Expensive taxes: US inflation will jump to 4% by the end of the year due to Trump's tariffs

Inflation in the United States will rise to 4% by the end of the year due to the duties imposed by US President Donald Trump, follows from the consensus forecast of Izvestia. In July, prices rose by 2.9% (+0.2 percentage points), but tariffs against most countries came into force in August, and sectoral tariffs, including 100% on pharmaceutical products, began on October 1. Another package will enter into force on October 14th. Accelerating inflation in the world's largest economy threatens to reduce global demand for oil, metals and grain, which could hit Russian exports and the ruble. Which countries and industries will be at risk — in the Izvestia article.

What duties will Trump impose in October

Donald Trump's new duties will accelerate inflation from the United States to 4% by the end of the year, experts interviewed by Izvestia predicted. Since October 1, the American leader has introduced several sectoral tariffs at once. He announced duties of 100% on the import of pharmaceutical products, 25% on foreign heavy trucks. And also a 100% tariff on all films produced outside the United States, Trump said on his TruthSocial social network.

In addition, the American president intends to impose a 10% duty on imports of softwood and lumber from October 14, 25% on softwood products and from 30% to 50% for some types of furniture. All these innovations strengthen inflationary expectations.

On October 15, the US Department of Labor will present quarterly results of the American economy. They will reflect the situation for August. According to the previous report, inflation in the United States in July was 2.9% year—on-year, which is 0.2 percentage points more than the previous month.

According to the release, on October 15, the jump in inflation will be small, since October duties do not fall there, said Vladimir Chernov, analyst at Freedom Finance Global. Further on the horizon of one to three months, new duties may further increase this figure, he added.

For the United States, 3.5–4% inflation is a lot because the Fed's official target of 2% and a steady deviation of twice as high means overheating of the economy and the risk of inflationary expectations being inflated, the expert explained. In Russia, the target level of 4% is embedded in the policy model due to the different structure of the economy.

At the end of last year, inflation in the United States was 2.9%, then it rose to 3% and fell to 2.3% in March, but by August it had risen again to 2.9%.

By the end of the year, a moderate increase in inflation of 0.5-1 percentage points is expected in the baseline scenario, that is, to a level of about 4%, said financial adviser Ekaterina Baeva. According to this forecast, it is assumed that tariffs as a whole will not be abolished (with possible local friction), a trade deal with China will not be concluded, India's position on oil and gas duties will not significantly shift, and there will be no sudden movements on the part of the Fed, she explained.

The forecast of the Congressional Budget Office indicates inflation at 3.1-3.3% by the end of the year. However, there are more pessimistic estimates of individual investment companies, predicting a level of up to 3.9%, said Igor Rastorguev, a leading analyst at AMarkets.

CPI (consumer price Index) inflation may even reach 5% by the end of the year, said Pavel Sevostyanov, an active state councilor of the Russian Federation, Associate Professor of the Department of Political Analysis and Socio-Psychological Processes at Plekhanov Russian University of Economics. According to his estimates, prices by the end of August will rise to about 3.3%, and by the end of the year the indicator may jump by another 1.7 percentage points.

Along with the October duties on inflation, the US measures introduced in August against 70 countries will also have an effect. Then the states from the list were divided into three groups according to the size of tariffs.: 10% — for countries to which the American side exports more than it imports; 15% — for countries with a small trade deficit with America, and above 15% — for those with which the United States has not concluded agreements. Increased tariffs are provided for Syria (41%). Only slightly lower (40%) for Myanmar and Laos. Trump imposed duties of 35% for Serbia and Iraq, 30% for South Africa, Bosnia and Herzegovina, Libya, Algeria, and 25% for Tunisia, Moldova, Brunei, India, and Kazakhstan. Slightly lower — 20% — for Bangladesh, Taiwan, Vietnam, Sri Lanka, 19% — for Pakistan, Philippines, Malaysia, and 18% — for Nicaragua.

How the new duties will affect the US economy

The logic of the Trump administration is transparent — it's about a comprehensive strategy for the country's economic sovereignty, says Igor Rastorguev of AMarkets.

— On the one hand, the duties stimulate the transfer of production to the United States and reduce the trade deficit. On the other hand, they provide additional revenues to the treasury, which is critical in light of the military spending of the budget for 2026 of $ 1 trillion. Thus, tariff policy is becoming a way to simultaneously address the challenges of industrial policy and fiscal sustainability," the expert explained.

For Trump, such steps are a tool of protectionism and negotiations, as well as a political signal ahead of the adoption of the new budget, added Vladimir Chernov from Freedom Finance Global. The United States is trying to bring production back to the country and strengthen the tax base, he said.

At the same time, the American consumer will eventually pay for Trump's duties, due to higher prices for goods, said financial adviser Ekaterina Baeva. However, there will be no significant transfer of production to the United States. In some cases, for example, in the textile industry, production has been almost completely lost and needs to be rebuilt from scratch, she stressed.

As for the pharmaceutical market, the situation here is quite indicative. One hundred percent tariffs on imported medicines will create price pressure in two directions at once, Igor Rastorguev said. According to his estimates, foreign drugs may rise in price by 15-25%, depending on the category and availability of alternatives, and American manufacturers will have the opportunity to adjust their prices upward by about 8-12%, taking into account reduced competition.

Vladimir Chernov gave a similar forecast. In the pharmaceutical industry, imported drugs are the most vulnerable: their cost in the United States may rise by about 25%, which will increase pressure on consumers and create risks for the healthcare system, he said.

Which economies will be affected by Trump's tariffs

Companies in most countries have begun to work out in advance measures to circumvent duties or adapt to them, said Kirill Kononov, an analyst at BCS World of Investments. In particular, Switzerland has managed to redirect exports to the EU and developing countries in recent months. In the future, it is likely that some productions aimed at the American market will be transferred to the United States, he predicted.

Globally, the introduction of duties will add 0.1–0.2 percentage points to inflation and reduce global growth rates by about 0.1–0.3 percentage points, Vladimir Chernov believes. In 2024, global GDP growth amounted to 3.2%, and in 2025 it is projected at 2.3%. Global inflation in 2025 is projected to reach 4.2%.

— Rising global inflation and trade wars increase the volatility of commodity markets, which can put pressure on oil and metals. And expensive medicines will primarily affect countries that are heavily dependent on pharmaceutical imports. In transport, innovations will lead to an increase in the cost of supplies and deter construction and logistics," he said. — The main countries at risk after the introduction of new duties are Canada, China and Vietnam. Canada supplies about 30% of softwood (softwood) to the United States and is already paying 14.5% additional duties, while the new 10% tariffs create a "double whammy" for producers. China and Vietnam are the top 2 furniture suppliers, each exporting $12 billion in 2024, and together they account for about 60% of furniture imports to the United States. For Chinese furniture, the cumulative tariffs can reach more than 100%.

The consequences for Russia remain indirect, said Alexander Abramov, head of the Laboratory for Analysis of Institutions and Financial Markets at the Presidential Academy. Trade with the United States is limited and there is almost no direct impact on our market. But with the slowdown in the global economy, demand for Russian export goods — energy, raw materials, and supplies - is naturally decreasing, which will affect incomes in the future, the expert noted.

Indirect effects for the Russian Federation may manifest themselves through a weakening of global demand for energy and metals, which will create moderate pressure on export revenues and the ruble exchange rate, Igor Rastorguev added. However, it is still difficult to estimate the exact figures. We need to wait for the first results of Trump's policy, the August inflation data, and see how this affects global demand.