One week from today, President-elect Donald Trump will be inaugurated, bringing a new round of import taxes on a series of goods across several economies.
While the details are still unclear, it is not too early to begin estimating the deadweight that a new round of tariffs will place on economic activity. The import taxes will have an impact on the relationship between supply chain pressures and durable goods inflation, which was the primary driver of inflation during the pandemic and its aftermath.
The Federal Reserve Bank of New York’s Global Supply Chain Pressure Index strongly implies there is a link between disruptions to the flow of trade and durable goods inflation.
A test that squares regression between the standard deviation from the average rule underscoring durable goods prices can explain approximately 63% of the variation in pricing.
Read RSM’s global economic outlook in the latest issue of The Real Economy.
A focus on Chinese imports and an attempt to address transshipments of those goods will increase supply chain pressures and raise the cost of durable goods.
Please be sure to check back with RSM’s economics insights where we will be modeling shocks to the U.S. and global economies as we get detailed information on what will be a meaningful change in trade and financial policies.
