According to the Bank of America, there is no ambiguity regarding the impact of former President Donald Trump’s tariff policies: these levies have undeniably contributed to rising consumer inflation across the United States. In an analytical memorandum published on October 31, a team of economists led by Aditya Bhave, Managing Director and Senior U.S. Economist at the institution’s research division, stated with conviction that there remains no debate within the data or among serious observers — tariffs have unequivocally fueled an upward trajectory in consumer prices. Their argument underscores a clear linkage between trade restrictions and the broader inflationary pressures seen across the retail market.
When President Trump introduced what he termed the “Liberation Day” tariffs on April 2, the action signaled a renewed assertiveness in U.S. trade policy. Although certain progress followed in the form of negotiated commercial agreements with key economic partners such as the United Kingdom and the European Union, the punitive tariffs levied on imports from other prominent nations, notably China and Canada, have largely persisted at elevated levels. This continuation has sustained a climate of tension and uncertainty within international trade, imposing challenges for both exporters and domestic producers that depend on global supply chains.
In launching these measures, Trump asserted that his tariff strategy would serve as a recalibration mechanism for America’s longstanding trade imbalances. He proposed that higher import taxes would redirect consumer spending toward domestically produced goods, thereby fostering a resurgence of American manufacturing and curbing dependency on foreign labor markets. From the administration’s standpoint, such protectionist policies were expected to generate billions of dollars in revenue for the U.S. economy and stimulate domestic job creation by making local production comparatively more competitive.
Yet, a significant number of economists and market strategists argued that the financial burden of these tariffs would not remain confined to foreign exporters or corporate intermediaries. Instead, they warned, the costs would inevitably filter down the supply chain, manifesting as higher retail prices for everyday consumers. Empirical research released by S&P Global in the previous month substantiated these concerns, estimating that the cumulative expense of tariff-related measures could amount to an extraordinary $1.2 trillion this year alone — a figure that ultimately reflects how businesses, pressed by rising import costs, have little choice but to transfer that burden to their customers.
Reinforcing this perspective, the Bank of America strategists reiterated in their note that the evidence pointing to tariff-driven inflation is now overwhelming. By their calculations, import duties account for an estimated 30 to 50 basis points in the core Personal Consumption Expenditures (PCE) inflation rate — a key metric employed by economists to gauge the underlying movement in prices for goods and services. Furthermore, their data indicate that U.S. consumers have already absorbed between 50% and 70% of the total cost imposed by these tariffs to date, suggesting that a substantial proportion of the trade policy’s economic consequences have been felt directly within household budgets.
The analysts further observed that this trend of price elevation shows no immediate signs of abating. Should the effective tariff rate continue to increase, as policy trajectories and existing agreements suggest, inflationary pressures could persist and even intensify in the months ahead. Such an outcome implies that consumers may face sustained cost-of-living challenges while businesses navigate a precarious balance between maintaining margins and retaining price-sensitive customers.
As of the latest readings, the PCE price index — widely considered one of the Federal Reserve’s preferred gauges of inflation — recorded a 2.7% year-over-year increase in August, edging 0.1% higher than the two preceding months and 0.2% above May levels. This steady upward momentum serves as a quantitative illustration of how trade policies, initially conceived as instruments of economic protection and balance, have contributed to a broader inflationary environment that continues to affect everyday fiscal realities for American consumers and enterprises alike.
Sourse: https://www.businessinsider.com/tariffs-boosted-consumer-prices-inflation-bank-of-america-2025-11
