Boston Federal Reserve: Trump's trade tariffs could raise U.S. inflation by 0.8 percentage points

The across-the-board tariffs that the Trump administration is seeking 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 that Trump's 25% tariffs on Mexico and Canada and 10% tariffs on China would boost the personal consumption expenditures price index (PCE) by 0.8 percentage points, the Fed's favored measure of inflation. Given that inflation is still above its 2% target at the moment, this level of upward pressure could spell trouble for the Fed. The Fed expects inflation pressures to ease gradually, but the tariffs will lead to higher prices for U.S. consumers, which leaves much uncertainty about the impact on the inflation data.