Trump’s universal tariffs to have an upward impact on inflation – Rabobank

Could Trump’s universal tariff revive inflation? Economists at Rabobank analyze how a raise in import tariffs could affect the trajectory of inflation and consequently the Fed’s rate path.

Universal tariffs would complicate the Fed’s mission to get the inflation genie back into the bottle

Based on current opinion polls and our expectation of a deterioration of economic data in 2024, we have decided to assume a Trump victory in our current forecasting round for the global economy.

Given Trump’s first term in office and his recent remarks on trade policy, we should expect a broad rise in import tariffs under a Trump presidency. This could lead to a rebound in inflation, especially in 2025, complicating the Fed’s mission to get inflation back to its 2% target in a sustainable manner. Ceteris paribus, this could reduce the amount of rate cuts that the Fed has in mind for 2025.