With less than two weeks until the U.S. presidential election, economic policy is once again a focal point, especially as concerns around tariffs and inflation resurface.

Gita Gopinath, deputy managing director of the International Monetary Fund (IMF), issued a warning about economic risks associated with tariffs, underscoring how they can drive up prices and potentially harm growth.

In a clear message that appears to counter former President Donald Trump‘s pro-tariff stance, Gopinath cautioned, “What we do know is that tariffs are inflationary.”

In an interview with Bloomberg on Thursday, Gopinath emphasized tariffs have a proven track record of raising prices for both businesses and consumers.

“Tariffs put pressure on prices — that’s usually what we see in the data looking at past episodes of tariffs that have been put in place,” she said.

Her remarks are particularly timely, as inflation remains a persistent concern in the U.S., even as the Federal Reserve works to bring it down.

The U.S. economy has been grappling with elevated inflation since the COVID-19 pandemic, and while inflation is now trending downward, prices remain much higher than pre-pandemic levels.

“The price level now is much higher than it was a couple of years ago,” Gopinath stated, explaining why inflation is still a top issue for many American households.

The IMF believes additional tariffs could reverse recent progress in controlling inflation. When tariffs are imposed on imported goods, production costs are raised and prices often increase down the supply chain. The impact is particularly severe for sectors that rely heavily on imported components, such as electronics, automotive and machinery industries.

Tariffs could have significant detrimental consequences for both sides of the Atlantic. “An increase in tariffs on Europe would push down European growth versus the U.S. and push up U.S. inflation versus Europe,” according to George Cole, an analyst at Goldman Sachs.

Tariffs could add new challenges to the Federal Reserve’s fight against inflation, creating upward pressure on prices and potentially forcing the Fed to consider even tighter monetary policy.

This risk comes as Goldman Sachs highlights another emerging trend: U.S. Treasury yields have surged sharply in recent weeks, mirroring the rise in Donald Trump’s election odds. Higher yields reflect investor concerns about inflationary pressures and future fiscal policy.

The race between Trump and Harris remains razor-thin in most polls, underscoring a polarized electorate. Betting markets reveal a clearer lean toward Trump, with implied odds showing him at 60.02% chance of winning, compared to Harris’s 39.98%.

Meanwhile, the U.S. dollar is gaining momentum. The U.S. Dollar Index (DXY), as tracked by the Invesco DB USD Index Bullish Fund ETF UUP, has climbed for four consecutive weeks, reaching its highest level since late July.

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