The US government is supposed to raise tariff rates for several categories of imported products. Some economists tracking these trade proposals say higher tariff rates can lead to higher consumer prices.
One model built by the Federal Reserve Bank of Boston suggests that in a “extreme” scenario, tax tightening on US imports could be 1.4 percentage points, and a 2.2 percentage point increase in core inflation. This scenario assumes a 60% tariff rate on Chinese imports and a 10% tariff rate on imports from all other countries.
Researchers have noted that many other tariff proposals have emerged since publishing the findings in February 2025.
Price increases can encounter many categories, including new homes and automobiles, along with consumer services such as nursing, public transport and finance.
“Yeah, you might think, “Oh, tariffs can only affect the items I have purchased. That cannot affect the service,” said Hillary Stein, an economist at Boston Fed. “These hospitals are purchasing inputs that could be medical devices coming from overseas, for example.”
White House economists say tariffs don’t contribute meaningfully to inflation. In a statement to CNBC, Steven Milan, chairman of the Economic Advisory Council, said “The United States retains all leverage as the world’s largest source of consumer demand, so foreign suppliers must eat the economic burden or “incidence rate” of tariffs.”
Assessing the impact of the administration’s full economic agenda has been a challenge for central bank leaders. The Federal Open Market Committee decided at its March meeting to change the federal fund’s targets.
According to the New York Fed, the Fed has an overnight borrowing rate of 4.25% to 4.5%, with a valid federal funding rate of 4.33% on March 31st. According to the Commerce Department, the inflation rate on the core personal consumption expenditure price index rose to 2.8% in February. The US GDP forecast suggests that in 2025, while still slower than its forecast for January, the economy will continue to grow at a 1.7% rate.
US consumers and businesses around the world are having an impact.
“There’s a reason why businesses have gone outside the US,” said Gregor Hirt, Chief Investor Officer at Allianz Global Investors. “Most of the time, that was because it was cheap and productive.”
Watch the video above and learn how much inflation tariffs are caused.
