The extreme tariffs proposed by US presidential candidate Donald Trump could block the path to disinflation and lead to higher interest rates, according to the head of the Institute of International Finance.
“We expect inflation to be higher and interest rates to be higher than they would have been without the tariffs,” Tim Adams, president and CEO of the IIF financial services industry trade group, told CNBC’s Karen Tso on Tuesday. “It has been done,” he said.
“You can debate whether it’s a one-time thing or whether it happens over time. It really depends on what the retaliation is and whether it repeats over time. But there is no doubt that the progress we have made toward lowering prices will be interrupted,” Adams said.
President Trump has made universal tariffs a core economic marketing pitch to voters, calling for a 20% tariff on all goods from all countries and a 60% tax increase on imports from China. I am proposing. He also promised to impose 100% tariffs on all cars crossing the Mexican border and impose 100% tariffs on countries that move to “exit the dollar.”
President Trump defended the plan to Bloomberg Editor-in-Chief John Micklethwait in an interview earlier this month, saying: “The higher the tariffs, the more likely companies are to come into the United States and build factories in the United States, so they don’t have to pay tariffs.”
President Trump has previously dismissed the possibility that universal tariffs would cause inflation, describing them as “ringing around the country.”
But analysts warn that President Trump’s overall policy proposals, including higher tariffs and curbs on immigration, will put upward pressure on inflation, even if some of the impact can be absorbed in the short term. I am doing it.
U.S. inflation hit 2.4% in September, down from a peak of 9% in June 2022, as the world grapples with supply chain disruptions from the pandemic and the impact of massive fiscal stimulus. The Fed began cutting interest rates aggressively by 0.5 percentage point in September despite concerns about further disinflation.
Trump’s possible return to the United States comes at a time of increasing trade fragmentation around the world. Earlier this month, the European Union voted to impose higher tariffs on Chinese-made battery electric vehicles, saying European carmakers benefited “significantly from unfair subsidies.”
IIF’s Adams told CNBC that Trump and his Democratic opponent, Kamala Harris, are running as “replacement candidates” rather than vowing to continue.
“The concern about President Trump is that he is anti-internationalist and will place less emphasis on transatlantic relations and more emphasis on isolationism and protectionism,” Adams said. It may be a little over the top in some places, but the elements are certainly there.”
“I have no doubt that Vice President Harris will further deepen his involvement in the international community and increase his focus on international organizations.”
CNBC has reached out to the Trump campaign for comment.
—CNBC’s Rebecca Picciotto contributed to this article.
