Wed Feb 19 19:00:00 UTC 2025: ## Trump’s Reciprocal Tariffs Could Nearly Double US Inflation, Study Warns
**Washington D.C.** – President Trump’s proposed plan to impose reciprocal tariffs matching those levied by U.S. trading partners could nearly double the nation’s inflation rate, according to a new study. While the administration frames the tariffs as a negotiating tactic to pressure other countries into lowering their import fees, economists warn of significant economic consequences.
The Peterson Institute for International Economics’ Gary Hufbauer described the potential impact as a “real shock to the American economy,” with potentially substantial inflation. The worst-case scenario, where the tariffs are fully implemented, could see inflation nearly double. However, economists believe that some of the duties may be absorbed by retailers and manufacturers, mitigating the impact on consumers.
The plan calls for tariffs mirroring foreign taxes, subsidies, and trade barriers, including value-added taxes (VATs) which are significantly higher than typical tariffs in many countries. This approach is unusual, as VATs are generally considered non-discriminatory.
Capital Economics estimates that the average tariff on all U.S. imports could jump from under 3% to approximately 20%, adding about 2 percentage points to inflation. This would raise the current inflation rate (2.6% in December) to 4.6%. Deutsche Bank’s Justin Weidner projects a more moderate increase, estimating a 1% rise to 3.6%, assuming businesses absorb half the tariff costs.
Even a partial implementation of the tariffs would likely boost consumer prices, especially when combined with other import levies already announced by the Trump administration. These existing tariffs, which include levies on steel, aluminum, and goods from China, Canada, and Mexico, could add over a percentage point to inflation alone, according to Weidner.
The complexity of calculating tariffs for 5,000 products across nearly 200 countries presents a significant challenge. Experts suggest a simpler approach, basing tariffs on average foreign rates, would lessen the impact.
While some economists, like Capital Economics’ Paul Ashworth, believe that the impact on economic growth could be offset by Trump’s tax cuts, the potential for a tariff-driven inflation spike could lead the Federal Reserve to maintain higher interest rates for an extended period. The unprecedented scale of the proposed tariffs makes it difficult to predict the precise economic effects, but the potential for significant inflationary pressure is a major concern.
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