No Doubt That Tariffs Raised Consumer Prices, Says Bank of America

For the Bank of America, President Donald Trump’s levies have boosted consumer inflation, and there’s no uncertainty about that.

“We think there’s no debate — tariffs have pushed consumer prices higher,” analysts, including Aditya Bhave, managing director and senior US economist at the research unit of the banking giant, wrote in a note on October 31.

Since Trump unveiled his “Liberation Day” tariffs on April 2, while some trade deals have been negotiated with partners, such as the UK and the European Union, rates on other countries, like China and Canada, have remained elevated.

Trump argued that tariffs would rebalance the trade deficit and bring billions of dollars back to the US, as Americans would be encouraged to shop domestically, and more manufacturing jobs would be introduced at home rather than companies relying on foreign labor.

However, many economists warned that the cost of the levies would be passed on to consumers. Research from S&P Global last month found that Trump’s tariffs will cost businesses $1.2 trillion this year, with shoppers ultimately bearing the brunt.

“We think there is overwhelming evidence that tariffs have pushed inflation higher for consumers,” the strategists said in the note.

They wrote that they estimate tariffs to account for between 30 and 50 basis points of the core personal consumption expenditure inflation rate, which measures the change in prices for goods and services. The analysts also said consumers have paid for about 50% to 70% of the total tariff cost to date.

“This suggests tariffs can continue to put upward pressure on inflation in coming months, especially since the effective tariff rate should climb further,” the note said.

The PCE price index was up 2.7% year-on-year in August, a rise of 0.1% on the previous two months and 0.2% compared to May.