EconomyEconomic turmoil looms as tariffs lead to inflation fears

Economic turmoil looms as tariffs lead to inflation fears

Consumers in the United States expect the prices of goods and services to increase by 3.9 percent annually over the next 5-10 years. These are the most pessimistic forecasts since 1993, according to Bloomberg. The sentiment is influenced by Donald Trump's tariff policies.

President of the USA Donald Trump
President of the USA Donald Trump
Images source: © PAP | YURI GRIPAS / POOL
Jacek Losik

US President Donald Trump is fulfilling his campaign promises, which include introducing and raising tariffs on imported goods from Canada, Mexico, China, and the EU.

American consumers anticipate painful effects from the Republican's policies. They believe that over a period of 5-10 years, prices will rise at an annual rate of 3.9 percent, as indicated by data from the University of Michigan.

"US consumer sentiment fell to a more than two-year low and long-term inflation expectations jumped by the most since 1993, illustrating growing apprehension about the economic impact from tariffs," notes Bloomberg. "The preliminary March sentiment index dropped to 57.9, the lowest level since November 2022," the agency adds.

Donald Trump warns of economic problems

President Donald Trump, in a recent interview with Fox News, admitted that his administration is taking very serious actions, which may lead to a transition period or disruptions in the economy.

The President's statement, combined with the escalation of the trade war, triggered a significant panic reaction in financial markets. Trump's words further fueled a rapid sell-off driven by concerns over the impact of tariffs on US economic growth.

Experts from the American advisory firm Oxford Economics downgraded the GDP growth forecast for the US in 2025 by 0.4 percentage points, reducing it to 2.0 percent. They also made significant adjustments to the GDP forecast for Canada and Mexico due to tariffs imposed on these countries.

Escalation between the US and the European Union

In response to the US-imposed tariffs on foreign steel and aluminum on Wednesday, the European Commission announced retaliatory tariffs by the EU on US goods worth 28 billion dollars.

Initially, the EC will reinstate tariffs from the first presidency of Donald Trump, covering American alcohol, Harley-Davidson motorcycles, and jeans produced mainly in Republican-led or electorally key states. These are set to take effect from April 1st.

"If this Tariff is not removed immediately, the U.S. will shortly place a 200% Tariff on all WINES, CHAMPAGNES, & ALCOHOLIC PRODUCTS COMING OUT OF FRANCE AND OTHER E.U. REPRESENTED COUNTRIES. This will be great for the Wine and Champagne businesses in the U.S.," announced Donald Trump on the Truth Social platform.

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