Recent moves by the U.S. government on tariff policies have concern growing over their negative, inflationary effect. Originally the country was levying a 25% duty on these key products. This raises tariffs for a host of commodities such as steel, aluminum, and certain cars and auto parts. Former President Donald Trump created these tariffs—one of his most controversial legacies—riling economists and policy-makers to this day. Their impact has become a major source of controversy.
Similar to previously when Trump had levied and then withdrawn or postponed tariffs in other major increases throughout his second term. The continuous cloud of unpredictability hanging over these tariffs has resulted in greater scrutiny over their impact on our economy. Sarah House, a senior economist at Wells Fargo Economics, emphasized the significance of these duties, stating, “I think tariffs are the biggest question mark over the inflation outlook.”
A new report from the Yale Budget Lab, published on May 12, 2025, contains sobering news. Recent tariff policies may cost the typical U.S. household as much as $2,800 over the next few years. This illustrative figure depicts the way tariffs are directly impacting the wallets of everyday Americans. Further, it begs critical questions of whether these policies can truly be sustained over the long haul.
As inflation rates keep rising and falling, economists are closely monitoring how tariffs could affect consumer prices. In April, year-over-year inflation, as measured by the consumer price index (CPI), was at 2.3%. That is a small drop from the 2.4% increase reported in March. Core inflation—excluding the most volatile components such as energy and food prices—has held steady at 2.8% in April.
A coalition of nearly 700 economists has warned that tariffs would make inflationary pressures worse. These budgetary pressures in many states have recently started to stabilize or even reverse. Mark Zandi, chief economist at Moody’s, noted the precarious position of inflation trends, stating, “It felt like we could just about declare victory on putting inflation back in the bottle, and it’s back out again.”
Joseph Gagnon is a senior fellow at the Peterson Institute for International Economics. He provided helpful advice on how tariffs can drive inflation going forward. He indicated that a 10% average tariff rate could add as much as one percentage point to the consumer price index within six to nine months. Nearly all of the United States’ major trading partners start off at a default 10% tariff. China faces a far steeper challenge of at least 30%.
Stephen Brown, deputy chief North America economist at Capital Economics, predicts a potent inflationary impact from tariffs. Look for evidence of this in future issue briefs. Specifically in regard to inflation, he pointed out that a partial trade agreement with China will not prevent core CPI inflation from increasing. He’s forecasting it to hit 3.5% by the end of 2025.
This new data point underscores the ongoing uncertainty of the administration’s trade policies and their impact on inflation. She remarked, “There’s all this tremendous trade uncertainty and we have higher tariffs pretty much across everything we import.” This uncertainty makes economic forecasting difficult and adds several layers of complexity to discussions about national, state, and local policy.
The next CPI report is due out early next month. It will provide insight into how these tariff policies are driving up inflation. As Ellen Zentner of Morgan Stanley tweeted, at this point the impact from the tariffs is going to start emerging strongly in the data. This indicates that consumers will soon start to feel the effects of higher costs.