Will Trump's tariffs trigger high inflation in the US?

The incoming Trump administration will continue Biden's protectionist and fiscally loose economic policies, while the Middle East looks more dangerous than ever, Philip Pilkington says

President-Elect Trump Speaks To The Press At Mar-A-Lago
(Image credit: Andrew Harnik/Getty Images)

In an unusual intervention, US Treasury secretary Janet Yellen recently raised concerns that incoming president Donald Trump’s tariff policies might “derail” progress on bringing down inflation and in doing so “significantly raise costs for households”. Yellen also raised the issue of fiscal sustainability, saying that “the deficit needs to be brought down, especially now that we’re in an environment of higher interest rates”.

These two comments are unusual because Yellen’s Treasury has itself pursued a simultaneous path of raising tariffs and at the same time massively increasing government spending. In May 2024, the Biden administration announced a raft of new tariffs, including an increase in the levy on Chinese electric vehicles (EVs) from 25% to 100%, on Chinese semiconductors from 25% to 50%, and on Chinese solar cells from 25% to 50%.

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Philip Pilkington is a macroeconomist and investment professional. He is the author of the book The Reformation in Economics, and blogs at Fixing the Economists and on Twitter @philippilk