Trump’s radical tariff proposals could lead to higher interest rates, according to the IIF head

The head of the Institute of International Finance (IIF), Tim Adams, told CNBC on October 23 that Trump’s radical tariff plans will trigger higher interest rates if he gets into office. The IIF president also noted that inflation would increase compared to when the tariffs were absent. 

Adams speculated on the questions many in the financial world could ask, especially whether the effects would be felt immediately or over time. According to the head of the IIF, the results would depend on the retaliation the country would face from foreign companies. Adams added that there would be a higher possibility of the tariffs breaking the country’s progress in lowering consumer prices.

If he were elected president, Trump would increase tariffs on imports into the U.S. The tariff proposal suggested a 20% tariff for all countries except China, which would have a 60% tariff. Trump also hinted at a 100% for all goods passing through the Mexican border and to countries that try to drop the U.S. Dollar. 

The U.S. Federal Reserve has made significant efforts to reduce the inflation rate from a high of 9% in 2022. In September, the Fed mentioned the dropped rate, which hit 2.4%. The bank also initiated a 50 basis point interest rate cut to reach its inflation goals. 

Another research says Trump’s tariff proposal could ‘wipe out jobs’

A September analysis by the Peterson Institute for International Economics shared views similar to those of Adams. The Institute’s researchers, Warwick McKibbin, Megan Hogan, and Marcus Noland, conducted the analysis. In the report, the researchers noted that the plans for deportation, tariffs, and the Federal Reserve would hurt the U.S. economy more than any other country.

The researchers explained that while Trump is selling the idea of ‘letting the foreigners pay,’ the damage to the economy could progress well into 2040. In the report, the researchers laid out a ‘low scenario’ of about 1.3 million undocumented workers being deported and countries not retaliating against the tariffs.

The report highlighted that in the low scenario, the inflation rate could rise to 6% by 2026, while consumer prices would increase by 20% by 2028. The analysis also expects that the employment rate will have dropped by approximately 2.7% by 2028. The country’s GDP will have also plunged by the end of Trump’s term by approximately 2.8%. 

In a high scenario involving the deportation of approximately 8.3 million workers and international companies retaliating against the tariffs, the situation would be more dire. Inflation could have risen to over 9.3% by 2026, a drop in employment by the GDP would have been 9% by 2028, and a GDP 9.7% lower by the end of Trump’s term.

IIF head considers Trump anti-internationalist

While expressing his views on the proposed tariffs, Adams hinted that analysts considered Trump an anti-internationalist. The IIF head commented that Vice President Kamala Harris had better chances of building international relations than the former president. 

“The concern about Trump is that he’s anti-internationalist, doesn’t care about transatlantic relations, and will be more focused on isolationism and protectionism.”

Tim Adams, IIF President on CNBC

The former president defended his proposal in a Bloomberg interview at the beginning of the month, saying the tariffs would create a ring around the U.S. Trump also insisted that the tariffs would not be inflationary. The former president suggested that more companies would build their centers in the U.S. to escape the tariffs.