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By Shane Croucher
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The world is bracing itself for another wave of U.S. tariffs as President-elect Donald Trump puts his plans together—and America's trading partners on notice—ahead of his inauguration in January 2025.
How these new tariffs manifest remains to be seen. Trump's tariffs from his first term remain largely intact, and it is clear he intends to continue using them as an instrument of American power to protect domestic manufacturers especially.
There is an ongoing debate among the economic community about the impact these tariffs have on inflation as data continues to roll in. So can we expect the next round of Trump's tariffs to drive up inflation? Newsweek asked economic experts for their views.
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Alan S. Blinder, Gordon S. Rentschler Memorial Professor of Economics and Public Affairs, Princeton University; Former Vice Chairman of the Board of Governors of the Federal Reserve System
Almost certainly, but the inflationary effects should dissipate if Trump doesn't keep raising tariffs year after year.
Jeffrey Frankel, James W. Harpel Professor of Capital Formation and Growth, Harvard's Kennedy School; Ex-Member U.S. President's Council of Economic Advisers
Yes, if Trump puts in place the tariffs he has been talking about, it will raise prices that Americans pay.
Gene M. Grossman, Jacob Viner Professor of International Economics, Department of Economics and Princeton School of Public and International Affairs, Princeton University
Trump's tariffs will almost surely lead to a one-time jump in prices, which likely would take some months to play itself out. So, it would look like an increase in inflation for a while.
But inflation is defined as a steady and ongoing upward drift in prices over time. There is no obvious reason why the tariffs will lead to ongoing price increases.
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Robert Z. Lawrence, Albert L. Williams Professor of International Trade and Investment, Harvard Kennedy School; Senior Fellow, Peterson Institute for International Economics; Ex-Member of U.S. President's Council of Economic Advisers
This is a hard question to answer because Trump has floated so many versions of his plans for tariffs.
A key issue is whether the tariffs are on all imports or just some imports from some countries. Trump's tariffs on China, for example, were selective -on just some products.
In cases where other countries could sell similar products, the impacts on U.S. prices of similar products were minimal. But in cases where substitution with other imports was not possible, they did raise prices in the U.S.
But, in total, the goods covered by the tariffs accounted for 60 percent of U.S. imports from China.
His new proposals are varied and sometimes inconsistent, and thus really hard to assess: 10 percent on all our trading partners, 20 percent on all our trading partners, 25 percent on Canada and Mexico, 60 percent on China but also 100 percent on the BRICs if they don't use the dollar.
Trump clearly sucks the numbers out of his thumb on the spur of the moment. But if we take the 20 percent number on all trading partners seriously, they are valued at $3.83 trillion in 2023.
With full pass-through, that's $0.76 trillion, which equals 2.8 percent of U.S. GDP.
If pass-through is $0.5 trillion because the dollar gets stronger and some of the increase is absorbed by foreigners, it's 1.4 percent of GDP. So it's a significant increase in the price level. A 10 percent tariff would be half that.
Kyle Handley, Associate Professor of Economics and Director, Center for Commerce and Diplomacy, Rafael and Marina Pastor Endowed Fellow, School of Global Policy & Strategy, UC San Diego
Tariffs work to reduce imports by driving up the price of both imported goods and similar U.S.-made products.
The tariffs won't lead to a sustained increase in the rate of inflation, but any product market where the share of tariffed imports is high will see relatively higher prices.
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