Goldman Sachs predicts nearly 1% inflation increase due to new Trump tariffs

The tariffs on imports from China, Canada, and Mexico announced by Trump on Monday could lead to a nearly 1% increase in the Federal Reserve’s preferred inflation measure, according to Goldman Sachs.

Goldman’s chief economist, Jan Hatzius, in a note to clients:

• “Using our rule of thumb that every 1 [percentage point] increase in the effective tariff rate would raise core PCE prices by 0.1%, we estimate that the proposed tariff increases would boost core PCE prices by 0.9% if implemented,”

The tariffs would affect 43% of U.S. goods imports and generate close to $300 billion in annual revenue, according to the Goldman Sachs’ analysis.

—

ps. The “PCE” GS refer to is the personal consumption expenditures price index, which is the preferred inflation reading of the Federal Reserve.

The October PCE reading is due out Wednesday, 8.30am US time. Expected to show a year-over-year increase of 2.8% for the core, according to economists surveyed by Dow Jones.

This article was written by Eamonn Sheridan at www.forexlive.com.