US EditionDow Hits Record, Energy Stocks End Higher After US Strikes Venezuela
Research shows 2025 tariff hikes may lower inflation but increase unemployment, prompting the Federal Reserve to cut interest rates by 75 basis points in response.
- On Monday, the San Francisco Federal Reserve Bank published research saying the 2025 tariff surge could raise unemployment even as it reduces inflation, with authors supporting interest-rate cuts.
- U.S. import data show U.S. imports faced an average 17% levy last year, up from less than 3% at the end of 2024, and the Federal Reserve held rates steady due to tariff inflation concerns.
- The analysis draws on historical comparisons of the United States, France and the UK, where large tariff shocks typically coincided with economic uncertainty and falling stock prices that helped lower inflation.
- By September the Fed reacted to labour-market weakness with rate cuts in 2025, lowering short-term borrowing costs and easing monetary conditions after the tariff surge.
- Researchers warned that historical findings may not apply as U.S. manufacturing now relies more on imported inputs, and the result conflicts with theoretical models predicting tariffs raise prices.
10 Articles
10 Articles
Trump may be raising your taxes with his tariffs but he could actually cut inflation with them, too, SF Fed says
Tariffs are a tax on you, the consumer. That’s the undisputed fact about how tariffs function, with the levies falling on companies, which then typically pass a great percentage on to the final shopper. Voter anger about affordability built throughout 2025, culminating in offyear elections that swept Democrats such as New York City’s new Mayor Zohran Mamdani into office, prompting an angry President Trump to complain that affordability is a “hoa…
Tariffs may lower inflation, San Francisco Fed research suggests
The sharp increase in tariffs imposed last year by the Trump administration may reduce inflation rather than increase it, according to research published Monday by the San Francisco Federal Reserve Bank, suggesting that interest-rate cuts may be the proper policy response.
Fed Says Tariffs Could Ease Inflation By Curbing Demand and Employment
New Federal Reserve research examines the relationship between high tariffs and reduced inflation. The research note from the Federal Reserve Bank of San Francisco, published Monday (Jan. 5), pointed out that past instances of steep tariff rates led to lower inflation, while examining possible causes for this phenomenon. “The 15% increase in the average U.S. tariff rate in 2025 was the largest in the modern era,” researchers Regis Bar…
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