Tariffs feeding inflation
Federal Reserve research says tariffs implemented through late 2025 raised core goods inflation by roughly 3.1%, a material drag on disinflation that can keep bond yields—and fixed mortgage costs—higher than central-bank talk alone suggests. (benzinga.com) The White House is also actively weighing emergency powers to impose steep new tariffs on countries that supply weapons to Iran, a policy route that would amplify the inflation channel if enacted. (politico.com)
A Federal Reserve note published on April 8 said tariffs put in place through November 2025 raised core goods prices by 3.1% by February 2026, and the authors said that increase explains all of the category’s inflation overshoot versus its pre-2020 norm. (federalreserve.gov) The researchers did not describe a vague squeeze on companies. They said the pass-through to consumer prices was effectively complete, which means the tariff showed up at the checkout counter almost dollar for dollar over time. (federalreserve.gov) Core goods means physical products like appliances, clothes, furniture, and cars, not food, gasoline, or rent. The Bureau of Labor Statistics tracks those pieces separately because food and energy jump around more from month to month. (bls.gov) That is why tariffs can keep inflation sticky even when central bankers are talking about rate cuts. If the government adds a tax at the border on imported goods, stores and manufacturers can still be raising prices even while demand elsewhere is cooling. (federalreserve.gov) The same Fed note estimated those 2025 tariffs added 0.8% to core personal consumption expenditures prices as a whole by February 2026. Core personal consumption expenditures is the inflation gauge the Federal Reserve uses most often when it talks about its 2% target. (federalreserve.gov) There is already a live policy fight over whether to add more. Politico reported on April 9 that President Donald Trump said he would impose a 50% duty on imports from any country that supplies weapons to Iran, with “no exclusions or exemptions.” (politico.com) The legal route is messy. White House National Economic Council Director Kevin Hassett said the administration could use the International Emergency Economic Powers Act, while U.S. Trade Representative Jamieson Greer told Politico that law works better for prohibitions or embargo-style restrictions than for tariffs. (politico.com) That matters because the Supreme Court ruled on February 20, 2026, that the International Emergency Economic Powers Act does not authorize the president to impose tariffs without Congress. Even after that ruling, a White House official told Politico that the administration is still exploring all available tools, including that law. (politico.com) Bond traders do not wait for a tariff to show up in a monthly inflation report before reacting. The 10-year Treasury yield was 4.29% on April 8, 2026, and 30-year fixed mortgage rates were still around 6.37% to 6.46% in the first full week of April, which shows how expensive long-term borrowing remains. (fred.stlouisfed.org) (freddiemac.com) Mortgage rates usually move with the 10-year Treasury yield because lenders and investors compare home loans with government bonds that last for similar lengths of time. Richmond Federal Reserve research says the 30-year fixed mortgage rate has moved in tandem with the 10-year Treasury for more than 30 years, even if the gap widens in periods of stress. (richmondfed.org) So the chain is simple: tariffs raise goods prices, sticky goods prices make inflation harder to finish off, and stubborn inflation keeps pressure on Treasury yields and mortgage costs. If the White House follows through with another 50% tariff round tied to Iran, it would be pushing on the same inflation channel the Fed just measured. (federalreserve.gov) (politico.com)
