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Rising Tariffs Poised to Fuel Inflation, Burden American Households

New economic analysis indicates that recently implemented adn proposed tariffs are likely to substantially increase inflation in the coming months, disproportionately impacting low- and middle-income American families. Experts from the Federal Reserve, Yale University, and the private sector are warning that businesses are beginning to pass the costs of these levies onto consumers through higher prices.

According to a recent blog post by Torsten Sløk of Apollo Global Management, inflation is expected to rise “significantly” over the next six months. This expectation is supported by a survey conducted by EY, revealing that approximately two-thirds of over 4,000 executives anticipate passing tariff costs onto their customers. Over 30% of those surveyed indicated they would pass on more than 90% of the added expense.

The Center for American Progress estimates that these tariffs could cost U.S. households an average of $5,200 annually. Further analysis from the Budget lab at Yale University projects a 1.8% increase in the overall price level by 2025 due to the tariffs, translating to an average household income loss of $2,400. Ernie Tedeschi of The Budget Lab told CNBC that American consumers are likely to bear 80-90% of these costs, with minimal absorption by foreign producers.

Several major corporations have already signaled their intention to raise prices. Adidas, Stanley Black & Decker, and Procter & gamble have informed investors of plans to pass on tariff expenses.Retail giants Walmart, Mattel, and Hasbro have issued similar warnings regarding potential price increases for consumers. Executives at Chipotle Mexican Grill and McDonald’s are observing early indications of financial strain among lower-income households, evidenced by a slowdown in spending on dining and travel.Beth hammack,President and CEO of the Federal Reserve Bank of Cleveland,recently told CBS News that inflation could reach 3% this year,exceeding the Federal Reserve’s 2% target,due to businesses passing on tariff costs.

The potential for increased consumer debt is also a concern. Shikha Jain, a partner at Simon-Kucher, suggests that individuals may increasingly rely on borrowing to maintain their current lifestyles, potentially creating a self-reinforcing cycle of scarcity and rising costs.Despite the stated goal of bolstering domestic industry and addressing trade imbalances, the economic consensus is that tariffs largely result in higher costs for Americans.The policy, intended to benefit the U.S. economy, may instead lead to increased prices and reduced consumer choice for families across the country, impacting cities like Boston and Bakersfield as much as, if not more than, targeted economies abroad.