In a global economy facing the worst inflation shock since the 1980s, the specter of rising prices looms large once again due to escalating trade tensions, particularly driven by Donald Trump’s tariffs on imports. While the impact on American consumers is expected to be significant, the situation remains uncertain for other countries. The narrative of rising prices fueled by tariffs could become a self-fulfilling prophecy, as companies find cover to increase prices. This phenomenon, termed “greedflation,” sees businesses raising prices to boost profits rather than passing on legitimate cost increases to consumers.

A recent example is Sony’s decision to hike PlayStation 5 prices by up to 25% in various markets, potentially influenced by the challenging economic environment and anticipation of tariffs. The overall average effective tariff rate in the US is now at its highest since 1901, with consumers facing potential short-term price rises across various goods. The Federal Reserve Chair, Jerome Powell, warns that tariffs are likely to trigger temporary inflation spikes, posing a challenge for the central bank.

Research highlights the broad impact of tariffs on prices, with a notable case being the rise in domestic washing machine prices despite not being directly subject to tariffs. As consumer inflation expectations rise, companies may feel emboldened to increase prices further, affecting market dynamics.

Despite differing political perspectives on the efficacy of tariffs, inflation expectations are on the rise across the board. The split in expectations reflects a broader trend of uncertainty and varying interpretations of the economic landscape. As consumers brace for potential price hikes, the future remains uncertain as global trade dynamics continue to evolve.