President Donald Trump‘s announcement of potential 50% tariffs on Colombian imports is stoking fresh inflation worries among economists and lawmakers, as markets grapple with shifting monetary policy expectations.
What Happened: Rep. Alexandria Ocasio-Cortez (D-N.Y.) criticized Trump’s proposed tariffs on Sunday, arguing they would worsen inflation for working-class Americans. “To ‘punish’ Colombia, Trump is about to make every American pay even more for coffee,” she wrote on X, emphasizing that U.S. consumers, not Colombia, bear the cost of tariffs.
The tariff threat came after Colombia’s President Gustavo Petro denied entry to two U.S. repatriation flights carrying Colombian migrants, demanding protocols for dignified migrant treatment. Trump responded by announcing a series of measures, including initial 25% tariffs on all Colombian goods, rising to 50% within a week.
Why It Matters: Goldman Sachs analyst Manuel Abecasis warned that while direct inflationary impacts might be modest, consumer inflation expectations could rise sharply. The bank estimates a universal 10% tariff could boost headline inflation by up to 1 percentage point in extreme scenarios.
Mohamed El-Erian, Chief Economic Advisor at Allianz, recently highlighted concerning divisions in inflation expectations, with the University of Michigan data showing Democrats anticipating 4% inflation while Republicans project just 0.1%.
Market indicators already suggest persistent inflation pressures, with the 10-year breakeven rate reaching the top of its two-year range. The University of Michigan’s consumer survey reported five-year inflation expectations at 3.3%, the highest since 2008.
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