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What Will Happen to Inflation This Year? It Depends What You Think About Tariffs
Key Takeaways
As Americans wait for President Donald Trump's tariff proposals, a new survey shows consumers disagree about how they could affect the U.S. economy.
Some see Trump’s proposals to raise taxes on foreign imports as good for the economy, bringing price increases to a standstill. But still, more see tariffs leading to significant price increases, according to the closely followed Michigan Consumer Sentiment survey. In January, the index declined for the first time in six months.
“Survey responses make clear that the recent partisan divergence in confidence in the economy is rooted in how consumers view Trump’s proposed policies,” wrote Michigan's Surveys of Consumers Director Joanne Hsu.
Trump has proposed tariffs as high as 60% on China and 25% on Canada and Mexico , but it’s unclear what actions he will actually take . Trump did not include tariffs in his early flood of executive orders but said he expects to take action by Feb. 1.
Inflation Expectations Rise in January, But Not for Everyone
Overall, the survey showed that consumers in January expected inflation to reach 3.3% in the year ahead, a jump to the highest level since May 2024. That’s higher than December inflation expectations, in which consumers estimated prices would increase 2.8% over the next year.
However, 62% of survey respondents who believe tariffs could harm the U.S. economy see inflation rising to nearly 5% in the next year. Many economists have also projected rising inflation if high tariff rates are enacted.
That’s in contrast to the 19% who believe that tariffs are beneficial for the economy. They see an inflation rate this year of just below 0%, often called “ deflation ,” which many economists see as bad for the economy . An equal amount said Trump’s tariffs would have little impact on the economy and had year-ahead inflation expectations of around 3%.
“These patterns are consistent with the fact that Trump has been outspoken about his plan to hike tariffs; consumers appear to have taken him at his word and have incorporated the message into their expectations,” Hsu wrote.
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