Economists say that the tariffs scheduled to take effect on Tuesday may mean that consumers will not benefit from high borrowing costs this year.

President Trump signed an order last Saturday to impose tariffs on the three largest trading partners of the United States.

Economists predict that if these tariffs are implemented and maintained, they will increase prices for American consumers. Economists say that when inflation has not yet fallen back to the target level, upward pressure on inflation may force the Federal Reserve to pause interest rate cuts in the foreseeable future.

The benchmark interest rate of the Federal Reserve affects the borrowing costs of consumer credit cards and other types of debt.

Paul Ashworth, Chief North American Economist at Capital Economics, wrote in a report last Saturday after Trump signed the tariff order: "In this situation, the window for the Federal Reserve to resume rate cuts at any time in the next 12 to 18 months has closed

Economists say that of course, the situation is volatile and it is almost impossible to make precise assessments. For example, Trump announced on Monday that he will suspend the 25% tariff on Mexico for one month.

Boston Fed President Susan Collins said on Monday, "There is a lot of uncertainty about how policies will be implemented

Joe Seydl, Senior Market Economist at JPMorgan Private Bank, stated that if long-term tariffs are imposed on Canada, major Asian countries, and Mexico, it is estimated that US inflation will increase by 0.5 to 1 percentage point by 2026.

These estimates are measured by PCE, which is the preferred inflation indicator of the Federal Reserve, for "core" prices (excluding energy and food costs).

This is important because the Federal Reserve uses interest rate policy to control inflation and the labor market. All other things being equal, it is expected that high inflation will keep interest rates at higher levels for a longer period of time.

A report released by Evercore ISI on Tuesday shows that tariffs on Canada, major Asian countries, and Mexico will "push up" PCE by about 0.7% relative to the baseline of no tariffs, and will reach around 2.8% in the fourth quarter of 2025.

Evercore's report states, "This will eliminate the possibility of the Federal Reserve cutting interest rates at least once or even twice this year

Last December, Federal Reserve officials predicted that they would cut interest rates twice in 2025.

Stephen Brown, Deputy Chief North American Economist at Capital Economics, wrote in an email, "Given the one month suspension of tariffs on Mexico, there is clearly some uncertainty about whether these tariffs will continue. If they continue, the Federal Reserve is unlikely to cut interest rates again

Although some people believe that tariffs may prompt the central bank to raise interest rates again, Brown believes that this is unlikely. He said that tariffs may drag down the US economy.

Seydl stated that similarly, JPMorgan expects the proposed tariffs to reduce US GDP (a measure of economic output) by 0.5 to 1 percentage point by 2026. He said that this economic drag may outweigh the inflationary impact of tariffs, ultimately leading to a rate cut by the Federal Reserve.