MNI: US Tariffs Could Boost Inflation By 0.81%-1.63% -ATL Fed
MNI (WASHINGTON) - New tariffs on imports from China, Canada and Mexico would noticeably boost consumer prices in an "immediate and persistent" manner, a new study from the Federal Reserve Bank of Atlanta on Friday finds.
The Trump administration is threatening 25% levies on goods produced in Mexico and Canada and a doubling of the 10% tariff on Chinese imports starting next week.
Such policies "could raise consumer prices on everyday retail purchases, such as food and beverage items and general merchandise, covering about a quarter of the total consumption basket, by 0.81% to 1.63%," wrote Salome Baslandze and three co-authors.
"In terms of the timing of the price effects, recent studies indicate that tariff effects are both immediate and persistent," the study adds.
That's smaller than the boost from the U.S.-China trade war of 2018-2019, the authors said, in part because the United States has since diversified its import base away from China.
Still, the authors warn their estimate should be seen as a lower bound for possible price increases due to tariffs.
"Tariffs can affect prices indirectly through input-output linkages, amplifying their impact beyond the direct pass-through captured in our analysis," they said.
"Notably, tariffs on Canada and Mexico are projected to contribute approximately 45% of the total price effect, underscoring the significant impact of these broader tariff measures." (See: MNI INTERVIEW: Lots More Coming On Trump Tariffs - Eissenstat)