People shop at a grocery store in Manhattan, New York City, on April 1, 2025.
Spencer Platt | Getty Images
According to the economist, President Donald Trump’s tariff agenda and the resulting trade war will likely lead to rising consumer prices by summer.
“I think by May – certainly by June, July – inflation statistics will look pretty ugly,” said Mark Zandy, chief economist at Moody’s.
Taxes are taxes on imports paid by US companies. Importers will at least pass on some of those high costs to consumers, the economist said.
Economists will debate whether tariffs will be a one-off price shock or more permanent, but there is little argument that consumer wallets will be a hit.
Consumers will lose $4,400 in purchasing power in the “short-term” states, according to a Yale Budget Lab analysis of tariff policy. (No time frame specified.)
The impact of “dark and sarcasm” tariffs
Economists say federal inflation data does not show the impact of tariffs yet.
In fact, in a “dark and ironic” way, the ghosts of the World Trade War may have had a “positive” effect on inflation in March, Zandi said. He said oil prices have receved amid fears of a global recession (and the resulting decline in oil demand).
“I think it’s going to take time for the inflation shock to tackle the system,” said Preston Caldwell, chief US economist at Morningstar. “In the beginning, [inflation data] In the end, it may look better. ”
But if the president maintains tariff policy, by May, consumers will start to see significantly higher prices, said Thomas Ryan, an economist in capital economics.
“Price rises take longer to squeeze filters through the supply chain (starting with producers, then retailers/wholesalers and finally consumers),” Ryan wrote in an email.
Capital Economics expects the consumer price index to be around 4% in 2025, up from 2.4% in March. That peak almost doubles what the Federal Reserve is aiming for in the long term.
Food is physical at first
Zandi said food is likely to be one of the first categories of prices rising.
Many foods are perishable, so grocery stores cannot supply them for very long. This speeds up higher cost pass-throughs for consumers, he said.
In comparison, other retailers can sell old stocks sitting in warehouses that were not subject to customs duties, the economist said. That dynamic will slow the impact on consumer prices, the economist said.
More details from personal finance:
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This tax strategy is a “silver lining” among tariff volatility.
Why the Stock Market Hates Tariffs and Trade Wars
Zandi said most physical items, such as vehicles, home appliances, clothing and furniture, are expected to become more expensive by anniversary.
Additionally, retailers and wholesalers “don’t want to do all this at once,” Ryan said.
They are likely to sprinkle on higher prices over time to slow backlash from consumers, Ryan said. Consumer prices from May onwards “reflect more of the true impact of tariffs,” he said.
It is also possible that some companies will try to frontrun the impact of tariffs by increasing prices in anticipation of higher costs, Ryan said.
But it’s gambling for businesses to do that, Caldwell said.
“A company that puts its neck first and raises prices will likely be subject to political boycotts and unfavourable attention,” he said. “I think companies will move quite slowly at first.”
Trump may change course
But there is ample uncertainty regarding the ultimate scope of President Trump’s tariff policy, economists said.
Trump on Wednesday retreated from imposing sudden tariffs on dozens of trading partners. Kevin Hassett, director of the National Economic Council, said 15 countries had made trade deal offers on Thursday.
For now, all US trading partners still face 10% universal tariffs on imports. Exceptions – Canada, China and Mexico face separate taxes. For example, Trump collected a total of 145% on products from China. This constitutes a “de facto embargo,” Caldwell said.
Trump also imposes product-specific tariffs on aluminum, steel, automobiles and auto parts.
Zandi said that if other countries retaliate with their own trade restrictions or if foreign demand is low, the prices of services such as travel and entertainment could fall.
In March, hotel prices and airline fares in CPI data dropped “slowly” in March, reflecting partly a recent decline in tourist visits from Canada, particularly from Capital Economics’ notes on Thursday.
