Members of US president-elect Donald Trump’s incoming economic team are discussing slowly ramping up tariffs month by month, a gradual approach aimed at boosting negotiating leverage while helping avoid a spike in inflation, people familiar with the matter said.
One idea involves a schedule of graduated tariffs increasing by about 2 percent to 5 percent a month, and it would rely on executive authorities under the International Emergency Economic Powers Act, they said.
The proposal is in its early stages and has not been presented to Trump, they said.
Photo: Bloomberg
Advisers working on the plan include Scott Bessent, the nominee for Treasury secretary, Kevin Hassett, set to be director of the US National Economic Council, and Stephen Miran, nominated to lead the Council of Economic Advisers, they said.
The US dollar fell against almost every major currency and US Treasury yields dropped yesterday after the report.
During last year’s presidential campaign, Trump floated minimum tariffs of 10 percent to 20 percent on all imported goods, and 60 percent or higher on shipments from China.
Since he won the election in November, multiple reports have emerged on how aggressively he would implement tariffs — with Trump himself calling one report of a measured rollout false.
With just a week until the inauguration day, economists can only guess as to how Trump’s trade wars would influence the US economy. That has left a complicated picture for the US Federal Reserve, because Trump’s tariff threats are seen as a risk to the growth outlook while potentially stoking inflation if nations retaliate.
UBS AG global head of economics and strategy research Arend Kapteyn said a decision by Trump to ramp up tariffs gradually once he takes office would be “problematic” for the Fed as it battles the last mile of inflation.
“We think of tariffs as a one-off price level shift, and then it goes away a year later, and then provided it’s not big enough you don’t have spillover effects so you don’t get second-round effects that are sort of inflationary,” Kapteyn said yesterday in a Bloomberg television interview in Shanghai.
“But if you do rolling tariffs, it’s a little like the repeat of the [COVID-19] pandemic and the Ukraine shock that we had, you have one supply shock after another and you start to create a much higher peak in inflation, so I think much more difficult to sort of know what to do with that as a central bank,” he said.
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