How will tariffs affect interest rates?
Let’s assume Trump moves forward with tariffs for Canada and Mexico. That will likely lead to an immediate surge in prices for most things. Wages will lag tariffs by years. My question is: will short term interest rates (let’s say 3 year T bill rates) go up or down?
In other words, will the tariffs thrust the US into an immediate recession and quickly increase unemployment and reduce demand? Thereby reducing rates? We also know that Trump and republicans don’t give a shit about the deficit- will they also try to stimulate the economy with wasteful/fraudulent stimulus programs like congress rolled out during COVID to counteract the very problem they created? Will Trump also browbeats the Fed to lower short term rates to add even more stimulus?
Are we looking at out of control inflation if Trump follows thru with his stated goals?