Boston Fed: Trump trade tariffs may cause U.S. inflation to rise 0.8 percentage points

The sweeping tariffs that the Trump administration seeks to impose will put significant upward pressure on already high inflation, according to a report released Thursday by the Federal Reserve Bank of Boston. The Boston Fed report said Trump would impose 25 percent tariffs on Mexico and Canada and 10 percent tariffs on China, which would push up the rise in the price index for personal consumption expenditures (PCE), the Fed's favored inflation indicator, by 0.8 percentage points. Given that inflation is still above the 2% target, this level of upward pressure could spell trouble for the Fed. The Fed expects inflationary pressures to ease gradually, but there is a lot of uncertainty about the impact of tariffs, which will lead to higher consumer prices in the U.S., on the inflation data.