Fed Officials See Inflation Risks from Tariff Surge

• Two Federal Reserve officials warned on Monday the large-scale tariffs now being pursued by the Trump Administration come with inflation risks, even as they stopped short of saying how that's affecting their thinking about monetary policy in a climate of notable uncertainty.
• "The kind of broad-based tariffs that were announced over the weekend, one would expect to have an impact on prices," Federal Reserve Bank of Boston President Collins said in an interview with CNBC, adding that "with broad-based tariffs, you actually would not only see increases in prices of final goods, but also a number of intermediate goods."
• Collins, however, noted there's not a lot of experience on how mega tariffs impact the economy in the modern age, which makes it hard for the Fed to know exactly how things will play out. She noted its possible that the Fed could even shrug off a one-time increase in inflation tied to the tariffs, although even that was uncertain.
• Trump on Saturday slapped tariffs on the three largest U.S. trade partners, announcing a 25.0% duty on goods from Mexico and Canada and an additional 10.0% duty on imports from China. Canada retaliated with its own tariffs on a range of U.S. products. On Monday, Trump said he was suspending the tariffs on Mexico for a month after President Claudia Sheinbaum agreed to send soldiers to the U.S.-Mexican border to curb drug trafficking. Economists broadly expect the tariffs will push up inflation and depress growth, but are struggling to measure to what extent, given the fluidity of the situation.
• Analysts at the Peterson Institute for International Economics said Monday that the full suite of tariffs on the three nations will cost the typical American household an additional $1,200 a year in higher costs. Meanwhile, ING chief international economist James Knightley highlighted the uneven nature of who will bear the impact of tariffs, which are effectively tax increases on American citizens, as tariffs are paid by the citizens of importing nations.

(Source: Reuters)