Andrzej Skiba, Head of BlueBay U.S. Fixed Income at RBC Global Asset Management, joined Forbes' Maggie McGrath to talk about the market reaction to Trump's retaliatory tariffs and what they mean for inflation.
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NewsTranscript
00:00space. Well, you fed into my next question, because I do want to go to your market commentary from yesterday, where you said that 10 percent
00:09tariffs are likely to be inflationary. Can you talk a little bit more about now that we have the fuller tariff plan? What are your
00:19inflation expectations and how equipped is the U.S. consumer to handle something like this?
00:24Yes, without a shadow of a doubt, these tariffs are likely to push inflation higher. So prior to the announcement yesterday, our
00:34base case working assumption was that the end state will be an average tariff of around 10 percent. And based on our analysis, that
00:43was likely to add up to one percentage point to headline inflation. One percentage point doesn't sound like a lot, but from
00:52Federal Reserve's perspective, it is a very meaningful amount that actually could make all the difference between being able to
01:00cut rates and not. So with the announcements yesterday, the average tariff that we are calculating on the back of those
01:08announcements and taking into account the exemptions that were announced as well, is somewhere in the range of 15 percent. So
01:17clearly higher than the number that we were looking for. And we will see whether the end state tariffs after all the negotiation is
01:25finished trends towards that 10 percent level. But if we stay around the parameters that were set yesterday, clearly that upward pressure on
01:35inflation will be even greater than the one percentage point that we were expecting earlier, maybe one and a half percent, if not
01:44higher. So clearly we do believe that U.S. consumers will be feeling the pinch of dealing with higher priced items, higher priced goods, and
01:56that will translate itself into overall higher levels of inflation, something that we do not believe Federal Reserve can ignore.