Chase
"Should go out and get himself a new Economist or maybe focus on being a DJ"
Former President Donald Trump on Goldman’s forecast
The tariff inflation debate reveals how policy signals can collide with real world prices. Pass‑through depends on product mix, timing, and how quickly retailers adjust. A cautious tone from major banks reflects the risk that inflation could surprise to the upside, even if CPI temporarily cools. Second, the episode shows how politics shapes market narratives; a single forecast can become ammunition in a political fight, even when data remains unsettled. Finally, the episode underscores the need for humility in forecasts as data evolve, and for readers to follow a path from headline to reality with care.
Highlights
- Tariffs walk the line between policy and price.
- Inflation chatter now needs real data to prove it.
- Markets crave clarity not confident forecasts.
- Expect surprises when data arrives.
Tariffs and inflation risk
The piece touches on political debate, tariff policy, and investor sentiment, raising potential backlash and sensitivity around budget and market responses.
The inflation story is still unfolding, and investors will watch data as much as headlines.
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