December 31, 2025 — As Donald Trump took office last January, most economists worried that he might adopt the high tariffs he had campaigned on, raising prices of consumer goods and inputs that US households and firms had to pay. The result would be an increase in inflation, at the same time as a fall in real income. As a supply shock, it would not be the sort of development that the Federal Reserve could counteract. The damage would be especially large if other countries chose to retaliate with tariffs of their own.