According to Bank of America, President Donald Trump’s tariffs have directly contributed to rising consumer inflation — and there’s no uncertainty about it.
“We think there’s no debate — tariffs have pushed consumer prices higher,” analysts including Aditya Bhave, managing director and senior US economist at the bank’s research division, wrote in a note released on October 31.
Since Trump announced his “Liberation Day” tariffs on April 2, some trade deals have been reached with allies like the UK and the European Union. However, tariff rates on other countries, including China and Canada, have remained elevated.
Trump has argued that the levies would help rebalance the trade deficit and bring billions back to the U.S. economy by encouraging Americans to buy domestically, thereby creating more manufacturing jobs at home instead of relying on foreign labor.
But economists have long cautioned that the costs of these tariffs would inevitably fall on consumers. Recent research from S&P Global found that Trump’s tariffs will cost businesses an estimated $1.2 trillion this year — a burden that is being largely passed on to shoppers.
“We think there is overwhelming evidence that tariffs have pushed inflation higher for consumers,” the strategists reiterated in their note.
They estimated that tariffs account for between 30 and 50 basis points of the core personal consumption expenditure (PCE) inflation rate — a key measure that tracks changes in prices for goods and services. According to their analysis, consumers have paid roughly 50% to 70% of the total tariff costs so far.
“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 added.
The PCE price index rose 2.7% year-over-year in August — up 0.1% from the previous two months and 0.2% higher than in May — signaling that Trump’s trade policies continue to exert inflationary pressure on the broader economy.
